The Decibel - Can carbon capture solve emissions problems for oil and gas?

Episode Date: December 12, 2023

Canada’s oil and gas industry has been facing immense pressure to reduce emissions. Last week, the federal government announced a cap and trade system to help do that, and one of the main ways the industry is planning to cut back on emissions is through carbon capture.Today, The Globe’s energy reporter Emma Graney explains the new cap and trade system, the science behind carbon capture, and the concerns around whether it is a viable option for Canada’s oil and gas sector.Questions? Comments? Ideas? Email us at [e-mail]

The Global Climate Conference in Dubai, COP28, is wrapping up today. And one of the big discussion points has been the future of the fossil fuel industry. Canada's oil and gas sector is facing immense pressure to reduce its greenhouse gas emissions. And last week, the federal government announced a new system to help do so. It's a cap-and-trade system. One of the technologies the industry is relying on heavily to reduce emissions is carbon capture. Emma Graney is the Globe's energy reporter. Today, she'll explain how this new system for reducing emissions will work,

the science behind carbon capture, and the concerns around whether it is actually a viable option for Canada's oil and gas sector. I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Emma, thanks so much for being here again. Of course. Thanks for having me. I think we should really just start with this cap and trade system that the federal government announced last week.

How exactly is this going to work? Okay. So it's a national cap and trade system. All right. So we're going to see some draft regulations in 2024, but we're going to see this whole thing phased in by kind of 2030. Now, the government is basically bringing in a system and they want, well, they expect, I should say, the sector to cut their emissions 20% to 23% by 2030 using a bunch of different technologies. But when the cap and trade system begins, it's going to bump that number up to 35 to 38 percent

by making producers either like reduce their emissions to that number or make them pay, basically pay for polluting by paying these carbon offsets or pay into a decarbonisation fund. As far as we know, basically emitters can just elect to pay into this fund. And then the money in that fund can be used for decarbonization activities, or what that might be, what that might look like, how exactly that will work. We don't know any of those details yet. Okay. Just to be clear, when we say like 20 to 23%, this is from 2019 levels. So that's what you're basing it on. That is correct. The number that was kind of being bandied about earlier was closer to kind of 42%, 40-42%. And now I will say we don't have a final percentage number then, which is why I'm kind of going in the range there.

But yeah, it is definitely not what the oil and gas sector was expecting or rather dreading, I think would be a better word there. So the federal government has certainly not come out with a cap that was anywhere near as kind of bad, I suppose, as what a lot of people in the sector, in the industry thought it might be. Okay. All right. So we have these targets for reducing emissions. The big question, of course, is then how will these companies actually go about doing that? How are they going to reduce their emissions? There are a whole bunch of different ways they can do it. So we're kind of looking at, for example, in the oil sense, there's already a lot of work being done to reduce emissions up there.

And there's stuff like using solvents instead of steam to kind of get the stuff out the ground. There's other ways that you can decarbonize your pump jacks. There's other ways that you can decarbonize the equipment that you're using, electrifying it rather than using natural gas to power the stuff, that kind of thing. But the big one up in the oil sands in particular is carbon capture and storage. So that's basically where you capture the carbon, just as it sounds. And then you put it underground and store it down there. So the idea is you reduce your emissions by capturing

your emissions, basically, and shoving them back underground. Okay, so let's talk about this, because I think the idea of, you know, taking carbon, putting it in the ground is a little bit kind of abstract for a lot of us. So how does carbon capture work here? Oh, carbon capture. It's a whole thing. Basically, I mean, it sounds funny to say, well, it captures carbon, but that's exactly what it does. So it captures the emissions called flue gas. So from smokestacks at natural gas power plants or facilities like oil and gas facilities or even factories that produce stuff like, you know, concrete or steel. Once you capture the flue gas, you separate the carbon dioxide from the other bits and pieces that are in the gas, and then you put it to a new use or you store it or whatever

you're doing. So to separate the carbon out, I don't want to get too technical because I'm no engineer, but it is to separate the carbon out. You use chemicals to kind of scrub it out of the flue gas. It has a whole bunch of other stuff in it too. So you end up with pure carbon dioxide, which is a lot easier for you to transport. So then you capture the carbon, make sure it's just carbon. You pressurize it into a liquid state and you chuck it in a pipeline and the just carbon, you pressurize it into a liquid state and chuck it in a pipeline and the pipeline goes wherever you want to use it or wherever you want to store it. Okay. Okay. So when we're talking about wherever you want to use it or store it, like usually this is being put somewhere in the ground, right? And is that, I mean, does that, is that bad

for the environment to just put this carbon in the ground? It seems like maybe not a good idea, but yeah, how does that work? Well, okay. So basically, carbon can kind of, it can seep into spaces in porous rocks, right? So you can store a whole bunch of it in a relatively small area. And oil and gas reservoirs are actually really well suited to store that because they have these layers of porous rock formations that have actually trapped the oil and gas for years. So you're kind of just, well, shoving the stuff back in there, which is the carbon. We're talking about really deep aquifers and permeable rocks.

So think sandstone and limestone. So there's actually kind of space within that because it's so porous for the injected gas to live, to occupy. But if you look at the Canadian Shield, you look at really hard rock, it just, it can't store the captured carbon. There's nowhere for it to go. So it can only be done in certain parts of Canada. But yeah, you are correct in that there are some concerns about it. I mean, when you're injecting the carbon underground, it's very, very, very deep, like a couple of kilometres deep. And, you know, these are natural reservoirs

and they have overlying rocks that kind of form a seal. So the idea is it keeps the gas contained. But of course, there are risks to underground storage. I mean, Mother Nature can be a bit tricksy-dicksy, can't she? So it's hard to predict, really, what the future holds for that stored carbon because things happen below the earth all the time. But right now, the thought is if you develop the, you know, you've got the skills, you've got the expertise, and you develop really good rules and regulations about it, hopefully you lower those kind of concerns. Okay. All right, so sometimes it sounds like we put it in the ground and we store it there, but you mentioned something about sometimes we can actually use it.

So what is that about? Yeah, so there are a few different uses for carbon, and it's actually kind of, it's a really interesting area. So there's a company in Quebec, for example, they've got this really neat technology and it uses captured carbon and industrial byproducts to produce this kind of cement-free carbon negative concrete, which is really great because concrete is extremely carbon intensive

and it's actually stronger than cement-based concrete as well. In Nova Scotia, there's another company that injects carbon into concrete so you get concrete with a lower carbon footprint. That's a really interesting way that this captured carbon can be used. You can use it in carbonisation of drinks, but there's actually, you can use it in soap, and I kind of love this example. Yeah, I know.

Wow. There's a really cool company that started here in Calgary and it converts carbon captured from building heating systems. So think boilers, water heaters, furnaces into soap. And I look, I don't want to sound like I'm sponsored by big soap here, but it gives us really soft, smooth lather. Like it is for real nice soap. It's a really nice soap. And no part of it ever kind of turns back into carbon dioxide. So you've kind of

done your part to reduce greenhouse gas emissions. It can also be used in enhanced oil recovery, which is when you kind of pump it into the ground and you use it to get more oil out of the ground. And from what I understand, though, that's actually the more common use for captured carbon, right? This is where it's being used most often. Yeah, for sure. To get more oil. And actually, that's how carbon capture kind of started, this idea of enhanced oil recovery, because companies were like, oh, hey, we're wasting a whole bunch of carbon here. I wonder if we can use that and get more oil out of the ground.

So that's exactly what happened. And it was first used in 1972 in Texas. And it really became an economic driver of the technology and how it kind of gained footing in the oil and gas sector. It's value adding to a waste product from your production. So you might as well capture it, you use it, and you kind of inject it down into the ground and it creates this pressure against the oil. So the oil might have like fallen down into the reservoir at it creates this pressure against the oil. So the oil might have like fallen

down into the reservoir at a really low level and, you know, your pipes can't get down to it as easily. If you just put in a well next to that, put in some carbon and it pushes to the side and then it kind of squishes the oil up and then, you know, you get more oil out of the reservoir. So that's how it's been used in a lot of places and is still being used in a lot of places in oil and gas. How many carbon capture projects do we actually have in Canada right now? Yeah, and it kind of depends on how you want to measure them. There are like seven or eight, mostly in the oil and gas sector, but there are a few big ones. But they only capture about

half of a percent of national emissions. It's a huge amount of money to basically build any carbon capture technology. We are talking in the billions. It's not hugely utilized around the world or in Canada at this juncture. Okay, so billions of dollars to do this kind of thing. I guess people must wonder, right, how effective are these sites? Like how much of the carbon that's being produced at these facilities is actually being captured? Yeah, and that's a fun question too. So actually the Quest project, so that's run by Shell at the Scotford Upgrader. So that captures around a third of carbon emissions. So, you know, 33% or thereabouts. It's not nothing. And 30%, probably

nothing to sneeze at. I mean, that's talking about, you know, 27 million tonnes over the Upgrader's 25 year life, right? But it is different on different technologies as well. So, you know, on natural gas power plants, for example, you can put it, you can put it on an upgrader, but it works most effectively where you've got those really high emitting facilities that are just like belching out carbon because you can capture it more easily, right? We'll be right back. So we've talked about how this works, but what are some of the concerns then with carbon capture technology?

Right, so there are a few concerns about carbon capture. I mean, off the bat, it is expensive. Like, this stuff is pricey. You know, we're talking about billions of dollars and then it doesn't even capture everything. I mean, you're not just, you know, chucking a lid on a flu from a facility and going, there we go. We got ourselves all the carbon. Good job, everybody. So there are those concerns that it's also really hard to scale. And if you're in a smaller facility, are you going to be paying an absolute ton of cash

to capture carbon emissions when it may not be economically viable for the size of your facility? Then there are environmental concerns as well. So once you pump it underground, could it potentially leak out? And then what do you do? But there's also a really fundamental concern about carbon capture projects, which is it doesn't change our habits as human beings. And that's where carbon capture falls down is because it's not changing the fundamental behaviour of consuming fossil fuels, which is what is problematic and what is causing climate change. And so that is a lot of what environmentalists say about carbon capture is it's, we need to change how we're doing things. And this is just giving everyone the license to keep on operating

as we always have been as well. I understand there's also a concern that this technology isn't proven at the scale that we need, essentially, right? You touched on that a little bit. Could you just explain that a little bit more? Yeah, I mean, it does work in some senses, as we've talked about there. But at the end of the day, it hasn't been proven at the scale that would need it to be rolled out if we were going to be capturing enough carbon to make a huge, massive amount of difference. So the International Energy Agency has said, you can't just keep looking at carbon capture as a

silver bullet. It's not going to be practical across the entire oil and gas sector. And that is true. But you can't just like chuck carbon capture everywhere that you're, you know, getting oil and gas from the ground. But the oil sands is really interesting because it is a relatively small footprint. So the idea is you can work together a lot more easily as companies, and it means you're not having to have such a massive whack of infrastructure here, there, and everywhere. You can keep it quite contained. So the idea is you can use carbon capture on the oil sands

because it is such a unique way of getting oil and gas. Like, there's nothing else like it around the world. And so because we do have the geology here in Alberta to be able to store it, because they are relatively smooshed together in terms of space, there is an argument to be made that it actually can work. It is different in the oil sands, and that's why they're pursuing it in the way that they are very enthusiastically. So oil and gas companies are pursuing it. A lot of governments have really put a lot into this as well. So we've seen investments into carbon capture from the federal government and provincial governments. Emma, can you just walk me through what governments have put into this technology. Yeah, so the federal government has a tax credit.

So it'll be up to 60% if it's direct air capture, which is a whole other kind of technology, but it's basically pulling carbon directly from ambient air. And then up to half for other kind of carbon capture expenditures. Here in Alberta, the provincial government just announced a new program only a week ago or a couple of weeks ago at this point. Basically, it's a grant program. So once the project is up and running, it will cover up to 12% of eligible capital expenditures. But companies are definitely looking at these two programs as a way that they can help build out

their carbon capture projects. I guess I'm just wondering, though, like, why is this the thing that governments are betting on? Like, given all the concerns and the costs that we've talked about, Emma, like, why are we seeing federal government and provincial governments invest so heavily in carbon capture? You know, it depends on who you ask that question. I'm sure that if you were to ask some environmental groups, they would say because of pressure from the oil and gas sector. But at the end of the day, if you want to reduce your emissions, you've kind of got to use all of the tools, right, in your toolkit.

And that's what governments will say as to why they're supporting this thing. Because, yes, it's an absolute ton of money to do it, but it is something that you can implement to continue your reliance on fossil fuels. And Canada is economically extremely reliant on fossil fuels. It's a ton of our GDP. So if you were to take away the money that we get from revenues from oil and gas, I mean, you'd be in real trouble. But carbon capture allows you to keep getting those revenues and keep using them. You can continue the economic benefit, basically, of using oil and gas, of selling oil and gas on the market. So, yeah, so what you're saying is so carbon capture kind of allows us to reduce emissions without actually cutting production. So we're still producing oil and gas, but we're doing this other thing to kind of offset it.

Exactly. And there are companies exploring new ways of capturing the carbon as well. There's a lot of technological advancements happening in this area that could potentially reduce costs, that could make it more effective as well. So the hope is if you roll it out and incentivize more companies to use this stuff, you're going to make the technology better and you're going to make it cheaper. And therefore we can use it even more and even more effectively. I guess when it comes down to it though, Emma, like what really matters here is if we're successfully reducing emissions, right? And so far, Canada has been lagging in actually doing that. So how far will these moves that we're seeing in the oil and gas industry, how far will they go to help us actually achieve our emission targets?

Well, yeah, I mean, you are right. Like in 2021, Prime Minister Trudeau said that Canada is going to cut its greenhouse gas emissions by at least 40% below 2005 levels by the end of the decade. So by 2030, we're getting closer to 2030. And the Environment Commissioner has said, look, we're on track to miss it yet again, because Canada just has never met any of its climate targets. And so, in fact, it's the only G7 country with higher emissions than 1990. So, you know, we're only seven years out from Canada's next emissions reduction deadline. And that's where the federal government is really pushing to get these programs running. So this emissions cap, the oil and gas emissions cap, the idea is you have it running by 2030. By that point, oil and gas companies will have had to reduce their emissions between, you know, up to 23%. That's kind of where the federal government is eyeing carbon capture as a real tool to help lower those emissions. Because right now, Canada does not look particularly good

on the international stage. Emissions are very high. The oil sands do have an extremely high environmental footprint compared with the global average of producing oil and gas. So Canada needs to do something to improve its international reputation here. And it just believes that having an oil and gas emissions cap is one way to do that. And one way to achieve that cap is by pulling in carbon capture and supporting it and rolling it out and hoping that it will cut emissions at a reasonable amount so that it's

worth for companies to do it. Emma, it was great to talk to you. Thank you so much for being here. Always a pleasure. That's it for today. I'm Maina Karaman-Wells. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Adrian Chung is our senior producer, and Angela Pachenza is our executive editor. Thanks so much for listening and I'll talk to you tomorrow.