The first large-scale effort to capture carbon dioxide emissions in the Canadian oil sands surmounted a crucial hurdle this summer with the signing of government agreements to underwrite nearly two-thirds of the $1.35 billion project's cost.
The Quest Carbon Capture and Storage project still must pass regulatory hurdles before a consortium led by Shell* makes a final decision to go forward with its share of the investment. Although Quest would rank among the half-dozen largest carbon capture and storage (CCS) projects in the world, sequestering 1.2 million metric tons of CO2 per year in the deepest saline aquifer of Alberta, environmentalists point out the amount is just a small fraction of the greenhouse gas emissions from the province's oil sands operations.
Proponents say the large investment in a pilot effort is important, to prove that Alberta has both the technology and geology to address the CO2 emissions that have marred the exploitation of its vast oil wealth.
An Oil Bonanza, With a Cost
Alberta's oil sands, also known as tar sands, are one of the world's largest petroleum reservoirs. It was long thought to be too expensive to extract oil from the mixture of sand, clay, and water there but the higher global oil prices of the past decade made it feasible. As a result, Canada catapulted to the top ranks of nations in proven oil reserves, behind only Saudi Arabia and Venezuela.
But all of the mining, cooking, and upgrading required to convert the sticky bitumen from the sands into crude oil releases 1.6 times more greenhouse gas than conventional oil production, according to the Canadian government's environmental agency.
(Related: "The Canadian Oil Boom: Scraping Bottom" and Photos: Canadian Oil Sands)
Because of the emissions and an array of other environmental concerns, including tailing ponds, water consumption, and risk of leaks, the operations have become a target of environmental activists. This Saturday, they launch two weeks of protests in Washington, D.C., against plans for the Keystone XL pipeline, which would increase oil sands imports into the United States. The U.S. Energy Information Administration projects the oil sands are on track to be the largest single source of U.S. crude imports.
(Related: "The Keystone XL Pipeline: A Tar Sands Folly?" and "Yellowstone Spill Shadows Efforts on the Keystone XL")
The Quest project is aimed at capturing the emissions that result from an intermediate step of the oil sands process, called upgrading.
The bitumen that is either mined or steamed out of the sands (at great energy cost) may be upgraded on site or transported vast distances by pipeline.
Quest would be located at an upgrader for oil pipelined some 375 miles (600 kilometers) away from the oil sands to a region near Edmonton known as Alberta's industrial heartland. At the site, there are facilities for heating and compressing the bitumen while adding hydrogen to the naturally carbon-rich mix to produce synthetic crude oil. The unit that makes that hydrogen by heating steam and methane subsequently creates a concentrated stream of CO2—and that's the Quest project's target. The CO2 will be captured with an amine solvent, compressed into a fluid, and transported by a 12-inch (30-centimeter) pipeline for some 50 miles (80 kilometers) to the middle of an agricultural area northeast of Edmonton. There, it is to be injected by wells more than 1.25 miles (2 kilometers) underground, into the deepest saline aquifer in Alberta.
Shell says Quest will cut CO2 emissions at its Scotford Upgrader near Edmonton by 35 percent and will store up to 1.2 million tons of carbon each year—the equivalent of pulling some 175,000 cars off the road each year for the next 25 years. The government of Canada and provincial government of Alberta on June 24 signed agreements with Shell to provide $865 million in funds.
The bulk of that money, $745 million, is to come from Alberta's $2 billion Carbon Capture and Storage Fund, and represents the largest of four CCS projects it aims to underwrite with the program it established three years ago.
Quest, being advanced by the Athabasca Oil Sands Project (AOSP)—a joint venture among Shell Canada Energy (60 percent), Chevron Canada Limited (20 percent), and Marathon Oil Canada Corporation (20 percent)—would be an oil industry first. Although there are a handful of similar scale projects around the world, most notably two offshore Norway and one in Algeria, this would be the first that tackles emissions from unconventional oil or gas operations.
An important aim of the project is to show that in addition to having geology rich in oil resources, Alberta may also have the right underground formations for storing carbon.
Stefan Bachu, who holds the title "distinguished scientist" at Alberta's provincially funded research organization, Alberta Innovates Technology Futures (AITF), said the saline reservoir that the Quest project has chosen for storage is capped by hundreds of meters of solid shale, overlaid by an additional layer of tight salt rock.
"It's very safe, very secure geologically," said Bachu, who shared in the 2007 Nobel Prize as a member of the Intergovernmental Panel on Climate Change. "I am absolutely convinced that the storage will be a success."
Quest scientists chose an area where geology is stable, with no natural fractures and faults to allow gas to escape. The other cause of potential leaks, old "legacy" wells, is also minimal because the deep saline aquifer where Quest's CO2 will be stored has no oil or gas resources and as a result has not seen drilling to any significant extent.
"This basal Cambrian sands formation was formed 500 million years ago when these parts of the world were tropical shorelines," said Shell's Ian Silk, the Quest project manager. "We essentially have about 130 feet (40 meters) of beach sand that's perfect for the deposition of CO2."
Silk added that the project might also prove that the basal Cambrian sands, a formation widespread throughout Alberta, can be an important resource for long-term CO2 storage. "That's important because the provincial economy has a heavy hydrocarbon basis, not only oil sands but conventional oil, natural gas, and coal," he said. "The government is mindful of the need for carbon mitigation and fortunately I think the natural capacity for storing CO2 is equal in scale to the natural hydrocarbon resources in Alberta."
Scale certainly is an issue in the oil sands, notes Chris Severson-Baker, managing director of the Pembina Institute, a Canadian environmental organization that monitors the industry via www.oilsandswatch.org. "The real challenge is in proving not so much the capture part but that you can pipeline and inject this CO2 on a very large scale into a deep saline formation," he says. "If you want to look at this as a big research project, the goal is to have a commercial operation that does all of those things and can be replicated and scaled up."
Sally Benson, an expert in carbon capture and director of Stanford University's Global Climate and Energy Project, said that a project like this will build on the experience that the oil industry has had since the 1970s injecting CO2 underground for enhanced oil recovery, or coaxing more oil out of reservoirs. "It's very well known how to do this," she said. "We have over 400 natural gas storage projects in the United States which use the same storage technology and by and large people don't even realize that they exist . . . It sounds radically new if you haven't thought about the fact that there are a lot of places where oil and gas are naturally trapped and stay in reservoirs for millions of years."
Benson, who is an adviser to National Geographic's Great Energy Challenge initiative, views the Quest project as a step in the right direction. "If successful," she said, "it could set a precedent for other operators to further reduce carbon emissions across a whole set of activities."
Only a First Step
That would be important because, as Severson-Baker notes, the Quest project would tackle only a fraction of the oil sands' carbon emissions problem.
"There are many sources of greenhouse gas emissions from oil sands and the major sources of emissions are from mining the bitumen or injecting steam into the ground to do in-situ recovery," he said. "This is one very specific source. And the real success would be if CCS could be applied in a post-combustion scenario, on the turbines and boilers," which he says are a major source of greenhouse gases in the oil sands sector. "But that's going to be a lot more costly."
Environment Canada calculates that upgraders produce about 40 percent of the CO2 emissions across the entire chain that creates crude from oil sands. (The majority comes earlier in the process: 40 percent from steam extraction and 20 percent from mining of bitumen.). But there is an advantage in going after the CO2 gas at an upgrader facility, because it produces a nearly pure CO2 stream—a target that Bachu described as "the low-hanging fruit."
Even so, the effort is an expensive one.
"No carbon capture operation is economical," Bachu said. "Carbon capture and storage is a cost. There are only two ways to bring the industry to do this: the carrot or the stick."
In the Quest project, it's the "carrot" of government subsidies propelling the project. But Bachu stresses that money is available only because the project is a unique first chance to demonstrate that the technology exists to do this type of carbon capture safely and securely on a large scale. "This is not tenable in the long term. It would bankrupt governments that are already in a difficult financial position," he said, adding that in any event "the industry cannot be subsidized on the scale needed to make significant reductions in greenhouse gas emissions."
Bachu said the alternative is a carbon tax or price that would force industry to apply and further develop the technology (while noting such a tax would ultimately be passed along to consumers). It was Norway's decision to impose a hefty tax on offshore CO2 emissions that spurred the two capture projects there. But few other places have followed suit so far.
In 2007, Alberta did enact a small carbon tax of $15 per ton of carbon on industries that surpassed certain emissions thresholds. The cost of the Quest project, for the emissions it aims to capture over 25 years, adds up to $43 million per ton.
"The funding gap is one of the big challenges to rolling out these kinds of projects on a much bigger scale," says Shell's Silk. "The main issue is the reluctance of governments to move forward with a significant carbon price and it has to be significant because the cost of abatement is significant."
The level of government funding for the project has drawn criticism, with the Alberta parliament's opposition party leader, liberal David Swann, saying that at least half the investment would be better spent on public transit, renewable energy and energy retrofits. "There are cheaper ways to reduce carbon," he said, according to the Calgary Herald.
And Ed Whittingham, executive director of Pembina Institute, is among the environmentalists who have raised alarms about other aspects of the government subsidies for the project. Alberta is providing two-for-one carbon offset credits for the project that they argue could have a perverse market impact of increasing greenhouse gas emissions. But Whittingham supports government spending on CCS, especially for a project like Quest, which goes beyond research into actually capturing carbon. "Right now the carbon price just isn't enough to incite the polluters to do this on their own," he said. "They need some kind of incentive. It would cost Shell a lot less simply to emit the CO2 and pay the existing carbon tax."
Shell says that even taking into account the government subsidies, Quest marks a significant investment for the company in CCS despite challenging economics. "We are willing to make this investment because we believe (it) could make a significant contribution to the global knowledge on CCS that will help to lead the way to get more projects up and running," said spokeswoman Adrienne Lamb.
If the Quest project receives regulatory approval and the companies decide to go forward, it would begin capturing carbon in 2015.
(Related: "Out of Thin Air: The Quest to Capture Carbon Dioxide")
*Shell is sponsor of National Geographic’s Great Energy Challenge initiative. National Geographic maintains autonomy over content.