The Canadian oil sands industry’s plans for a C$16.5-billion carbon capture, utilization and storage (CCUS) megaproject in Alberta would likely be “scuppered” without continuing financial support from taxpayers, analysts at the Wood Mackenzie energy consultancy conclude in a report issued last week.
The massive CCUS hub proposed by the Pathways Alliance, whose six members account for 95% of Canadian oil sands production, would apparently be the biggest project of its kind in the world, according to Wood Mackenzie’s analysis. But with Pathways due to make a final investment decision on the hub next year, WoodMac says the big question hanging over the project is not whether the current federal government will offer it a generous tax subsidy—but whether taxpayers will step up through the entire life of the project.
“The overarching question is who between government and industry is willing to underwrite the political risk… over a project that will take three to five years to build after sanctioning and need to operate for 20 to 30 years,” said WoodMac’s director of CCUS economics, Peter Findlay.
“The real challenge for Canadian CCUS then is not insufficient incentives—they are some of the most attractive in the world—but the uncertainty of their existence throughout project life,” he added. “The value of most of these incentives could be changed by political whim at any point during the project life—even going to zero.”
Which means that “if federal and provincial governments cannot collaborate to underpin this uncertainty, few CCUS projects will move forward and most, if not all of Pathways, will be delayed and potentially scuppered, as the industry has threatened,” Wood Mac writes in a release.
Findlay maintained that, “while the federal government and much of the public expect producers to reduce their Scope 1 and 2 emissions, especially when profits are high, there are challenges that exist.” He called on governments and industry to “constructively work together and solve this uncertainty,” contending that “it is in all their best interest to do so.”
But in a scathing analysis released in September, 2022, the Calgary-based Pembina Institute concluded that Pathways members were steadfastly refusing to invest significantly in new decarbonization projects, even though they were flush with record amounts of cash. “Canadian oil and gas companies’ free cash flow is estimated to reach C$152 billion in 2022,” their highest profits ever, Pembina wrote at the time. But “this boom is not being accompanied by new projects in Alberta’s oilsands sector, or a significant expansion of jobs. It is also not being invested in decarbonization.”
Since then, Pathways has been lobbying the government for greater “certainty” on CCUS subsidies, and iPolitics reported earlier this month that the alliance is beefing up its lobbying presence around the federal tax credit.
Those discussions might be shaped or shifted by another Wood Mackenzie report that shows major fossil companies looking for new oilfields that will still be profitable if oil prices fall to about US$30 per barrel—a threshold that would suggest plummeting demand as the world decarbonizes. “After three major oil price crashes in 15 years, there is wide acceptance that another one is likely to happen,” said Alex Beeker, the consultancy’s director of corporate research.
Oil sands critics and independent analysts have repeatedly warned that a barrel of oil from oil sands bitumen is more expensive to produce (and a more carbon-intensive product) than competing supplies in other parts of the world.
Meanwhile, seven First Nations in Alberta are raising questions about Pathways’ plan to store millions of tonnes of carbon dioxide beneath or adjacent to their traditional lands, The Canadian Press reports.
“We don’t know how pumping carbon underground will affect our lakes, our rivers—even our underground reservoirs,” said Beaver Lake Cree Nation Councillor Michael Lameman, one of seven members of the Treaty 6 working group. He added that industry’s response to those concerns has “been vague, not very forthcoming.”
“There’s lots to be checked as far as the project relates to both the safety of the environment and the communities,” said Darryl Steinhauer, consultation coordinator for the Whitefish Lake First Nation. The Pathways project “is inclusive of eight Nations where people are not only practicing their treaty rights but living there day to day. Safety is a big concern.”
In addition to Beaver Lake and Whitefish Lake, CP says the Treaty 6 working group includes Heart Lake First Nation, Kehewin Cree Nation, Frog Lake First Nation, Cold Lake First Nations, and Onion Lake Cree Nation, with Saddle Lake Cree Nation participating as an observer.
Pathways Executive Director Kendall Dilling said the industry is doing its best. “We are in the early stages of consultation with communities,” he told CP in a statement. “We are dedicated to working together with Treaty 6 First Nations and ongoing discussions will take place in a confidential manner.”
