Varcoe: New Pathways Alliance executive chair says carbon capture network nears 'end of runway', but not there yet

‘No one has done this before, and certainly nobody’s done this before on this scale,’ said Derek Evans with Pathways Alliance

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Call it a case of unfinished business.

Derek Evans officially stepped down as CEO of oilsands producer MEG Energy at the end of April, but it didn’t take long for him to find a new gig.

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His appointment as executive chair of Pathways Alliance, which is expected to be a two-day-a-week position, could require more time and energy to see the country’s largest oilsands producers move forward with an ambitious $16.5-billion carbon capture network in Alberta.

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And that’s just fine.

“This was a piece of work that wasn’t finished and wasn’t done. And it’s very important to me, personally and professionally, to get this across the line,” Evans said in an interview Monday.

“I will do whatever it takes to make this thing happen. That’s how important I think this is.”

An industry veteran, Evans had served as the chief executive of MEG Energy since 2018.

He led the Calgary-based company as it became one of the founding members in 2021 of the Pathways Alliance consortium of oilsands operators, along with Suncor Energy, Imperial Oil, Cenovus Energy and Canadian Natural Resources, and was later joined by ConocoPhillips Canada.

The companies are working together to reach net-zero emissions by 2050.

The initiative is essential for the oilsands industry, as well as the province and country, to reach net-zero targets. Alberta has the highest emissions among the provinces.

The oil and gas sector was responsible for 31 per cent of Canada’s emissions in 2022; the biggest contributor within the industry was the oilsands at 87 megatonnes.

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When Pathways was formed in June 2021, the group unveiled plans for a foundational carbon capture and storage network, with a pipeline connecting more than 20 oilsands facilities to an underground storage hub near Cold Lake.

The proposed development will be one of the largest carbon networks in the world, aiming to capture 10 to 12 megatonnes per year.

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While an initial regulatory application for the pipeline was made earlier this year, the group has not made a final investment decision. It remains in talks with the federal and provincial governments about incentives needed to see the development progress.

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When the alliance was formed three years ago, Evans called it a watershed event: “I am going to be going home tonight and be able to look my kids in the eye and say, finally, we have turned the dial on this. We are going to make this thing happen.”

But construction hasn’t started yet, prompting Natural Resources Minister Jonathan Wilkinson in February to criticize the lack of progress on a final investment decision on the project. Ottawa wants to see the group order the pipe that’s required for the CO2 line.

Evans said the parties are continuing to make progress.

“I would say the biggest concern I have is how naive I was in 2021 with respect to how quickly we could move things forward, and that’s not an indictment on the federal government or the provincial government,” he said.

“No one has done this before, and certainly nobody’s done this before on this scale.”

Evans said capturing post-combustion CO2 in low percentages has created challenges for governments, for “what they would consider potentially as higher levels of support than they . . . would think that is necessary.”

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Pathways Alliance Cold Lake CCUS project
An employee with the Pathways Alliance explains how a proposed carbon capture and storage project based in Cold Lake works during the Oil Sands Trade Show at Shell Place on September 13, 2023. Vincent McDermott/Fort McMurray Today/Postmedia Network

The Trudeau government has promised to create an investment tax credit to cover up to half of the capital expenditures for carbon capture and storage projects. It will also provide carbon contracts for difference to offer longer-term certainty on the future price of carbon for such developments.

In Alberta, the province has introduced a program to offer a 12 per cent grant to eligible carbon capture developments.

“We’d love to make a pipe order, but we can’t make a pipe order until we have that fiscal certainty . . . We are getting closer and closer to the end of that runway, but we’re not there yet,” said Evans.

“The oilsands industry is not dragging its feet.”

Environmental groups, however, have said the oilsands sector isn’t going fast enough.

Simon Dyer, deputy executive director of the Pembina Institute, said there are already enough public subsidies on the table to move. It’s not reasonable for the oilsands sector to expect a level of certainty or support that isn’t provided to other industries, he added.

“It is time for companies to invest,” Dyer said.

“This cannot be conditional on the government paying the majority of the freight on this.”

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However, the cancellation of Capital Power’s planned carbon capture project earlier this month at its Genesee Generating Station highlights the complexities of advancing such developments as the country strives to decarbonize.

Genesee Generating Station
The Genesee Generating Station operated by Capital Power in Genesee, Alberta. Handout phtoto

Michael Bernstein, executive director of Clean Prosperity, a Canadian climate policy group, said it’s important to have greater certainty around the industrial carbon pricing system.

The federal carbon contracts for difference should be expanded so they incentivize the proponents of carbon capture and storage projects to move forward.

“These businesses aren’t going to put billions and billions of dollars on the line without it making economic sense to do so,” Bernstein said. “The biggest trigger is how do we get a systematic contract for difference program, which we don’t have today.”

Asked if there are enough incentives to move forward, Evans said he sees commitment from the federal and the provincial governments to find a way to get this done.

“I would not be sitting here in this chair with these sorts of incremental responsibilities if the Pathways Alliance didn’t feel that they were still committed and wanted to move this project forward as fast as we possibly could,” he said.

“I fully believe this is going to happen.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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