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ENEV - Standing Committee

Energy, the Environment and Natural Resources

 

Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue No. 25 - Evidence - April 11, 2017


OTTAWA, Tuesday, April 11, 2017

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:05 p.m. to study the effects of transitioning to a low carbon economy.

Senator Richard Neufeld (Chair) in the chair.

[English]

The Chair: Good evening, colleagues, and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.

My name is Richard Neufeld. I am honoured to serve as chair of this committee. I am a senator from British Columbia.

I wish to welcome all those who are with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, these committee hearings are open to the public and also available online on the new Senate website at sencanada.ca. All other committee-related business can also be found online, including past reports, bills studied and lists of witnesses.

I would now ask senators around the table to introduce themselves.

Senator MacDonald: Michael MacDonald from Nova Scotia.

Senator Fraser: Joan Fraser from Quebec.

Senator Patterson: Dennis Patterson, Nunavut.

Senator Seidman: Judith Seidman from Montreal, Quebec.

Senator Griffin: Diane Griffin, Prince Edward Island.

The Chair: I would also like to introduce our staff, beginning with the clerk, Maxime Fortin, and our Library of Parliament analyst, Sam Banks.

Colleagues, in March 2016, the Senate mandated our committee to embark on an in-depth study of the effects, challenges and costs of transitioning to a lower-carbon economy. The Government of Canada has pledged to reduce our greenhouse gas emissions 30 per cent below 2005 levels by 2030. This is a huge undertaking.

Our committee has taken a sector-by-sector approach to this study. We will study five sectors of the Canadian economy that are responsible for over 80 per cent of all greenhouse gas emissions. They are electricity, transportation, oil and gas, emission-intensive, trade-exposed industries and buildings. Our first interim report on the electricity sector was released on March 7.

Today, for the fortieth meeting on our current study, I am pleased to welcome, by video conference, from Shell Canada, Tim Wiwchar, Portfolio Business Opportunity Manager.

Thank you for joining us, sir. We look forward to your opening statement, and then we will go to some questions and answers. The floor is yours. Thank you for being here.

Tim Wiwchar, Portfolio Business Opportunity Manager, Shell Canada: Thank you to the Senate committee for inviting me, Tim Wiwchar, and Shell to talk about our Quest CCS project.

Just a little bit of background about myself: I have 23 years of industry experience, 15 of those with Shell. I have spent more or less the last 6 years working or associated with Quest through the development, construction, start-up and, lately, the operation of our project. In the last several years, I have acted as the project lead for the Quest project. Over that time, I have had a lot of exposure to not only the CO2 but, specifically, to CCS and the potential that it has in reducing our CO2 emissions.

Although I'm talking to you as Shell in oil and gas, the one important takeaway I want to share with folks is that this technology, carbon capture and storage, can be actually applied across numerous industries, such as fertilizer, cement, power generation, as well as oil and gas, including refining and petrochemicals.

I'm turning to page 4 of the slide deck, for those who are following along.

We often get the question: How did Quest come to be? In 2000, Shell Canada established an external climate change advisory panel, and even in the broader group of RDS, there was significant interest in the CO2 world. About mid- 2000 is when CCS — carbon capture and storage — became important to Royal Dutch Shell, and we started to explore how we would deploy this within the company.

Interestingly enough, in Canada, with Canadian folks and technology, Quest was being positioned as one of those leading entries in Royal Dutch Shell for carbon capture and storage deployment. Through 2008, a lot of traction took hold with Quest, not only within Shell Canada but also within the group, and we were able to take a final investment decision in 2012 that allowed us to start building the project.

Turning to slide 5, one of the key things we looked for by working with the government was the government's support. This project would not have gotten over the line, as we say, without significant government support.

To put a project like this together — that is, engineering, development, construction, commissioning, start-up and 10 years of operation — cost about C$1.35 billion. Both the Governments of Alberta and Canada were significant contributors in our partnership.

The Alberta Government contributed $745 million. That was paid over three phases of the project. The first phase of $298 million was paid through the construction phase, where we had performance criteria. That is, we had to hit seven milestones that had to be independently verified by a third party engineering firm. We had $149 million to pass three commercial tests during the commissioning at start-up. The remaining $298 million is predicated on basically capturing 10.8 million tonnes over 10 years of operation. All of that funding is and was performance based; that is, subject to us hitting milestones.

The federal government's funding of $120 million was provided to help with the front-end engineering of Quest. That totalled $865 million, which is a very important piece in getting Quest across the line.

With that, there are some criteria that we have to pass. I mentioned the performance criteria. There's also a very extensive knowledge sharing requirement both federally and provincially. Every year, through the construction phase and even in the operation phase, we provide a very extensive knowledge sharing and detailed report on everything from our detailed engineering drawings, to how we design the plant to our operating conditions, lessons learned, as well as where we've shared and helped others learn about our technology.

We also have a very important program around the subsurface. It's called MMV or measurement monitoring verification. Of course, to prove and get confidence in both the government's and the public's eye in the Thorhild county area where we operate and store the CO2, we had to provide assurances to both the government and the public that the CO2 would remain in place in what's called the Basal Cambrian Sands storage complex that is almost 2.5 kilometres below the surface. There is annual reporting related to our performance on the subsurface, three-year reporting updates and 10-year reports through the life of the project.

Finally, there's also a requirement here that we cannot receive any more funding, whatever the source may be, whether it's sales of CO2 or government funding, that's in excess of our costs for the life of the project. That's called the net revenue neutral requirement.

In this project, I think it's also fair to note that over 2,000 people were employed in the development, design and construction of the project, a very high local content. All the manufacturing of the pipe and material was done in Canada. We had one compressor that was in Germany and two towers in Korea. Everything else was either made in Canada or in Alberta. We had upwards of 900 full-time and part-time employees during the three year construction phase.

Quest itself is a fully integrated carbon capture and storage project. As the operator of it, that means we capture, transport and store the CO2 underground. The capacity that we've designed for — and actually have confirmed with our year and a half operation — is actually over 1 million tonnes per year for 25 years. We believe we have good capacity for that.

To put that in perspective, what is 1 million tonnes equivalent to? This comes from a variety of sources. One source is the U.S. Department of Energy benchmarks that they use for CO2 emissions from an average automobile. One million tonnes of CO2 equates to the equivalent emissions from 250,000 cars. This is a partnership with our partners Chevron and Marathon. That size of a million tonnes represents just around one third of the emissions from the Scotford Upgrader, and, as mentioned, this is over 2 kilometres below the ground in the Basal Cambrian Sands Saline Aquifer Reservoir.

To get it out to the storage area, we employ a 65-kilometre pipeline from the upgrader to three injection wells. This is on slide 7. The pipe is a 12-inch pipe, and we believe we have capacity for than a million tonnes there, and six-inch laterals out to the pipe.

You can see on the map how we followed the routing there. We were very diligent in selecting that route. We tried to minimize disturbances by following existing right-of-ways as much as we could south of the river that you see there called the North Saskatchewan River. We drilled under the river for the pipeline and then followed existing farm properties north of the river to get out to the three wells.

This area here is primarily farmland, so it's very flat. We had to work a lot with the farmers in the region as we did the disturbances during the winter season and then did the repairs and final touches to their land during the summer to make sure that their crops would be minimally affected.

Of course, one of the challenges we've received in the early days of Quest is the performance. One thing I want to emphasize is that the technology that we're actually using to capture the CO2 from the upgrader is actually technology that oil and gas has used for decades, from the mid-20th century. Essentially, we're now removing that CO2 and storing it underground. You can see by the performance that in August of 2016, we captured our first million tonnes, so we're actually ahead of target. We are seeing daily capture rates of 1.2 to 1.3 million tonnes per year equivalent, and we are now over 1.6 million tonnes project to date.

We're seeing excellent reliability with the operation, good integration with the existing operation as well, and good performance in the reservoir. We're noticing that our models are predicting good performance with the CO2 within the reservoir.

With that, I leave it as a summary of Quest and will open the floor to questions.

The Chair: Thank you very much for that presentation. We will begin with the Deputy Chair, Senator Massicotte.

Senator Massicotte: Thank you very much for your presentation. It is appreciated.

You're basically capturing 35 per cent of the CO2. Why only 35 per cent? Can you go higher?

Mr. Wiwchar: Yes. Not to get too far into the technical details, I would say this is the easier capture. This is what is called pre-combustion. The CO2 is in a stream that is a bit cleaner. We at Shell, through our council of affiliates, have post-combustion capture. We believe on the Scotford complex, including the refinery, that we have potentially another 2 to 3 million tonnes per year of CO2 that we could capture either pre-combustion or post-combustion.

With this first one, we wanted to start small and make sure we got this right and could demonstrate not only to the government but also to the public that this is a viable technology.

Senator Massicotte: You say "viable.'' For you to proceed from an economic point of view, your own firm, you obviously needed a significant injection of public money. I gathered if that was not available, you wouldn't have proceeded. Having said that, I presume there's a point, though, if the carbon price goes up to a certain level, you will be able to proceed with this kind of carbon storage without government money. What would that number be to prove the economics are right from a private firm to build that kind of facility?

Mr. Wiwchar: Our costs, when you include the capital and the operating costs and you discount it over the life, and this is stuff we have been reporting to the Government of Alberta, would be in excess of about $100 per tonne. We've been in the news for the next Quest, so the next version of this, we believe we could probably reduce that by 20 per cent to 30 per cent. A lot of that is, of course, through what we're learning now on how we would build it, so there are some savings that we can have on how we would engineer and construct it.

There are also some savings that we're starting to realize today. We had originally put out an operating cost of around $40 per tonne. We're seeing that currently, and of course with lower gas prices, below $30 per tonne.

We are actually looking at what that next one would be and believe that we can get that for 20 per cent to 30 per cent less than our first Quest.

Senator Massicotte: I want to make sure I understand the answer. At $60 or $70 a tonne, this would be justified. That would be presuming the same level of public financing or presuming no public financing?

Mr. Wiwchar: If we build this for 20 per cent to 30 per cent less, say at $70 per tonne OPEX and CAPEX, and your carbon price is $70 per tonne, you wouldn't need any public funding.

Senator Black: Thank you very much, sir, for your presentation. I'm interested in knowing a couple of technical things. Is there a storage capacity? Does it get to a point that you can't capture any more carbon because you have no place to put it, kind of like my closets?

Mr. Wiwchar: That is a very good question that we get. Let me put this in perspective. We have a 3,600 square kilometre area that we're essentially leasing from the Government of Alberta that is 2.5 kilometres below the surface.

To put it in perspective how big this basal Cambrian sands complex is, it stretches from the foothills of Alberta to the middle of Manitoba, basically from Grande Prairie down to the border. Actually, so we're just a little kind of pin drop in that entire area. After 25 years of operation, so 25 million tonnes in our leased area, we would only utilize between 7 per cent and 9 per cent of that CO2.

Senator Black: So effectively storage is not an issue?

Mr. Wiwchar: Storage, we don't believe, is an issue. There are studies that have been done by the U.S. government that show that — again, it's always site selected — in the U.S., Canada and even in Mexico, there is quite a bit of basal Cambrian sands type reservoirs available for storage.

Senator Black: Building on the excellent question that my colleague Senator Massicotte was asking you, what is needed to encourage others to do carbon capture and storage, from the government's point of view? Money, obviously, but is there something else that's required? We don't see the take-up that I would have necessarily expected given the pressures around GHGs. Why is that and what is required?

Mr. Wiwchar: If you look at some of the key things that we had to work through in the early days of Quest, one was a regulatory framework that recognized the storage of CO2 in the basal Cambrian sands, and for us in Alberta that recognition also provided us with the ability to get an offset credit at a carbon price. So when we were actually justifying this project, we were justifying this at $15 per tonne. Granted, Alberta is moving to $30 per tonne. Federally it's been announced the goal is to move to $50 per tonne. You're starting to actually close that gap where people start to observe and maybe study what it would take. There's a regulatory aspect and there's the carbon price aspect. Even we in Shell have advocated for $40 per tonne.

The other piece of the puzzle, of course, and we recognize this at Shell, is that we can't accept that we're going to build and operate this for over $100 per tonne into the future. We have to find ways through how we build it differently. There are new technologies that can come available whereby we can actually reduce that cost per tonne.

If we can build the next Quest, and we're actually looking at that right now, if we get 30 per cent and get somewhere between $70 and $80 per tonne and our carbon price moves up to $50 per tonne here — in California it's over $100 per tonne — if you start to close that gap where there's a minimal change or you're actually now in some aspects revenue positive as a result, I think you start to see people look at this because we've proven the technology itself. SaskPower has shown it, Petra Nova in the U.S., and there are a lot of these projects globally. It's regulatory, it's carbon price and it's our ability over time to learn and reduce our costs to build and operate.

Senator Black: That's very helpful.

I have a question on the recent transaction with Shell and CNRL. Are you now part of CNRL?

Mr. Wiwchar: I am still with Shell, and Shell still operates the Quest facility. As we know right now, we're going through the details. We'll still administer the relationship with the governments. It's still Shell-operated.

As per the funding agreements with both of them, all the information we get from Quest, you can go to the Government of Alberta, Department of Energy web page and get everything, like I said, from how we built this, detailed engineering drawings to operating costs and everything.

Senator Fraser: Thank you very much for this. It's truly fascinating. The first question I had wanted to put was, fortunately, put by Senator Black, which was about capacity. Let me go on to the next two questions, if I may.

You talked about there being capacity in North America, but there are emitters all around the world. Are there also similar geological formations in other parts of the world that could use this technology?

Mr. Wiwchar: I don't know the numbers, but in Africa and in Norway they have permanent injection into saline aquifers. One was actually before our time called the Insula project in Nigeria. The saline aquifer itself is actually available on every continent. The one thing you always have to look for is its ability to permanently store it. That's what the subsurface geological folks can determine, but my understanding even through an NGO called the Global CCS Institute, based out of Australia, they've done some of that work and it is available globally. It isn't just a North America phenomenon.

Senator Fraser: Terrific. I'm assuming that includes Russia.

That leads me to my second question, which is, given that my middle name is Cassandra, what are the possibilities of something going wrong, for major leakage, for basically some kind of disaster occurring?

Mr. Wiwchar: We've run those scenarios, and we've actually worked them with the local folks. As I highlighted, one of the important things that we have seen in this area and why we selected it is there is a very important geological formation through three different layers just above the basal Cambrian sands saline aquifer. The first is what's called the caprock generically, and it's basically an impermeable rock that basically acts as what its name is, a caprock. There is no CO2 or gas that can go through it. That exists around the world. That is how gas, even acid gas, formations store it. It has to remain intact. Of course, through our subsurface technologies, we can detect even the smallest cracks in there.

The other two layers that we have in the region that provide a good sealing mechanism are two salt layers. One is about 40 metres thick and the other is about 80 metres thick, and the salt layers actually provides a nice tight sealing mechanism should that cap rock get cracked.

The good news is, in Alberta, we don't have earthquakes like they do in Japan, so we have good confidence. Part of our MMV program is to, on an annual basis, provide the confidence that we're seeing in that sealing mechanism.

To put it in perspective of how big this plume would go after 25 years from each injection point, I've talked about a 3,600-square-kilometre zone. The extent of the plume, with what we're seeing right now, would be only about three to four kilometres radial from each of the injections. It's contained quite tightly there.

We've even done the scenario for, let's say, it did even go beyond the salt layer. Let's say we had a probability where your caprock was cracked and the salt layers leaked. About half a kilometre above that are old oil wells where the CO2 would eventually enter into and act as a storage mechanism as well.

We do monitoring in the subsurface. We do monitoring in the groundwater, because in that area, that's how the locals get their potable water. There are over 500 groundwater wells in our zone. We sample them and break up over 200 of them on a quarterly basis, and particularly the ones within that radial extent that we believe will happen.

If you turn to slide 15, if you're following along, that gives you a graphical view of what I was trying to describe, the different layers for the seals.

As part of our measurement, monitoring and verification program, we also test the groundwater. We also test the soil for CO2 concentration, and we also have air monitoring of CO2.

One of the things we've talked with the public about as well, and to put CO2 into perspective, we've done modelling on what happens if there were a pipeline leak. So there's a 65-kilometre pipeline. We've modelled it, and the way we've designed it is that let's say there was a major rupture from the pipeline. We've done our emergency response planning related to it. We know there would be a 4 per cent concentration of CO2 in the emergency planning zone, and we've done all the work with the neighbours on how we would deal with that. To put 4 per cent CO2 into perspective, that's what we exhale in our breath. We resuscitate people back to life with 4 per cent CO2. To put it into perspective, CO2 isn't this nasty thing that maybe is attributed to H2S. We use it in dry cleaning, in the Coke we drink, in fizzing water. We use it in dry ice for drama stages and in plays. It is quite prevalent. We use it in fire extinguishers. It is something that we use in our day-to-day lives.

Senator Griffin: In your slides, you mention that sharing of the knowledge is one of the conditions, and you also mentioned some visitors to the site. What else are you doing to share the knowledge, and has there been much interest or uptake of this?

Mr. Wiwchar: We've had a couple of visits from the government in China, Norway and the U.K. During those visits, we've explained to them how we got Quest to cross the line from a funding, regulatory and technical perspective. These entourages usually involve a broad group of folks from policy and government regulations to technical folks.

We also work with an NGO called the Global CCS Institute, which is their specialty. Last summer, we put on a summer school, if you will, a two-day session, where there were folks from Italy, from the universities. There was Italy, U.S., Great Britain and Germany. We put on a two-day session — one day of classroom, one day of field — so they could learn and see what Quest is all about, how we operate and staff it, how we monitor in the facility. We've even sponsored a couple of students from Great Britain to come and learn. They provide us a service, and we provide them some knowledge and experience.

Senator Griffin: As you know, the federal government has a commitment to reduce emissions by 30 per cent below the 2005 levels by 2030. What are your thoughts on this target? Is it achievable?

Mr. Wiwchar: When you look at the full spectrum of technologies through solar, wind and CCS, if we have a view that they don't compete against each other but you use them collaboratively and working together, I think it's possible. One of the things we would learn from Quest is that we started the idea in 2008 and had a start-up in 2015. That's seven years. We would try to shorten that gap as well. If you try to look at one technology only, I'm not sure you'll get there. If you look at all the technologies, renewables and CCS, I think it's possible.

Senator Seidman: Thank you very much, Mr. Wiwchar, for your presentation.

Senator Fraser pretty much asked the question I have, but I might approach it in a slightly different way. It's regarding any environmental concerns that might be associated with the storage facility in the pipeline. You said you do measurement, monitoring and verification, and you talked about how CO2 could be the issue. Are there any other environmental concerns associated with the storage facility or the pipeline?

Mr. Wiwchar: The other one that we proactively managed, of course, and one of the things that we get maybe erroneously related to, is fracking. We actually do have earth movements, called a micro-seismic detector. Each of the injection wells has a deep monitoring well, and in one of the deep monitoring wells we have a micro-seismic device to detect if there are even micro-into-the-negative Richter scale movements. We've only seen one minor one recently. The sensitivity of this device is such that we've measured earthquakes as far south as Montana. We haven't seen any. Those are questions from the public, but that is something we've monitored pre-injection and will monitor during the injection. To date, other than just a very small blip, we haven't seen any of those events.

Senator Seidman: So there are standards for understanding what you're looking at in terms of measurements and things like that. These are well-developed standards. It's a new technology, but the standards for understanding any potential environmental problems are well developed and accessible. Is that what you're saying?

Mr. Wiwchar: Through what we've developed on our behalf and actually have verified independently by Det Norske Veritas, we've set the standard, if you will, for what we would be monitoring for. To put it in perspective, a lot of the subsurface technologies are available in oil and gas, and the surface monitoring is available.

There are entities that we're involved in through ISO and even the Government of Alberta, where what we're learning through this, and one of the things on which we have an agreement, is what we've put in place is pretty much a platinum standard. We were monitoring everything even up to two years before. Over time, what we're all starting to see is there are some things we've put in place that aren't necessarily going to provide us value, and there will be new technologies that we're even testing here, with the U.S. Department of Energy, around monitoring. It's something that we got independently verified and for which third-party companies are looking to start to create that standard.

Senator Seidman: I just have one last question about the storage site. When it is full, does it have to be capped or shut down in a particular way?

Mr. Wiwchar: The way the decommissioning of it works, through an agreement we have with the provincial government, is that when we've turned off the taps, if you will, to the injection, we actually have to continue monitoring the wells in the storage area for at least 10 years to make sure the CO2 stays in place. The agreement we would have is we would decommission the wells — basically, cap and cement them in — and basically remove our facilities. At that point, we would get what's called a post-closure certificate, where we would then be released from liability by the provincial government. We would follow our existing practices for well abandonment.

The Chair: The bell is ringing. There's a one-hour bell in the Senate. We can continue our hearing. Yes, we can. I just got an email saying that we can continue through the bell, so let's continue. Other than that, we're going to be here until midnight.

Senator MacDonald: Let's talk about money for a few minutes. Total cost of the Quest project was $1.3 billion, with the provincial and federal governments contributing over two thirds, $865 million. Both of those numbers are a lot of money. Would this project have been possible without these public funds? In your opinion, are public funds necessary to advance this technology? And is there any way forward in the near future, if ever, for CCS technology to advance without taxpayers' money?

Mr. Wiwchar: To the first question, no. The government funding was very important to get Quest across the line and get the final investment decision. I think the important thing that we worked with the government on, of course, was that it wasn't just necessarily free money. What are they getting in return? What they have received in return is, basically, the recognition of their significant funding.

We provide all the technical details, other than a couple of patents related to our aiming technology, which is related to it. Both governments share it with other governments. I know, federally, they've provided this information to both the U.S. Department of Energy and Mexico, so it helps Canada. Canada is being recognized as a leader in the technology: When you factor in Quest, enhanced energy and Boundary Dam, we are becoming that leader.

With regard to your next question, internally, our goal is actually to not utilize public funds for the next one. How would we do that? There are a couple of things. One thing, of course, is to, like I said, start looking at closing the gap and reducing our costs to operate and build it, but there's also a carbon price escalation. Right now, that is based on regulation and based on government, but we're looking at ways beyond that.

One of the things we at Shell are doing is sponsoring an XPRIZE, and in the XPRIZE, these are leading edge folks coming up with technologies that could potentially utilize the CO2 for more valuable types of products. For example, one of the entries is a Canadian company called Carbon Cure that blends CO2 in with the concrete and that, apparently, makes the concrete stronger and can reduce their costs. That can show that CO2 can be viewed as more than a waste stream; it can actually be used as something valuable.

The other thing we're investigating internally is the use of greenhouses. Although that's good, and with our winter climate, there's probably an opportunity for it, but the one issue there is you don't necessarily get full uptake of the CO2.

Another area that we're pursuing is the use of CO2 in fertilizer to make urea. We understand that if you blend urea with sulphur, there have been studies done in Brazil and China that show that actually improves crop yield by 30 per cent. Maybe that's not full recognition of CO2 sequestration, but it is an opportunity.

The one that we're also exploring, that's prevalent in Texas and southern Saskatchewan, is the use of CO2 EOR. There, you do get the permanent storage, but you also get the oil production. As I mentioned before, we don't necessarily view the EOR as the final solution, but it is a bridging gap that allows us to deploy carbon capture technology solutions and reduce the cost of it, and, in the process, help self-fund future CCS projects.

Senator MacDonald: I have one supplementary question. What is the monetary cost of CCS per tonne of CO2?

Mr. Wiwchar: With the first of Quest, it was over $100 per tonne, and that includes the CAPEX and the OPEX. That was why, for the first one, it was important to get the government funding. We believe, based on what we're seeing internally and externally with new and different types of capture technology, that we should be able to reduce that next generation by 20 to 30 per cent. That now starts to bring it into a $70 or $80 per tonne range.

Senator Wetston: I have a couple of quick questions. Senator MacDonald is more or less getting at this. I'm sorry, but I missed the first part of your presentation. When you talk about the $865 million, how is that allocated across this project?

Mr. Wiwchar: The $120 million federally was provided to help us with the front-end engineering. This is basically the money that did the initial subsurface work to select the site, develop the technologies for the monitoring and do the engineering to come up with the design to capture. That was the pre-investment decision, as we called it.

The C $745 million from the provincial government is and was paid out in three phases. The first phase of $298 million, or 40 per cent, was paid out to us by hitting seven construction milestones. We agreed that every six months, there was a milestone we had to hit, performance based, had to be verified by a third-party engineering firm that was independent of Shell, one we hadn't used in the past several years before that. They had to validate our performance relative to construction.

To give you an idea of what some of these milestones were, we built this all in a modularized fashion at a local company just east of Edmonton, and there were 69 of them. We got a payment once we delivered the first module to site and another payment once we delivered the last module to site. That gives you an idea of the construction milestones.

There was $149 million for us to pass three what we call "commercial operations tests.'' For 24 hours, we had to prove that we could capture 1.08 million tonnes per year equivalent. The second test was that for 20 days we had to capture at least 75 per cent of the CO2 in the stream. For 30 days, we had to prove that we could keep at least one train running up to one well for that full 30 days. Upon successful completion of that, and again certified by a third-party engineering firm, we received the $149 million.

Over 10 years, or 10.8 million tonnes, whichever comes first, is the final $298 million. If you work the numbers, it equates to almost $27.55 a tonne for every tonne of CO2 that's stored.

Basically, through the Government of Alberta, every dollar we get is based on performance criteria that they validate.

Senator Wetston: I'm trying to understand the relationship between the technology and the geology. What comes first here, or are they both absolutely necessary to achieve the targets that you're describing?

I'll give you an example of what I'm thinking of. I'm an Ontario senator, and you're well aware of gas injection in the Don and how important that is to the supply of natural gas in the province, both for generation and heating. The geology obviously is compatible to support that.

There's a lot of work that's been done on storage, but from a different perspective. It's really the storage technology to deal with renewable intermittent generation and the storage capability to deal with these renewable resources. You're probably aware of that as well. There's a lot of flywheel technology that's been worked on in that area, having nothing to do with this particular project but having a lot to do with greenhouse gas reduction, as you can imagine.

The question I'm getting at is to try to understand the breadth of the implications of this kind of work. Obviously, you have your upgrader here, the pipelines that you've built and the storage capacity, but is it possible to develop this for other applications for greenhouse gas reduction?

Mr. Wiwchar: Yes. We've put this on an upgrader. This could be easily applied to a refinery. It could be applied to fertilizer and cement as well. I've seen numbers that concrete production represents about 5 per cent of global greenhouse gases. With power generation, whether it's gas or coal, you can apply this technology to both of those to reduce your CO2 emissions.

To put it in perspective, where we're starting to get interest with Quest is folks are starting to talk about hydrogen fuel cells for automobiles. This Quest project is actually put on a hydrogen manufacturing unit, so a unit that makes hydrogen. Essentially, you could have a natural gas feed that produces hydrogen with zero emissions providing a mobility fuel for the future with automobiles and hydrogen fuel cells. When you look at that application, CCS can really be that tool for the future, but something that's always been there in the past.

Senator Wetston: Just a quick follow-up: for power generation, which I'm somewhat interested in, and if you had a significant gas plant or coal plant, would this technology, provided the geology was available, be potentially viable in this context?

Mr. Wiwchar: To give you an example, that's what SaskPower Boundary Dam did. They're using our aiming technology to capture. Their target is 1 million tonnes per year. On their coal-fired power plant, they've deployed CCS to remove their CO2 emissions. They use some of that CO2 actually for permanent storage. The Basal Cambrian Sands is a little bit deeper, over 3 kilometres deeper there, and they also use some of that CO2 to sell to the local EOR operators.

Senator Patterson: Senator Wetston asked one of my questions. I'd like to thank the witness, of course. We were privileged to see the Boundary Dam operation in the course of this study, so it's great to have this information about Quest.

You're capturing all this carbon, which is great, but do you calculate how much energy is required to capture, transport and store the CO2 emissions at the facility?

Mr. Wiwchar: Yes, we do. To put it in perspective, we're about 1.1 million tonnes of CO2 that we capture and inject. We are somewhere around 150,000 tonnes of CO2 equivalent through power for the compressor and through the natural gas we use to produce steam. The net CO2, or CO2 avoided, as we say, is about 950,000 tonnes per year. In order for us to get credits on that CO2 avoided, we've recently gone through an audit by the Alberta climate change office, our department of the environment in Alberta, and they have to validate those numbers that we provide in order for us to get serialized credits.

Senator Patterson: I guess we can do the math on the percentage ourselves.

Mr. Wiwchar: Yes.

Senator Patterson: Thank you.

The Chair: I just want to finish with a couple of questions to this presenter.

Is Shell involved in other CCS operations around the world? In your documentation, there are quite a number of them. I think you say 15, with 6 being built as we speak. Is Shell involved in any of those?

Mr. Wiwchar: Yes. We are involved in Mongstad, the technical centre in Norway. That's a demonstration capture facility in combination with Statoil in Bergen, Norway. Through our involvement, there are different technology providers that come and do their tests so they learn and are able to see whether their technology can be applied: Can it capture the CO2 it needs to? Of course, we're always looking at energy reduction as well.

I mentioned Boundary Dam. We're involved there through our aiming technology. We're working right now with Chevron's big Gorgon facility in Australia, where we're 25 per cent owner, and they're in the process of starting up their capture unit, which will capture and store about 3 million tonnes a year of CO2, I believe.

The Chair: Second, you talked about the area you have leased from the Alberta government for your storage. Help me here a little bit. Two kilometres — I'm from the old school; I'm still on feet and inches in a lot of things — would that be approximately 6,500 feet?

Senator Massicotte: Pretty close.

Mr. Wiwchar: It's about a mile and a half.

The Chair: It's a little bit more than that. Anyhow, that's obviously fairly close. There must be no drilling leases let in those areas where you're actually storing. Or are all the wells a lot shallower than that in that area?

Mr. Wiwchar: No. There are a couple of requirements. The first requirement is any storage recognition in Alberta has to be deeper than one kilometre, so we meet that.

One of the areas that I mentioned is also site selection. On the periphery of our lease, there are some old oil leases that are depleted. In the area where we are, there is no oil exploration, and the way that this leasing agreement works is, because it's through the department of energy, if there's any desire to do any drilling in there, the government and ourselves have to be consulted before that can take place.

Even if somebody wanted to come and store adjacent to our lease area, there's a consultation process. We haven't had to use it, but there is a consultation process in place to make sure the combined effect doesn't have a detrimental effect to the subsurface.

The Chair: There would probably be no drilling in the area where you're actually storing, in the future.

Mr. Wiwchar: There hasn't been for a couple of decades, yes.

The Chair: The last question I have is in relation to a question that Senator Griffin asked about getting 30 per cent below 2005 levels by 2030. With the information that we've received from the government, putting in place all of the regulations and all of the steps that they've taken so far and, in fact, the ones they're going to take in the next 13 years, they still have to find 219 million tonnes of CO2. Oil and gas represents 233 million tonnes of that. I think transportation is 157, and trade-exposed industries about 100. There's a lot there.

Are you saying that we can meet that target by 2030? That's only 13 years away, and we still need to find 219 million tonnes and actually dispose of it. Can you help me there a little bit? You can inject 1 million tonnes, so 219 of the systems that you have would reach that target. I know there are other technologies, but I think the low-hanging fruit has been grabbed. Now we're looking for the stuff that's a little bit harder to find. Help me a little bit there.

Mr. Wiwchar: As I mentioned, it's a mix of technologies that's required, and that's what we believe at Shell. We believe there's a little bit of competition.

To get there, what we also recognize internally that there has to be the price on carbon. In Canada and Alberta, we have talked about $30 per tonne, moving to $50 per tonne. You probably need to move more to get that gap closure. In some regions like California, we're hearing that the carbon price is over $100 per tonne.

It's not going to take one or two entities. We recognize that we have taken an extra step out as Shel, but we haven't seen others follow. If everyone is truly committed to this, I believe it is possible, but it has to be a wholehearted effort between government, industry and even private citizens.

The Chair: Tougher than one thinks on the surface, would that be correct?

Mr. Wiwchar: It's a challenge. Is it doable? I wouldn't say it's impossible, but it takes a very concerted effort.

The Chair: Thank you very much for that very interesting presentation, sir. All of us learned something tonight. Thank you, panel members, for the questions.

For the second portion of this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources, we now have presentations from Big Moon Power, Lynn Blodgett, President and Chief Executive Officer; and Jamie MacNeil, Country Manager.

Gentlemen, if you would make your presentation, we'll watch the clock closely. As you understand, we have to go for a vote. The vote wouldn't take long, and then we would come back and do our questions and answers. The floor is yours, sir.

Lynn Blodgett, President and Chief Executive Officer, Big Moon Power: Thank you, senators. It is an honour to be invited to testify before your committee this evening.

Climate change, the transition to a low-carbon economy and the meeting of national and international targets for greenhouse gas emissions has inspired policy-makers, academics and entrepreneurs in a way few issues have over the last 20 years.

I would like to start by saying that, unlike most people who jump into renewable energy or clean tech, I'm not an engineer and I'm not a scientist; I'm a businessperson. My brother and I started a computer company in our garage many years ago. We grew it to a Fortune 500 company with 100,000 employees. And when I retired, while I was CEO, I oversaw the sale of the company to Xerox and then I transitioned to be the president of Xerox services globally.

Unfortunately, I became ill, and my doctor gave me advice to go to sea level in order to recover from a serious cardiac condition. While I was in the Caribbean, I became obsessed with the tide and became obsessed with this wonderful resource that most people take for granted. I watched as the tide lifted these massive vessels effortlessly, and I became convinced there had to be a way we could harness the power of this tide.

After I retired from Xerox, I started Big Moon Power with the objective of harnessing the power of the tide. But being true to my business roots, I knew that developing a technology to harness the power of the tide was only part of the solution. For a product or service to be of value, as you know, it has to not only deliver the service but do it in a competitive way. What good does it do to generate another megawatt of electricity if it costs three or four times as much as other renewable energy? It was our objective not only to develop a new method for capturing tidal energy, but to do it in a way that was cost effective.

Assembling a small team, we began to look at the basic information around tidal energy. Although tidal is not a constant or a firm source of power from a utilities point of view, it is predictable and it is dispatchable. So unlike solar and wind, we know what the speed of the currents in the Bay of Fundy will be from tomorrow, the next day, and many years into the future, unlike other forms of renewable energy. Because of that, we're able to tell the power company exactly how much power we can generate tomorrow and the next day, and any point during that time into the future. There is an inherent value to the utility for the fact that it's predictable. Tidal energy should have some value, some premium above other forms of renewable energy.

Secondly, we looked at the current technology that was being developed, and we immediately recognized the very high cost associated with designing, building, implementing and maintaining these devices. It's one thing to be able to build a device that can operate in seawater where the water and debris are moving at 12 knots. That's a very complex proposition. But installing and maintaining those devices is also a very complex proposition. As you know, complexity in business means expense, and expense is the enemy of success in a cost-competitive environment.

We settled upon a few basic principles that we would follow. First, we would take all of the complicated items out of the water. Second, we would design something that would be as inert environmentally as possible. Third, we would try to take advantage of the economies of scale that have been achieved by wind as much as possible.

I'm not an expert in renewable energy, but I am pretty good with numbers. I know numbers, and I was in the IT business when China and India came into our industry. I saw what that did to the costs in our industry. Effectively, wind has done that to the cost of renewables. Wind has reached scale, and, with that scale, the cost of wind has fallen off a cliff. The components for wind are being made 10,000 units at a time now, and they're being made by the largest companies in the world now. So we felt it was very critical that we design something that took advantage of those economies of scale.

After countless hours of innovation, of testing, of re-testing, of re-innovating, we took what we call our "kinetic keel'' to Nova Scotia. When you think of the kinetic keel, I want you to envision a work barge, a barge that you've seen on bodies of water everywhere and that has operated in the Bay of Fundy for generations. Take that work barge and weld a steel plate down the centre line of that barge and extend it down into the water 50 feet. If you take that barge and turn it perpendicular to the tidal flow, it will create a tremendous amount of drag.

The challenge was: How do you take that drag now and turn it into electricity? Basically, we attached a four-point harness to that plate. That harness goes out to a single line. We use a high modulus rope that's seven times stronger than steel. That rope goes deep under the water back to the shore. There is a large drum of rope. For the generator, essentially, we replaced the blades of a wind turbine with a drum of rope. As the current pushes that barge, it causes that rope to pull, turns the drum and spins the generator. All of that is done using the components of wind, and the keel moves at about one kilometre per hour. It will move about five kilometres during a tidal cycle.

In 2016, we worked with the Government of Nova Scotia. We successfully tested the keel, and, in 2017, we have been working again with the Government of Nova Scotia to implement a pilot program, a 4-megawatt demonstration site in the Bay of Fundy.

When we came to Nova Scotia, we made a commitment to the Government of Nova Scotia the day that we arrived, and it was this: The Bay of Fundy belongs to the people of Canada and the people of Nova Scotia and New Brunswick. It belongs to those people, and they should be the primary beneficiaries of that. To that end, all of the development that we could possibly do in Nova Scotia has been done there — the manufacturing, the engineering and so on. In fact, we even had the keel built by the Lunenburg Foundry down in Lunenburg.

We don't just want to build a project in Nova Scotia or in New Brunswick. We want to build an industry that can benefit the people long term. We want to coexist with other users of the bay, and we want to be able to export the intellectual capability of Canadians and Nova Scotians around the world.

Canada has been a leader in transitioning to a low-carbon economy. I believe that governments and businesses are realizing the benefits of investing in clean technology. More and more young people, including the young people at Big Moon, are on the leading edge of that economic transformation. The work that has been done by the Government of Canada and the provincial governments has been effective at attracting investment. We could have tested our technology anywhere. It's designed to operate in 3 knots up to the 12 knots of the aggressive tides of the Bay of Fundy.

What bought us to Nova Scotia was not so much the tidal regime as it was the investments that had been made by the Government of Canada and by the province of Nova Scotia in things like the feed-in tariff program and in ongoing research and development in tidal energy.

It's one thing to recognize a new industry, a new technology or a new economy. That's very important. But it's also very important that you do it correctly, and, from my point of view, the Government of Canada and the Government of Nova Scotia have done both.

We appreciate you taking time to listen to us, and we look forward to your questions.

The Chair: Thank you very much for that presentation.

Senator Massicotte: Tell me, in summary, where are you at today? You're producing how much energy, and what is the cost of that production?

Mr. Blodgett: We are working with the Government of Nova Scotia to obtain a permit to implement our first demonstration site, and our levelized cost of capital, which is the main thing that drives the cost of energy, we have it pretty close to the cost of wind. We believe that we can, at even moderate scale, be producing energy in the $100 to $125 per megawatt hour range, which is quite a bit less expensive than most of the other tidal technologies.

Senator Massicotte: And, technology-wise, you're there now? Within a year, this is up and running?

Mr. Blodgett: Yes.

Senator Massicotte: With a baseline amortized cost equal to wind energy?

Mr. Blodgett: I think we can have a capital investment equal to wind. We don't know; so we're hedging a little bit on maintenance costs because it's new. We think we have the capital costs well budgeted, and, for maintenance, we're going to learn some. We hope that we can get it very close. In particular, I made the point that, because it's predictable, we would expect that, based on our discussions with the power companies, typically that could demand a 15 to 20 per cent premium over what they're paying for wind. So we hope that we can be in that range.

Senator MacDonald: Mr. Blodgett, it's great to have you here. I was the fellow that spoke to your man John Coleman in Washington.

Mr. Blodgett: Oh, is that right?

Senator MacDonald: Yes, and brought this to the attention of the committee. So I'm glad to have you here.

Mr. Blodgett: Thank you.

Senator MacDonald: I have so many questions to ask you, but I'll think I'll just start with one of the practical ones. I'd like you to explain to me, which John was explaining to me: This technology seems to be much less intrusive than the turbine technology, with much of the capacity on land, actually, the way he described it to me. If wonder if you could expand on that for the committee and explain it to us.

Mr. Blodgett: Absolutely. The concept was to take the complicated bits out of the water and put them on land. So picture a wind turbine, but, instead of having it go up on a 200-foot tower, you actually can drive a truck up and do the maintenance on the generator and on those pieces at ground level. So that's one thing.

The device that's in the water is essentially a work barge — we're refining that a little bit — a work barge with a metal plate. So it's quite simple. It would need to be taken out periodically and just have regular maintenance, like any kind of marine vessel, but there are no moving blades in the water.

From an environmental point of view, we actually formed a committee of scientists on our own, and we brought in people who were fish experts, sediment experts, mammals and so on and so forth, and had them go through the technology independent of us and write a report. We're doing an environmental assessment right now, but, so far, the feeling seems to be quite positive about it. It seems to be less intrusive.

Senator MacDonald: A lot of the concerns that have been expressed about the tidal projects that are there are concerns about blades, lobster fishermen, fish stock, things of this nature. You're confident that this technology will not only work but will address those concerns of these industries?

Mr. Blodgett: Very early on, we engaged with the First Nations and began listening to them to hear what their environmental concerns were.

We also have had considerable discussions with the fishers. Thus far, the reaction of the fishers has been positive. I think they appreciate our openness about it, to be candid. They realize that because the device is a simpler device, we're not getting the same kind of reaction that was quite adamant about the other technologies.

We need to do a demonstration site so that we can properly monitor and verify that, but so far, the reactions that we're getting from those constituents have been quite positive. We want to make sure that we test properly.

We actually sponsored a fish-lobster study and a weir study that is being formulated by academics, by fishermen and by input from the First Nations. Our desire is to establish the best data that we can, that those constituents agree with and that they feel has been done in a way that addresses their concerns

Senator Mockler: I've seen the tidal power in the Bay of Fundy. Why did you name your company Big Moon Power?

Mr. Blodgett: That's a very good question. The sun, of course, has a role in the tide, but the moon has a bigger role. I have a good friend in the United States, a Native American. I said, "What do you think we should call the company? She said, "Big Moon Power.'' I said, "That works for me.'' That's how we came up with the name.

Senator Greene: There are various examples of turbine technology around the world. Some are very successful; some not so much. Are there any other examples of your keel technology present anywhere else in the world?

Mr. Blodgett: No. I ran a $10 billion company, and I know how critical it is to husband your resources, and we felt that we should focus. We focused on Nova Scotia for the reasons I mentioned in my introductory comments.

We've had discussions with the people in New Brunswick, and we're hopeful that very soon, after we get our project going with Nova Scotia, that we can then step to New Brunswick. It's close. We don't think it's spreading ourselves too thin. We want to make sure it's successful here.

Once that is done, we believe the best sales pitch we can have is bringing people to Canada and showing them it actually working.

Senator Greene: I wish you luck, because we need it, actually.

Senator Fraser: Thank you both, gentlemen. It's very interesting.

Based on ignorance, a couple of questions: How far offshore do your vessels have to be? Those tides go down.

Second, you're working on a four-megawatt demonstration site. For a given vessel, once you get past of the demonstration and into regular production, what would you expect the output to be?

Mr. Blodgett: The interesting thing about our technology is that the vessel in the water and the generator on the shore are completely decoupled. In New Brunswick, because the tidal currents are a little bit slower, we can still deal with that; we just make the vessel a little bit bigger. In the Bay of Fundy, if we go out into the middle of the channel where it's going pretty fast, the vessel can be very small.

The site that we've identified is along Cape Split. We're typically operating about 2,000 to 3,000 feet off the shore and running pretty much parallel to the shore.

Senator Fraser: And output?

Mr. Blodgett: The keels that we're putting in there, that's a relatively lower speed area. If we took a two-megawatt keel there and moved it out into the really fast water, that same keel could make 10 megawatts.

Senator Black: This is fascinating, as everyone has said. I'm interested in knowing where you are on the continuum of progress, sir. Do you define this as a developed project, or is it still experimental?

Mr. Blodgett: It is until we have put in the demonstration site and have it running for a period of time.

Senator Black: That's where you are now.

Mr. Blodgett: Yes. I will say that the test that we ran, we had Stantec and a representative from the U.S. Department of Energy on the site through the entire test, and we met every criteria and actually exceeded it. We feel good about the test, but until we have it in a demonstration site, it's still experimental.

Senator Black: Let's assume and hope that the experiment goes well. Can you talk to us about what a rollout looks like?

Mr. Blodgett: Yes. In that same area that I mentioned to you, Senator Fraser, in a rollout, we would be able to generate 1 to 1.5 terawatts of energy. In a small footprint, that's quite a bit of electricity. Step one is the 4 megawatts; step two is 40 or 50 megawatts; step three would be going to 1 to 1.5 terawatts.

Senator Black: What would the timing for that transition be?

Mr. Blodgett: We want to be very mindful of the Department of Energy in Nova Scotia and their schedule. They have told us that they are working to get us in the water by the end of the year. We would expect to be up and running with that four-megawatt system shortly thereafter. It then will depend on what they require or how long they want us to operate at four megawatts before they feel comfortable about us stepping up. We would be anxious, with successful output, to ramp up as rapidly as we could.

Senator Black: Thank you for the work you're doing.

The Chair: Thank you very much for an interesting presentation. Our members may have other questions that they can provide in writing, and you can provide the answers back to the clerk. All of us will receive the answers.

Mr. Blodgett: Thank you very much for your time.

The Chair: The meeting is adjourned.

(The committee adjourned.)

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