Getting big projects across the finish line is difficult. Sometimes, just getting to the starting gate can prove insurmountable.
Two cases underscore the herculean effort needed to get large-scale developments built in Canada — while a third major initiative is waiting in the wings.
On Wednesday Edmonton-based Capital Power said it’s discontinued plans for a $2.4-billion carbon capture, utilization and storage project (CCUS) in Alberta, which had been in the works since 2021.
It would have been one of the centrepiece carbon capture projects in the province, and for the Canadian electricity industry.
Meanwhile, Trans Mountain Corp. has confirmed it’s reached mechanical completion of its $34-billion pipeline expansion, more than 13 years after the project’s conception.
For a point of reference, Alberta has had seven different premiers in that time.
Both projects illustrate the complexities behind advancing major energy infrastructure today.
“We need to find ways to get major projects built,” Cenovus Energy CEO Jon McKenzie said Wednesday when asked about the length of time required to complete the Trans Mountain expansion (TMX).
“We would all realize that 13 years is far too long for a project of this national importance to get built.”
Cenovus, along with Canadian Natural Resources, Suncor Energy and three other oilsands producers are members of the Pathways Alliance.
The group is working to advance a $16.5-billion carbon capture network in Alberta, as it seeks to reach net-zero emissions by 2050, although a final investment decision hasn’t been made.
The producers are waiting for more certainty about government incentives and policies before giving it the green light.
“Completion of TMX, in some ways, is pretty important for the country because it showed that the country can do big projects,” Murray Edwards, executive chair of Canadian Natural Resources, said in an interview Thursday.
“To me, Pathways, TMX, are all a message that Canadians can do big things and do grand things. But we have to work together and have to understand that you need support at all levels of government.”
Getting to the starting line is not always easy, as the cancellation of Capital Power’s project demonstrates.
The country has set a net-zero emissions target for 2050, and 2035 for the power sector.
In late 2021, Capital Power unveiled an agreement to work on an ambitious carbon capture and storage (CCS) project at its Genesee Generating Station, west of Edmonton, with pipeline giant Enbridge.
The companies agreed to evaluate the project to capture emissions from the power plant, with Enbridge transporting and storing them underground at its proposed Wabamun Carbon Hub.
Capital Power’s project was expected to capture up to three million tonnes of CO2 a year from its repowered natural gas-generating units; the companies said the proposal could be in service as early as 2026.
Since then, the Trudeau government promised in its 2021 budget it would offer investment tax credits for CCUS projects — covering up to 50 per cent of eligible capital costs — although they still have yet to be passed in legislation and finalized.
Subsequent federal pledges of establishing carbon contracts for difference, to help lock in a future price of carbon and provide long-term investment certainty for project proponents, were also made. (The Alberta government has announced its own program to provide 12 per cent grants to CCUS developments.)
However, Capital Power vice-president Jason Comandante told the Globe and Mail in March the company was disappointed about the state of discussions about carbon contracts for difference with the Canada Growth Fund — the key federal entity to issue them — warning it would “park the project” if they couldn’t land on a price and structure.
On Wednesday, the company didn’t lay the blame at the feet of Ottawa — although the Alberta government certainly did.
Capital Power said while its work confirmed carbon capture is technically viable for thermal power generating units, the project isn’t economically feasible.
“Fundamentally, the economics just don’t work where we are on the project. So, that can be attributed to capital costs, outlook for dispatch, the contract for differences,” CEO Avik Dey told analysts on a conference call.
Alberta Environment Minister Rebecca Schulz pointed the finger squarely at Ottawa.
“Despite years of promises from Ottawa, the federal government has failed to provide the necessary support to help emissions-reduction projects like this one move forward,” she said.
Other companies, including the head of Shell Canada and the Pathways Alliance, have also voiced concerns about the lack of certainty around promised federal incentives.
The project being discontinued is a “big blow” to developing carbon capture in Canada, said Wood Mackenzie CCUS analyst Jack Mageau.
He noted the investment tax credits from the federal government still haven’t passed, while Ottawa has only made limited progress in offering the carbon contracts for difference.
“Operators clearly need more certainty,” Mageau said.
Finally, there’s the Trans Mountain expansion.
It was massively behind schedule and overbudget, facing numerous regulatory, legal, political and financial challenges.
Yet, it also proved some projects can get done, with enough time and patient capital; in this case, it’s owned by the Canadian government.
Looking forward, billions of dollars of potential investment in decarbonization projects have been proposed — such as Pathways, or Shell Canada’s Polaris initiative — but need to see more clarity about federal or provincial incentives.
Edwards said Canadian Natural Resources, the country’s largest oil producer, is talking regularly with Ottawa.
He sounds optimistic, but also said there’s more work to be done.
“I don’t know if there is a holdup, I just think there’s a lot of complexities,” he said.
“We want to see the federal government put their commitment on paper. . . . The province has come forward with some initial support in terms of (grants), but I think there has to be additional support there that will allow the industry to show further investment back in the province,” he added.
“If we can get the governments there and the final support, I’m confident the project will go.”
Chris Varcoe is a Calgary Herald columnist.
cvarcoe@postmedia.com
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