CALGARY – A $1.4-billion project to capture carbon dioxide emissions from an Alberta coal plant and store them underground has been scrapped because the economics of the plan aren’t good enough, says TransAlta Corp., one of the companies backing the project.
CEO Dawn Farrell said an initial study of Project Pioneer found the technology works and that the capital costs were in line with expectations.
However, there were not enough customers to buy the CO2 to make it worth the Pioneer partners’ time and the price was not good enough.
“You have to be able to use the carbon somewhere and we couldn’t find enough places to use it to make the project work,” Farrell said in an interview.
The idea was to sell some of carbon dioxide to nearby energy producers, who would inject the gas into their fields as a means to get more oil out of the ground. The emissions would have been prevented from entering the atmosphere.
The federal and Alberta governments have been banking on CCS, or carbon capture and storage, as a means to reduce the carbon footprint of the power generation and oil and gas industries. Project Pioneer, which would have been connected to the Keephills 3 coal plant west of Edmonton, received $779 million in backing from Ottawa and Edmonton.
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Enbridge Inc. (TSX:ENB) and Capital Power Corp. (TSX:CPX) were the other companies behind the initiative.
Now was the time the companies had to make a go or no-go decision.
“In the timeframe where we had the government grant money, it could not come together, and so we had to cancel the build part of the project,” Farrell said.
“Frankly, if we’d had more time, you might have been able to make it work. But it just wasn’t coming together in this time frame.”
Farrell said no one is to blame for the project’s cancellation. Oil companies are relying more and more on horizontal drilling and other technologies to boost output from mature oilfields, so the demand for carbon dioxide to perform that function has been pushed out several years.
“We thought the better decision was not build at this time and return the money so that the government could then reinvest it into other projects that can advance the technology on CO2 capture,” said Farrell.
Chris Severson-Baker, with the environmental think-tank Pembina Institute, said conventional coal-fired electrical plants are the “dirtiest possible” source of power, and should have no place in today’s energy mix.
“The reason for this failure is clear. Until the federal or Alberta governments implement policies that incentivize companies to capture their emissions or switch to cleaner sources of energy, those companies will continue to pollute with coal,” he said in a release.
“TransAlta pointed to the insufficient price on carbon as the main reason that the project is not going to proceed.”
Earlier Thursday, TransAlta reported a sharp drop in profits for its latest quarter as it was hit by lower prices and an increase in maintenance activities.
The utility (TSX:TA) said it earned a profit attributable to shareholders of $89 million, or 40 cents per share, for the quarter ended March 31 compared with a profit of $204 million, or 92 cents per share, a year ago.
Revenue totalled $656 million, down from $818 million.
“While our financial results were down in the first quarter of 2012 compared to the first quarter of 2011, we still generated strong cash to cover our dividend, support our sustaining capital and have free cash left over for reinvestment,” Farrell said in a release.
TransAlta has power plants in Canada, the United States and Australia.
Shares in the company closed down 34 cents at $16.38 on the Toronto Stock Exchange.
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