Coal vs Pixie Dust: Saskatchewan’s Carbon Capture and Storage Saga

Last Friday the news broke that Cenovus, a Calgary-based oil company formerly known as Encana, sent an email to Saskatoon Star Phoenix/Regina Leader Post reporter DC Fraser, stating that they had never had a contract with SaskPower to purchase 100 per cent of the CO2 produced by the 1.4 billion dollar Boundary Dam 3 carbon capture and storage facility.

This is, in my opinion, beyond stunning, and I can’t believe both newspapers buried the story in the back sections of their Saturday print edition. The following might help you understand why I feel that way.

Saskatchewan had been leading the way on carbon capture and storage (CCS) long before the massive Boundary Dam 3 (BD3) SaskPower facility was announced in 2011.

Down the road, the Weyburn-Midale project had been ticking along since the year 2000, proving a valuable resource for both research and energy resource extraction, the latter thanks to Cenovus (prior to that, Encana).

For seventeen years Cenovus has been injecting CO2 into what would otherwise be dry oil wells. The CO2 dislodges more oil, because science. The CO2 arrives via pipeline from the North Dakota Degasification Plant, approximately 150 miles to the south.

Yes, that’s right. It’s a pipeline, that crosses under an international border, to enable oil extraction, and it was the Saskatchewan NDP’s doing.

After the Sask Party took the provincial reins, they rightly wanted to expand on this Saskatchewan success story.

In their first budget, 2008, Bill Boyd announced his government would spend $800,000 on “further studies to assess Saskatchewan’s capacity to enhance oil and gas production through storage of carbon dioxide.”

By November of that year the federal government had agreed to contribute $240-million to the CCS retrofit of SaskPower’s BD3 Power Station at Estevan, Saskatchewan.

Then-Minister of Crown Corporations Ken Cheveldayoff was pretty forthcoming – the total cost to turn Boundary 3 into a CCS facility would be $1.4 billion. But come on, the price of oil was over $100 per barrel just two months prior, and obviously it was going to go back up and stay there, so really, it was chump change. We were RICH.

“There will be a component for the private sector to enter into, and we’ll be aggressively pursuing that,” he said in committee at the time, though almost within the same breath had to admit that there weren’t actually any private funds committed, claiming it was “too early” in the process. Chevy also went on suggest that SaskPower also had a bunch of cash for capital projects, and that BD3 had reached the end of its life cycle, so would have had to have been refurbished anyway.

It was in this same committee where, as far as I can tell, the promises and guarantees regarding BD3 began.

“How much carbon dioxide will this project sequester? How much CO2 will this take out of the atmosphere?” asked the NDP.

“One million tonnes a year,” replied Chevy, without missing a beat.

Boom.

“But as far as this project goes itself, there will be 1 million tonnes of carbon that will be eliminated. 2013 is half a million tonnes; 2015 another half million. So, you know, substantial in that regard.”

You know, substantial. One million tonnes. A million per year. Okay, over three years, but who’s counting?

Chevy wrapped up by saying that CCS may be “one of the greatest contributions that Saskatchewan can make towards reducing carbon footprints in coal-fired generation across North America and across the world.”

“…across the world”…Mwahahahahaha….

Definitely no chickens being counted there.

Somewhere along the way there suddenly were not one, but two carbon capture projects on the table – BD3, and another dubbed the “Saskatchewan-Montana Project”.

In spring of 2009, one Dr. Malcolm Wilson was being heralded as the government’s very own environmental hero, right here in Saskatchewan, “where he’s doing leading-edge research in carbon capture and sequestration and projects like the North Dakota-Weyburn project, like the proposed project between Montana and Saskatchewan — that indeed will keep costs as low as possible as we go out and do leading-edge technology…”

Four years later, in 2013, Wilson was turfed out of the University of Regina non-profit where he was doing the “leading-edge research”, because it turned out the non-profit, funded primarily by both the provincial and federal governments, was paying millions into another, for-profit company of which Wilson was a director. There weren’t even any contracts with said company – just “handshakes”.

“The only way to make these projects viable is to inject [huge] massive subsidies from government, including a public utility such as SaskPower, as this project does,” said Chevy in that spring of 2009.

No shit.

Meanwhile in 2009, while Dr Wilson was doing his “leading-edge research” over at the U of R, we were in a full-on relationship with the Democratic governor of the state of Montana. #SaskatchewanMontana4EVA

“How much money do you have in your budget relating to carbon capture?” the NDP asked Bill Boyd, then Minister of Energy and Resources

“I don’t think that there is a breakdown with respect to specific items like that…” said Boyd.

Awesome.

“Certainly I’m aware that there is a great deal of interest in that in the United States,” he continued. “The Premier and I were in Montana recently discussing that with Democratic governors. There was a great deal of interest in that.”

Oh, well then.

“Even though it’s, you know, to us a pretty well-known fact that Saskatchewan is a world leader in this, there’s still places that aren’t that well acquainted with it.”

A pretty-well known fact you guys, that we’re a world leader, so…kind of a big deal.

Can you believe some places weren’t well acquainted with our world-leading awesomeness?

You know, like Nepal; some random outpost in Antarctica; maybe a couple third world African nations… oh and that US state that’s right across the Saskatchewan border.

The buzz around the Saskatchewan-Montana Project continued to grow, as did the cost, which went from $170 million in January of 2009 to $270 million in May of 2009. But that was okay, because the Government of Saskatchewan remained firm that our portion would only be $60 million, with the Canadian and United States governments kicking in $100 million each. The premise of the project, I think, was that Saskatchewan would build the Boundary Dam CCS facility to produce the CO2, and Montana would build a storage facility, and import it.

In May of 2009 Governor Schweitzer strode into the Saskatchewan Legislature in his jeans and cowboy-style string tie and dazzled the living hell out of the place. Oh man, were he and Premier Wall ever proud as they signed a MOU declaring their intentions to wed and create beautiful CCS music together. They even both liked border collies, can you believe it?

I mean, it was perfect.

The October 2009 Throne Speech boasted that “Saskatchewan’s vast resource wealth and ingenuity have become an international story.” We also had many leather-bound books and smelled of rich mahogany.

OMG we were SO FULL OF OURSELVES.

Anyway, despite the fact we were actual geniuses and world famous, in 2010 rumors swirled that Montana was ghosting Saskatchewan, but Boyd insisted that the couple were still totally a thing.

In March 2011 the Saskatchewan-Montana Project was scrapped, primarily because Mom and Dad – AKA the Canadian and United States governments – said No Way were they giving us the money to do it.

A month later the Saskatchewan government announced it would proceed with construction at boundary dam at cost of $1.4 billion anyway. I mean the caterer had already been paid, the DJ booked and the venue non-refundable. We were all in.

“In 2014 Boundary Dam 3 at the Boundary Dam Power Station will be rebuilt with a state-of-the-art turbine and a fully integrated carbon capture system, a system capable of reducing its greenhouse gas emissions by 1 million tonnes a year,” said Rob Norris in the House. “That’s the equivalent of taking more than 250,000 vehicles off Saskatchewan roads, about 25 per cent of all vehicles now registered in the province.”

But wait… there’s more! Not only will Boundary Dam capture CO2, but sulphur dioxide as well, to sell to companies who make sulphuric acid, said Norris. These two income streams will help to offset the costs of the project.

In July 2012 a memo was sent to Minister Bill Boyd outlining the business case for Boundary Dam CCS. It said that SaskPower was negotiating sales of CO2 to two oil companies: Canadian Natural Resources Limited and Cenovus. The memo said that Cenovus was the front-runner (why they couldn’t sell to both, I don’t know), because they would take all of the CO2 produced at Boundary Dam, so SaskPower wouldn’t have to go out hunting more buyers. In fact, Cenovus would not only take all the CO2 from not only Boundary Dam 3, but maybe even the planned future Boundary Dams 4, 5 and 6.

Wahoo!

In late November 2012, Premier Wall was on the receiving end of another one of those memos from SaskPower, for his eyes only, which allegedly stated that Cenovus didn’t need Saskatchewan CO2 until 2016.

Huh. So they didn’t need CO2 until 2016, but we went on to pay Cenovus millions of dollars in penalties for not getting them enough CO2 in 2014 and 2015?

(Let’s pause for a moment and clarify what exactly Cenovus does with the CO2. SaskPower built a pipeline to connect to the existing Cenovus CO2 pipeline, the one Cenovus is already using to import the CO2 they’re buying from North Dakota for their Weyburn-Midale project, as I detailed above. BD3’s captured, liquefied CO2 is sent one of two directions: to the Cenovus pipe, which takes it to their wells at Weyburn-Midale; or to a Saskatchewan underground carbon storage facility called Aquistore. Don’t ask me why they called it that, since no freshwater is involved, but it certainly sounds like it is, so weird name choice.)

Another briefing note Ministers in 2012 made it clear that BD3 had been designed to be economically feasible around the premise that 1 million tonnes of CO2 per year would be sold at a minimum of $25 per tonne. It also said that delays would compromise the project.

Early in December 2012 then-SaskPower CEO Robert Watson told a Legislative committee that SaskPower had “employed an independent consultant and lawyer on learning intellectual property rights… we’ve identified and registered the intellectual property rights we’re going to learn from it. And we’re going to market them to companies that want to learn how to put it together.”

If I was cynical, I’d suggest that there might have been some collective pant-shitting going on right about then, because this thing was only going to make money if 1 million tonnes of CO2 were sold.. except there wasn’t a contract on the table for 1 million tonnes of CO2, and they didn’t even know if it could produce 1 million tonnes of CO2, so somebody had to come up with plan B.

Go go gadget intellectual property rights!

Days before Christmas 2012, SaskPower announces that they have signed a 10-year agreement with Cenovus wherein Cenovus will purchase the “full volume of 1 million tonnes per year of CO2” captured at Boundary Dam for their projects operated by Cenovus operated near Weyburn.

I can’t believe I have to spell this out, but to me that says ‘At full volume, BD3 can produce 1 million tonnes of CO2, and Cenovus is going to buy all of that’.

2013 comes and goes, with international visitors from all over the globe flocking in to Saskatchewan’s first CCS “symposium”, and the government assuring us regularly that the project was on time and on budget. The NDP’s attempts late that year to extract some information on costs of production are flatly refused by Robert Watson, who constantly begs off on confidentiality.

“That is not given out anywhere in the world right now,” he said, just in case we forgot that the whole world is a stage and CCS is the star.

As 2013 drew to a close, Cathy Sproule asked Watson pointedly in a Legislative committee meeting, “What percentage of the captured carbon are you planning to sell? Ideally would you want to sell 100 per cent and not store any of it?”

“Well to answer your question properly, Cenovus, who has agreed to take it, wants all of it — 100 per cent,” he replied.

This, almost one year to the day after signing the contract with Cenovus.

All of it. Every last drop. One hundred per cent of the CO2. Cenovus wanted it, and they had agreed to take it.

Which brings me back to last week’s announcement that there was never an agreement with Cenovus to take “100 per cent.”

“Cenovus was never contractually committed to purchasing 100 per cent of the daily CO2 volumes from the project,” wrote Brett Harris, a media spokesperson for the Calgary-based company. “Our agreement has always and continues to commit us to purchasing a minimum daily volume of C02.”

A minimum daily volume.

“(The) actual contract was for the minimum take with the option to take up to 100 per cent, which was never exercised by Cenovus and has not been exercised by Cenovus up to this point today,” current CEO of Sask Power Mike Marsh told the Star Phoenix/Leader Post.

But there was “certainly every indication that Cenovus was saying that they were prepared to take the full amount,” Marsh insists.

First of all, can you please explain to me what businessperson in their right mind would agree to sell a minimum amount of their product to one company, while also giving that same company the option to take all of it?

“Oh, you don’t want all my widgets today, but you might? Okay they’ll sit here and I won’t sell them til you need them. Which may be never, but that’s cool.”

Except this isn’t a widget shop. It’s a multi-billion dollar corporation led by a small group of people to whom the Saskatchewan taxpayer is collectively paying millions of dollars in salaries and benefits.

Robert Watson is gone, I hear you thinking. He must be the fall guy here. Sure, except when he told that committee, on the record, that Cenovus wanted “100 per cent” of the CO2, either knowing full well that was not the case or exhibiting a deep misunderstanding of the contract key to the success of this project, he was literally sitting between Bill Boyd and SaskPower CFO Sandeep Kalra. Who certainly didn’t correct him.

So what am I supposed to believe here, that the Minister and the CFO hadn’t seen the contract?

April 2014, the month when SaskPower was supposed to start delivering the CO2 to Cenovus (that they apparently didn’t need til 2016, but whatever), came and went with construction not completed. Same deal in July 2014.

Mike Marsh said the original, not-for-100-per cent, minimum daily volume contract was then renegotiated. To what, I can’t imagine, but I’m guessing it went from “minimum” to “whatever the hell we feel like that day”. Remember, Cenovus already had a longtime supplier of CO2 out of North Dakota, so who knows why they agreed to any of this in the first place.

In November 2014, Cathy Sproule asked Bill Boyd in the House repeatedly how much money CCS, now that it was up and running, was earning .

“(Cathy Sproule) unfortunately has a track record of providing information to the Assembly that isn’t quite right, Mr. Speaker. It’s sort of that NDP, Dwain Lingenfelter-style of stringing information together in the hope that somebody out there might believe it, Mr. Speaker,” replied Boyd.

Oh, OKAY BILL, except you somehow confused “NDP” and “Dwain Lingenfelter” with  “people I personally am accountable for to spin Saskatchewan a rather made-up story for the past two years”.

In the hope that somebody out there might believe it.

But I digress.

“The fact is this is a very, very successful project. This is something that is getting worldwide renown, Mr. Speaker,” Boyd continued, with a straight face. “This is something that is very, very good for Saskatchewan.”

In February of 2015, SaskPower and BHP Billiton announce the establishment of a “centre of carbon capture and storage knowledge” to be located at the Innovation Place research park in Regina. BHP would kick in $20 million over five years, while SaskPower will contribute “CCS expertise and experience”. Presumably this initiative will go a bit smoother than the legendary Dr Malcolm Wilson’s did a few years prior, and is necessary on top of the Petroleum Technology Research Centre (PTRC), a non-profit that’s been around for almost 20 years in Regina, and has studied CCS intensively, including the Weyburn-Midale project, as well as the underground storage facility used by Boundary Dam 3.

That same month the Saskatchewan government issued a media release stating that “Boundary Dam has the capacity to capture up to 1 million tonnes of CO2 in 2015 and is on target to meet that goal.”

Less than a week after his government stating that publicly, Bill Boyd received a briefing note stating that since Boundary Dam launched in October of 2014 “the BD3 capture plant has been operating at approximately 45 per cent capacity.”

So obviously the Saskatchewan government immediately corrected themselves and supplied this information to the public, pledging to fix things and get on track. Nope. Nevermind.

In April 2015 new SaskPower CEO Mike Marsh told the NDP in a committee meeting that BD3 was “achieving over 80 per cent carbon capture at the present time” – two months after it was at 45 per cent, but okay – and he expected to be at “full volume” by June of 2015.

In September 2015, this article, penned by SaskPower’s Mike Monea, runs in that month’s issue of Cornerstone magazine, a coal industry publication. Included in the article is this graphic:

Screenshot (660).png
Graphic that ran in September 11, 2015 edition of Cornerstone magazine

 

Whoever designed that graphic forgot to include the word “Someday”.

It’s like me announcing today that “I’m exceedingly wealthy”, as opposed to “Someday I will be exceedingly wealthy”. Big difference, right?

If I stuck to the first, present tense example – I’d be lying.

In late October 2015, shit really hits the fan. Leaked documents revealed that Boundary Dam had been operating at just 40 per cent capacity, and SaskPower has already paid Cenovus $12 million in penalties for not meeting their contracted deliverables, which I can only assume was that “minimum daily amount”.

With this news, Premier Wall is asked in Question Period if and when he knew that SaskPower was paying Cenovus, instead of getting paid by Cenovus.

“The subject that has been breathlessly raised first by the member for Nutana, now by the Leader of the Opposition, was hidden away in the annual report, Mr. Speaker..it was in a Moose Jaw Times-Herald story, January 12th, 2015. He should cheer that transparency. The Leader-Post, February 17th, 2015, there’s transparency. Estevan Mercury story, February 17th, 2015; at a presentation to the Pacific northwest regional forum on July 13th, 2015; in a SaskPower press release from September 14th, 2015; a Leader-Post story from September 14th, 2015. The Estevan Mercury again had another story — we’ll get him a subscription if he likes — September 16th, 2015. Oh and, Mr. Speaker, the National Geographic magazine reported it, October 2015. This has been reported by SaskPower. It will be . . . We’ve made sure, Mr. Speaker, that it will continue to be reported.”

Transparency? Are you kidding me Premier Wall? Did you actually read any of the articles you quoted? You are trying to tell us that these stories, handily linked above, are evidence of your government’s transparency on the bad news on BD3?

Tell me, was it the Moose Jaw story on the award BD3 received that was supposed to tip us off? Or was it the line buried in the bottom of that September media release, the title of which is “Large piece of SaskPower equipment makes its way from Saskatoon to Estevan”?

When pressed on who knew what when (AKA The Anatomy of a Scandal) regarding the fact that SaskPower’s CCS was crapping the bed, Bill Boyd had this to say:

“All of the information…has all been disclosed, hidden away in the annual report, hidden away on the Internet, Mr. Speaker, hidden away in the Moose Jaw Times story on January 12th, hidden away in the Leader-Post in February, hidden away in The Estevan Mercury. All of that information has been disclosed.”

He literally looked us in face and said he told us already, we just must have missed it. So really, this is our fault for being so bloody scatterbrained.

In January 2016 the NDP Opposition asked Boyd why the government issued a media release in February of 2015 stating that the plant was “on target” to capture 1 million tonnes, and then didn’t say a word of correction a week later when he learned it was maaaaaybe going to capture half of that.

“I guess it gets into a question of semantics,” said Boyd. “Can the plant perform to that level? It appears that it can. Was it on target at that point in time? I think the goal was still in front of us, but clearly that wasn’t the case….I would just say that the hope and the wish of the government and of SaskPower was that they would be able to meet the target.”

Ohhhh I see. It was a hope and a wish, not a statement of fact. Except that hope and wish was outlined in a government media release, and without the actual words “hope” or “wish”, or any derivative thereof.

“Um, Tammy, you explicitly said you were going to have all those widgets built by the end of the week. You put it in writing. I have it right here.”

“Did I write that down boss? Shoot. What I actually meant is that I hoped and wished that I would get them built. You obviously misunderstood. We cool, right?”

Anyway, in January 2016 meeting Marsh stated that “as part of that contract, they (Cenovus) have the ability to nominate a certain amount that they are wishing to offtake or wishing to take from us. And I won’t get into those details, but it’s not the maximum capacity of the plant.”

I don’t speak Executive Management all that well, but does that sound like he’s saying “Cenovus tells us how much they want, and we give it to them” to you too?

So, now that we knew that BD3 was not operating at full capacity, and the taxpayer/ratepayer (essentially both, double the fun, hurray!) are paying Cenovus instead of getting paid by Cenovus, was Marsh going to tell us why?

“Okay, first of all we have to be mindful of the confidentiality agreement we have with Cenovus to not reveal specific contracted amounts, volumes for CO2,” said Marsh. Of course.

That line continued through February 2016, when the government refused to provide the NDP with even a redacted copy of the latest BD3 contract with Cenovus, because confidentiality.

“The particular terms and provisions of this contract with Cenovus simply do not allow us to release all the details that are contained in that contract,” said Marsh. “We enter into contracts with many different firms — consulting firms, contracting firms. All of them usually have some form of confidentiality agreement in them. This one is no exception and unfortunately we just cannot provide the specific terms of the contract.”

“Our interest as a utility was simply to undertake to build a cleaner coal-fired generation station, one that had carbon capture attached to us,” said Marsh in February of 2016. “So the analysis of how much CO2 is recycled or how much is kept underground at the end of the day, that wasn’t part of our calculation. Our interest was really making sure we had an economic business case to proceed with..”

Really? How many daily widgets could potentially remain unsold was not part of your economic business case, SaskPower? Awesome.

In early June, federal Liberal Environment Minister suddenly became Bill Boyd’s best friend, when after touring BD3 she allegedly said that “in terms of the technology, there is opportunity for $50 trillion worth of technology transfer in China alone.”

That’s trillion – with a ‘t’! A number so big as to be meaningless, you could even say.

Meaningless, especially because Saskatchewan does not own the CCS technology, Shell Global does. So have fun with those trillions of dollars Shell Global, and you’re welcome for providing you with a marketing case study. As for us, SaskPower spent around $1.5 million marketing BD3 and CCS between 2013 and 2015, plus hundreds of thousands of dollars spent on sending SaskPower execs around that world. You know the one that’s watching us so closely.

Oh, and just under $2 million to an American lobbyist to lobby carbon capture and storage on Capitol Hill. No word on how much we can thank them for the privilege of the US government outright refusing to support carbon capture and storage, but it’s not like the cash is refundable because they failed, so who cares. That’s how lobbying works.

And here we are today, with the latest on BD3 being the news that I kicked this novel off with, that of Cenovus advising there was never an agreement with SaskPower for 100 per cent of the CO2.

I’m guessing they sent that information out in response to this story, which ran in the June 14, 2016 editions of Postmedia papers:

“To avoid paying a $91.8-million penalty, SaskPower was forced to renegotiate a deal with Cenovus…Under the previous deal, Cenovus was committed to buying 100 per cent of the output — or about $25 million worth — from the carbon capture project. Delays in the project starting would have, under the original contract, forced SaskPower to pay Cenovus a $91.8-million break fee…As a result of the renegotiation though, Cenovus is not required to take 100 per cent of the C02 output, meaning less revenue coming into SaskPower.”

Presumably Cenovus felt the need to correct Postmedia. Not sure why they didn’t feel the need to correct the Saskatchewan government the first umpteen-trillion (with a ‘t’) times they said the same thing publicly.

More tellingly, (to me, anyway) was this line:

“Production has been slowed, (Marsh) said, because Cenovus “does not need the full amount, so we don’t need to produce the full amount.””

Really. So we’ve gone from BD3 being broken, to BD3 sitting idle because our one customer doesn’t really need much.

I get it. Notwithstanding the notion that it’s throwing good money after bad, many feel we have no choice but to move forward with BD3 and CCS because of the billion plus dollars we’ve sunk into it.

Others in government start screaming about how shutting BD3 down would create job loss in and around Estevan, already hard hit by the oil slump. Not sure on the economics of $1.5 billion for a few hundred jobs in one region, but what do I know, right? They’re the smart ones.

And yes, it’s new. Everybody laughed at Noah when he built an Ark. Maybe twenty years from now we’ll look back on this period of time in the life cycle of BD3 and shake our heads at how skeptical we were. Maybe we’ll be rolling in the riches earned for Saskatchewan from the sale of, um, CCS Operations Manuals? It could happen.

And finally, there’s that issue of the coal – the hundreds of years worth sitting just below our province, ready to heat it up when it’s 40 below. Except, unless we find a better option, we’re not going to be allowed, literally, to keep burning it.

BD3 was supposed to be that better option.

Even if renewable energies like wind and solar power are a feasible, nevermind better option, we still need a baseline resource to ensure we don’t freeze to death, or have to walk to Regina.

Perhaps Sask Party MLA Warren Steinley said it best in a November 5, 2015 Seventy-Five Minute Debate in the House (or as I like to call it, the The One Time Backbenchers Get To Talk) on BD3:

“How are we going to supplement 44 per cent of our electrical power — magic pixie dust?”

Well, if this keeps up at this rate, I know where I’m putting my money.

 

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