A recent energy agreement between Alberta and Ottawa highlights the interconnectedness of a proposed new pipeline project and a carbon offset initiative named Pathways. Alberta is taking the lead in planning a potential one-million-barrel-a-day pipeline to the West Coast to facilitate increased oilsands production and exports to Asia. However, this agreement with Ottawa stipulates that there must be a significant offset to the carbon emissions resulting from the pipeline.
Pathways, a multi-billion-dollar plan, aims to transport and store 16 million tonnes of carbon dioxide annually from the oilsands by 2045. Despite being in development for about four years, the project stakeholders, including the proposing companies, provincial, and federal governments, are still in negotiations to determine cost-sharing and risk allocation. The deadline set in the Alberta-Ottawa agreement to finalize a three-way deal by April 1 has passed without resolution.
The Oil Sands Alliance, comprising major oilsands players such as Canadian Natural Resources Ltd., Cenovus Energy Inc., Imperial Oil Ltd., Suncor Energy Inc., and ConocoPhillips Canada, is behind the Pathways project. According to Brendan Frank from Clean Prosperity, carbon capture and storage are viewed as a cost-effective method for industrial decarbonization in Alberta.
The Pathways initiative involves three main components: capture, transport, and storage. Companies within the Pathways alliance are expected to install carbon capture equipment at their oilsands facilities to separate and compress carbon dioxide. Furthermore, a pipeline network spanning over 650 kilometers is proposed to transport CO2 from various oilsands sites to a storage hub in the Cold Lake region. The captured gas would then be injected deep underground for storage.
While an updated cost estimate was not provided in the overview, the initial investment for the first phase was projected to be $16.5 billion by 2030. The cost-sharing aspect remains a point of contention among the stakeholders, with Cenovus CEO Jon McKenzie acknowledging the need for shared financial responsibility.
Both the federal government and Alberta offer financial incentives for carbon capture projects, but industry players suggest that additional support is required to offset the substantial costs. The governments have agreed to target an effective carbon price of $130 per tonne by 2040. Environmental groups have expressed concerns about the timeline for achieving this carbon price target, emphasizing the need for immediate private investments to advance the Pathways project.
Carbon contracts for difference have been included in the federal-provincial implementation agreement to provide certainty to clean energy investors regarding future carbon pricing policies. The incorporation of these contracts aims to safeguard against potential policy reversals that could impact investment viability in the clean energy sector.
According to analysis by Clean Prosperity, carbon prices ranging from $130 to $150 could make portions, if not all, of the Pathways project financially feasible. The implementation agreement is seen as a step forward in making the Pathways project economically viable by offering increased certainty to market participants.