Alberta government and federal government encourage potential carbon storage center development | The tone
Successful sponsors selected from the first request for full project proposals for the use and storage of carbon dioxide (CCUS) from the heartland of the industry
On March 31, 2022, the Government of Alberta (GOA) announced that six proposals for carbon storage center development serving Alberta’s core industrial region near Edmonton have been selected to work with the Argentine government to assess the suitability of their respective proposed sites for storing CO2 emissions. These proposals were submitted in accordance with the Government of Argentina’s first call for full project proposals (RFPP) published December 2, 2021 (discussed therein prior insight). In the next phase of the competition process, the successful proponents will work with the GOA to further assess the suitability of their respective project sites for permanent CO2 Warehouse.
The six project advocates selected for the evaluation phase of the process are:
- Bison Low Carbon Ventures Inc. – Meadowbrook Hub Project;
- Enbridge Inc. – The Open Access Wabamun Carbon Hub;
- Enhance Energy Inc. – The Origins Project;
- Pembina Pipeline Corporation and TC Energy Corporation – Alberta Carbon Grid;
- Shell Canada Limited, ATCO Energy Solutions Ltd. and Suncor Energy Inc. – Atlas Carbon Sequestration Hub (Atlas Hub); and
- Wolf midstream and partners.
If a promoter can convince the GOA that their proposed project can enable permanent storage, they can work with the GOA on the terms of an agreement under the Mining and Minerals Act this would grant the proponent the pore space time required for CO injection2 into the target formation. At this time, it is not clear whether the GOA intends to include terms in such a pore space tenure agreement that would provide for open access to the hub, or whether they would address the fees charged by the hub operator for access.
Surface rights and regulatory approvals are not granted through the RFPP process. If a proponent is able to secure the required pore space lease, they would still need to acquire the surface rights required for all collection, transfer and injection facilities. They would also have to obtain approval from the Alberta Energy Regulator for such facilities and for the entire underground injection program.
Second CCUS call for full project proposals underway
As expected, a second RFPP is now open to proposals for carbon sequestration centers primarily targeting emissions originating outside of Alberta’s core industrial region. The GOA is accepting submissions for full project proposals under this second RFPP between April 25 and May 2, 2022. These full project proposals must be based on updated guidelines published by the GOA in early March. These guidelines will be known to parties considering participation in the first round of the RFPP, with relatively minor changes to clarify the specific information that the Argentine government expects from proponents.
The federal government is promoting the development of carbon storage centers
On April 7, 2022, the federal government of Canada released its 2022 federal budget and reiterated that the strategic implementation of CCUS projects is an important part of Canada’s plan to reduce greenhouse gas emissions by proposing a refundable investment tax credit for CCUS. The proposed CCUS investment tax credit is designed to help mobilize readily available private capital to support the development of thriving Canadian businesses during the energy transition. The proposed CCUS investment tax credit would be available to companies that incur eligible CCUS expenses from 2022. Eligible CCUS expenditures relate to CCUS projects that permanently store captured CO2 in specific geological formations or concrete, but does not include enhanced oil recovery. The CCUS investment tax credit rates will be set at the following amounts from 2022 to 2030:
- 60% for investments in CO capture equipment2 on direct air capture projects;
- 50% for investments in CO capture equipment2 in all other CCUS projects; and
- 5% for investments in equipment for transport, storage and use.
These rates will be reduced by 50% for the period 2031-2040 to encourage industry to cut emissions rapidly.
Successful proponents of GOA’s first RFPP and potential proponents of GOA’s second RFPP are likely to be encouraged by the proposed federal CCUS investment tax credit. Industry groups have recommended that the federal government introduce a loan of up to 75% to cover the high costs required to develop and operate CCUS projects. Given these high costs involved, the federal government confirmed that it will also work with the provinces in anticipation that they will offer further financial incentives to encourage the development of CCUS projects. The proposed CCUS investment tax credit may not be sufficient on its own to make any proposed CCUS project viable under current conditions, but it is clearly an important step in the right direction.
Dentons will continue to monitor developments in the area of CO2 capture, utilization and storage and will update on the progress of the CO2 sequestration process.
Special thanks to Ana Cherniak-Kennedy, law student, who helped create this insight.