City can now explore carbon capture

By COLLIN GALLANT on October 6, 2022.

cgallant@medicinehatnews.com@CollinGallant

The City of Medicine Hat has the rights to explore the potential for storing carbon deep underground north of the city, the province’s energy ministry announced late Tuesday.

Tenure to examine the pore space in geologic formations around the province were awarded to 19 proposals on Tuesday, part of the effort by the provincial government to create regional carbon capture and sequestration hubs around the province.

Now, work will begin in earnest on the local project first proposed 14 months ago, which officials believe is critical to retaining existing industries and attracting new ones, city officials told the News on Wednesday.

“It is a big project for the city with major, positive implications, and we know there is a lot of interest in the community,” said Brad Maynes, the top manager in the utilities and infrastructure division.

He said beyond finalizing an agreement on pore space with the province, the next steps is to perform exploratory work. If successful, a second agreement with the province to operate would be needed, before construction and operational plans, as well as financing work is provided, likely in the 2025-26 city budget.

Presently, the city plans to spend about $16 million in each of the next two years, including $7.5 million in grant funding and city money reallocated from cancelled capital projects in the gas division, said Maynes.

Work in 2023 will consist of surface and seismic evaluation on plot of land north of the city, then move to a $9.5-million drilling program in 2024 to prove the suitability of the formation to lock in carbon dioxide slurry that will be injected from the surface.

At the same time, supply studies and evaluation at the city’s two power plant sites are being examined, as well as high-level engineering work on a gathering system – linking other major emitters in the area – and an injection facility.

“This is a very well-staged approach and some work depends on the stages before,” said Mayor Linnsie Clark. “Some work is happening parallel, in that we’re determining if it’s viable. Is the business case there? We’re being very cautious.”

The project was unveiled in the summer of 2021 by economic developers at city hall in tandem with a push to attract hydrogen production to the city’s industrial sector, and could proceed in a variety of “consortium” style scenarios said Maynes. Right now, the city is leading the work, he said, but there is wide interest in the project among potential customers.

The province will require all hubs to operate on an “open access,” meaning able to deliver to the facility for a fee.

The move toward carbon capture is a strategy to reduce the amount of CO2 that enters the atmosphere in the short term as cleaner energy sources are developed, and help facilities avoid charges under escalating carbon levies.

Financial documents released this week state the city’s power plant will pay about $5 million this year under the province’s TIER emissions regulations, which stand in place of the federal carbon tax under an agreement with Ottawa.

The size of the local carbon hub has been outlined as having capacity to store 3 million tonnes annually – about one-sixth greater than the total current CO2 emissions of the city power plant, Methanex and CF Industries.

The province announced pore space tenure for a half-dozen hubs in the oilsands region and north central Alberta last spring, and was expected to determine the remainder of the province this fall.

Two other potential hubs among the 14 announced Tuesday are located in southern Alberta, and several more near Hanna or Drumheller.

The “Calgary Region Carbon Sequestration Hub” is led by Reconciliation Energy Transition Inc., the First Nations consortium formed last year with the stated goal of purchasing a stake in the federal government’s Trans Mountain Pipeline expansion.

Last May, West Lake Energy announced it would seek tenure at a site near Pincher Creek, where it envisioned a blue-ammonia plant and a future gas power plant to be built by Bow Ark Energy.

Bruce McDonald, CEO of West Lake, said in a release the project “represents a significant step in clean energy transition, while generating valuable economic benefit for the province and surrounding communities.”

Other major companies involved in successful applications near Red Deer, Calgary, Edmonton, Edson and Grande Prairie were Heartland Generation, Inter Pipeline, Tidewater Midstream, Whitecap Resources, Keyera, ARC Resources, AltaGas and Tourmaline.

22
-21