July 12th, 2024

Carbon capture work advances in the Hat

By Collin Gallant on June 12, 2024.

Methanex has included Medicine Hat as one of two potential sites where the company would initially install carbon capture equipment to reduce emissions and boost production from its methanol production plants.--NEWS FILE PHOTO

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Two major employers in Medicine Hat say their local chemical production plants are strong candidates for carbon-capture upgrades as the city plans to advance development of a CCUS hub.

Methanex and CF Industries state in annual “sustainability reports” published this spring that they are evaluating near-term investments as provincial and federal governments discuss potential support for projects that could reduce emissions of carbon dioxide into the atmosphere.

In the case of Methanex, it will decide on an initial carbon capture conversion – diverting CO2 back into its production initially – at either Medicine Hat or Geismar, La. plants by the end of 2024.

They are “the most promising locations for implementing this technology” states the Vancouver-based global methanol producer, which would decide on full emission reduction when facilities are available and the costs of low-carbon production make sense compared to prices.

That comes as city council this month gave administrators authority to finalize unspecified commercial arrangements to advance project “Clear Horizon.”

Proposed in 2019, it calls for early engineering and feasibility work to build an underground “hub” to store pumped carbon dioxide produced in the region.

No further details were announced by the city this month, but the council motion calls on staff to launch public engagement soon after the deal is announced.

Energy committee chair, Coun. Darren Hirsch, told the News that more will be known soon about the announcement, and stressed the project is still being studied and developed by the city and potentially the private sector.

“We know that we’re an emitter and some of the major companies that operate in Medicine Hat are as well,” said Hirsch, who hinted that a short-term agreement relates to infrastructure agreements rather than potential operation agreements or partnerships.

“We believe that either us, or other entities, could carry certainly that load as well.”

The city has said it’s open to partnerships or moving in tandem with other industrial players on the project that could store two million tonnes of CO2 each year, and specific to the City of Medicine Hat, reduce carbon levies at the power plant that were $8.5 million in 2023.

Last week, Premier Danielle Smith told reporters she sees no changes coming to the provincial TIER carbon levy paid for by large emitters – like power plants and chemical facilities – and said this week the province is open to potentially providing more aid in tandem with Ottawa for large CCUS hub development.

That especially involved the “Pathways Alliance” of major oil sands companies which propose a massive regional storage near Cold Lake, estimated to cost $15 billion.

Some environmental and fiscal critics have questioned the CCUS model, arguing it perpetuates fossil fuel use, or provides unsustainable subsidies and potential liabilities for hub operators.

This spring, Capital Power announced it would halt development on a $2-billion CCUS project until the economic case improved.

Smith told the News in May she sees the technology as encouraging, but there are hurdles to overcome for the private sector.

“We know (Capital Power) are frustrated with not having clarity around the federal regulations that would make the project viable, like an investment tax credit and contract for differences,” she said May 2. “We want to work on that.”

As well on Tuesday, Varme Energy announced it has an agreement to build a CCUS facility near Edmonton with Gibson Energy that includes a “contract for difference.”

That essentially guarantees the carbon price of at least $85 per tonne from the government no matter the potential for changing government policy. It secures base cost savings (compared to paying carbon levies) that make up the economic rationale behind the projects.

Methanex says work could proceed before the hub is operational sometime later this decade, according to private section “sustainability reports.”

The 2023 Methanex ESG report, published this spring, says its $2 million-study last year proved the technical feasibility of capturing CO2 at plants in Medicine Hat and Geismar.

A decision to advance work at one plant will be made by year end to capture some gas to inject back into the plant system to boost production while the company awaits hub development.

“Despite technical feasibility, project economics require a price premium for blue methanol and we continue to gauge customer interest,” the Methanex report reads, adding underground sequestration is an option once available.

“We will continue to monitor the development of supportive conditions for a carbon capture investment, including government incentives, customer willingness to pay and carbon transportation and storage infrastructure in the region,” the report concludes.

CF Industries is currently advancing a CCUS at its Donaldsonville, La. facility under agreement with a hub being developed by ExxonMobile.

Similar investments across fleets of major production facilities is outlined as a goal by 2030.

“These roadmaps identify projects we believe we can execute in the coming years – such as implementing CCS at our Medicine Hat, Yazoo City and Waggaman sites – as well as identify the sources of GHG emissions from our facilities that require additional technology development and are thus longer-term focus areas,” its report reads.

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