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Canadian pipeline operators propose carbon transportation, sequestration network

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Canadian pipeline operators propose carbon transportation, sequestration network

Highlights

Pembina, TC Energy plan focused on Alberta

Questions over costs, regulation, revenues remain

Two of Canada's largest pipeline operators are partnering to develop a network of infrastructure to carry and sequester carbon emissions in Alberta as early as 2025.

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The collaboration between Pembina Pipeline and TC Energy announced June 17 is the kind that industry experts have said will be needed more broadly for capture and storage projects being proposed by oil and gas producers across North America to be successful.

Neither company provided details about costs, customers or expected revenue -- among the biggest question marks facing proponents of such projects. By leveraging their footprints connecting supplies from the Western Canadian Sedimentary Basin, Pembina and TC Energy are hoping to create a platform that will lure producers eager to limit the impacts from the global energy transition to cleaner burning fuels.

In the US, numerous upstream producers and liquefaction terminal operators have proposed, launched or said they are considering carbon capture projects, though to date there has not been a major collaboration announced among pipeline operators that endeavors to transport captured emissions to underground storage locations on the scale of what is being proposed in Canada. Past US carbon capture projects have had mixed success, amid issues with the high cost of scaling out the technology.

The carbon transportation and sequestration system that Pembina and TC Energy hope to create envisions having the capability to transport more than 20 million mt/year of CO2. The project would utilize surplus capacity on existing pipelines and a new sequestration hub, which the companies will call the Alberta Carbon Grid.

There would be three principal legs -- North from the Fort McMurray area of the province, Central tied into the industrial heartland and Southwest from power generation facilities in the region. Depending on buy-in from customers, future legs could be expanded to Joffre, Christina Lake, Cold Lake or Swan Hills.

A reservoir near Fort Saskatchewan has been selected for sequestering emissions to be transported along the proposed network. In a statement, the companies said permit applications have been prepared.

American efforts

Who will pay and how much will need to be spent are issues with which US carbon capture and underground storage project developers are also grappling.

The 71 MW Petra Nova power generation unit near Houston, which was designed to capture carbon dioxide to be transported through pipelines to mature oil wells, was mothballed, after initially halting operations last year due to low oil prices driven by the coronavirus pandemic.

In a bigger failure in 2017, plans for Southern Company's multibillion-dollar carbon capture project at the Kemper coal plant in Mississippi collapsed amid ballooning project costs and regulatory pushback. More recently, Enchant Energy and the City of Farmington have been said to be struggling to convince potential investors that retrofitting New Mexico's San Juan Generating Station for carbon capture at an estimated cost of $1.5 billion was financially viable.

The only financial figure provided by Pembina and TC Energy was the amount they said Alberta has committed in general to the technology -- $1.24 billion.

The companies said they hope that by utilizing existing assets, they can create their carbon network faster and reduce capital costs and cumulative environmental and community impacts. On the revenue side, they hope the new business platform will support financial growth. Tolls will be "materially less" than the current price of carbon in Alberta, the companies said without elaborating.

Other partners

Financial considerations aren't the only questions -- the companies said that achieving the full scale of the network is subject to Pembina's proposed acquisition of Inter Pipeline, which faces a hostile takeover bid from Brookfield Infrastructure Partners. Inter Pipeline shareholders have until June 22 to decide on the unsolicited Brookfield offer, which Inter opposes.

Pembina and TC Energy are open to other infrastructure owners joining the Alberta Carbon Grid partnership, their statement said.

The target for the first phase to be operational as early as 2025, with the fully scaled solution complete as early as 2027, is subject to regulatory and environmental approvals, Pembina and TC Energy said.