Alberta to capture CO2 with oil sands revenue

By Bernard Simon in Toronto
Published: July 9 2008 01:16

Alberta is to set aside C$4bn ($3.9bn, €2.5bn, £2bn) of its burgeoning oil and gas revenues for projects to reduce greenhouse gas ­emissions.
The initiative, announced on Tuesday by Ed Stelmach, the Canadian province’s Conservative premier, is a response to increasingly vocal criticism of environmental damage caused by huge projects to exploit the bitumen-like oil sands deposits in north-eastern Alberta.

The C$4bn will be allocated to two funds. One will finance large projects to capture and store carbon dioxide emissions from oil sands recovery sites, the plants that upgrade the bitumen into crude oil, and from coal-fired power stations.
The gas would be pumped deep into the earth where it can be trapped for millions of years.
The other fund will finance improved public transport in the province. The extra funds are likely to revive interest in a high-speed rail link between Calgary and Edmonton, the province’s two main cities.
The government estimates that the reduction in greenhouse gas emissions brought about by these initiatives would be the equivalent of taking 1m motor vehicles off the road. Mr Stelmach’s plan is also designed to deflect a recent movement in Canada towards carbon taxes.
The neighbouring province of British Columbia this month imposed a carbon tax and the Liberal party, the federal opposition, has made a carbon tax a central part of its policy platform with its proposed levy offset by personal and corporate income tax cuts.
Carbon capture and storage projects are under way in the UK, Norway, Denmark and Australia. In north America, a group of oil and gas producers has piped more than 7m tonnes of CO2 from North Dakota into a depleted oilfield near Weyburn, Saskatchewan.
The Alberta government on Tuesday said that porous sedimentary rock formations in the province beneath ­non-porous geology were well suited to secure, long-term storage of vast quantities of CO2.
The funds will come from this year’s budget surplus which, the province said, would be “significantly larger than predicted” owing to the surge in oil and natural gas royalties. The surplus was estimated at C$1.6bn in April’s budget.
The province has already repaid all its debt. It has the lowest corporate tax rate among Canada’s 10 provinces and is the only one without a retail sales tax.
Critics have accused the long-ruling Conservative government of overspending, thereby fuelling labour and raw material shortages as well as inflation. They have urged the government to save a higher proportion of its oil and gas revenues for the day when oil and gas prices drop.
Copyright The Financial Times Limited 2008