The site of Entropy's Glacier carbon-capture project in Saddle Hills County, Alta. It captures CO2 from a natural gas processing plant.David Hills/Supplied
A Calgary-based carbon-capture developer has begun operating a $200-million project in northwestern Alberta, and its chief executive is urging changes to federal carbon-credit policy to unlock significant investment in its unique technology.
Entropy Inc. is commissioning the largest commercial phase of its Glacier project, which features gear that captures carbon-dioxide emissions from one of Canada’s largest natural gas processing plants and from an attached gas-fired turbine. The turbine provides electricity to the plant and can feed the Alberta power grid.
The captured CO2 bonds with a solvent and is injected underground as the final stage of the proprietary process.
The company is backed by Advantage Energy Ltd., Brookfield Asset Management Ltd. and Canada Growth Fund, the latter of which also struck a deal in 2023 to buy carbon credits from the development at a guaranteed price.
Brookfield’s first Global Transition Fund, one of the world’s largest impact funds, was an early backer of Entropy, investing $300-million in 2022.
With the technology scaled up, Entropy is looking to expand its use in other locations as demand for low-carbon energy surges, chief executive Sanjay Bishnoi said.
Two key targets are power-hungry data centres, many of which are being designed to run on gas-fired electricity, and Alberta’s oil sands, where producers have committed to installing carbon-capture technology as they increase production to fill a proposed pipeline to the West Coast.
“We view what we’re proving out at Glacier to be an important blueprint to provide for those two important industry segments,” Mr. Bishnoi said in an interview.
With the first large operation up and running, capturing more than 400 tonnes of CO2 a day, Entropy executives said the company sees opportunity to build up to five similarly sized operations at other gas plants, a potential investment of $1-billion.
One barrier to that expansion is carbon pricing in Alberta, which under the current regime is too low to build the plants economically. Entropy is calling on Ottawa to tweak its policies to allow credits to trade in a market aimed at transport fuels, which offers much higher prices.
The company built Glacier in phases to prove the technology. The newest phase moved forward after Canada Growth Fund provided $200-million in convertible debt financing. It also agreed to purchase up to 185,000 tonnes a year of credits generated under Alberta’s industrial pricing system at $86.50 a tonne, rising with inflation, for 15 years.
Janetta McKenzie, who directs the oil and gas program at the Pembina Institute, an environmental think tank, called Entropy’s investment in carbon capture a positive step. However, she added, the economics are badly harmed by recent changes to the Alberta Technology Innovation and Emissions Reduction, or TIER, carbon pricing system, now being applied across the country.
Alberta’s industrial carbon pricing system, set out in the recent implementation agreement between the province and Ottawa under their memorandum of understanding, has a floor price ranging from $60 a tonne in 2030 to $110 by 2040.
“Because of the Alberta and federal government’s agreement to a lower and slower carbon price trajectory, the Canada Growth Fund may be on the hook to top up carbon revenues for Entropy, using public funds, for the foreseeable future,” Ms. McKenzie said.
Credits under Canada’s Clean Fuel Regulations, meanwhile, are selling for more than $400 a tonne, a level that would support new investments, Mr. Bishnoi said. Such credits are generated by refiners that add ethanol imported from the United States to gasoline and diesel, but not for natural gas used in the refining process.
The company said it is in talks with Ottawa to change that.
“We think, not only does it line up philosophically with what [Entropy is] trying to accomplish here, but also with the Build Canada thesis of getting more of these projects off the ground and keeping that value within Canadian borders,” Mr. Bishnoi said.
The federal government said carbon capture is one of multiple activities that can generate credits within its Clean Fuels Regulation, but only if done in the production of liquid fuel. Natural gas is not eligible, said Brandon Clim, spokesperson for Environment and Climate Change Canada.
“This ensures the focus of the CFR remains on reducing emissions and deploying innovative solutions in the transportation sector, such as renewable diesel, co-processing, and hydrogen fuel cell vehicles,” Mr. Clim said in a statement.
Critics of carbon capture argue it is held up by the energy sector as a fig leaf to allow for ever-increasing fossil fuel production and use, which exacerbate climate-related disasters. But Mr. Bishnoi said the technology fits within a range of decarbonization options.
“We do believe that this can be done at scale. We don’t think it’s 100 per cent the solution to reducing CO2 emissions, but we do think that it’s an important tool in the toolbox and that it’s got a significant role to play,” he said.