Pathways Alliance's carbon-capture initiative is a 400-kilometre-long pipeline that would transport carbon trapped at oil-sands facilities to an underground hub.IAN WILLMS/The New York Times
The group behind a proposal for a massive carbon-capture project in Alberta’s oil sands has begun preliminary discussions with the federal government’s new Major Projects Office, driven by a renewed sense of urgency around the plan.
The discussions so far have been “very high-level,” Pathways Alliance president Kendall Dilling told The Globe and Mail on Wednesday, but he expects the MPO will be instrumental in getting the emissions-reduction project up and running.
Discussions ramped up slower than many in the sector expected, Mr. Dilling said, owing in part to the continuing trade war with the United States. But he said that Ottawa’s Bill C-5 has conversations “happening in earnest now.”
The legislation aims to fast-track major infrastructure projects that are in the national interest. Mr. Dilling expects high-level agreement by the end of the year on how to move the Pathways plan forward.
“It honestly feels different now than ever before in terms of the urgency from all parties to get stuff moving,” Mr. Dilling said in an interview on the sidelines of an energy summit organized by the Atlantic Council, a think tank.
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The Pathways Alliance carbon-capture initiative is a 400-kilometre-long pipeline that would transport carbon trapped at oil-sands facilities to an underground hub near Cold Lake, Alta., with the aim of reducing emissions by 22 megatonnes a year.
Industry as well as the governments in Ottawa and Alberta have always lent their support to the concept of the project, Mr. Dilling said, but its significant expense has to be balanced with the oil sector’s global competitiveness.
Although Ottawa and Alberta have tax credits available for the construction of carbon-capture projects, the financial hurdles for Pathways are not yet resolved.
Since carbon capture will not add to oil’s sale price, its financial value would likely have to come from generating carbon credits. But Alberta’s carbon credit market is in rough shape and clouded in uncertainty – including the extent to which governments will continue to maintain and strengthen industrial-pricing regimes.
Under then-prime minister Justin Trudeau, Ottawa tried to get past that hurdle by offering a complex form of revenue certainty generally known as carbon contracts for differences, in which the government would effectively guarantee or prepurchase carbon credits from companies investing in carbon capture – either profiting or suffering a loss depending on what the credits wound up trading for.
It designated the Canada Growth Fund, a $15-billion federal initiative launched in 2023, as the vehicle for providing those deals. Although Mr. Dilling expects the CGF will play a role in Pathways, he said Wednesday that conversations with the fund have petered off.
“It was hard for the Canada Growth Fund to deal with the realities of the scope and scale of our project and, frankly, the unpredictability of carbon markets. So it’s hard for them to step into that space decisively,” he said.
Prime Minster Mark Carney has tied progress on the Pathways project to any new pipeline to Canada’s coasts, reflecting what Alberta Premier Danielle Smith has called a “grand bargain” in talks with Ottawa.
When he announced the MPO in September, Mr. Carney said the carbon-capture project would be referred to the office, calling it “Pathways Plus.”
For Mr. Dilling, the “plus” tagged on by Ottawa refers to a new pipeline to access export markets, along with the increased oil production needed to fill said pipeline and provide the economic benefits of fossil fuel royalties.
But oil needs to be carbon competitive, Mr. Dilling added, which is where the Pathways project comes in: by continuing to reduce production emissions from the oil sands.
“We need to continue that trend to demonstrate that we can provide a cost- and carbon-competitive barrel to the market,” he said.
Tim Hodgson, the federal Minister of Energy and Natural Resources, told the Atlantic Council summit that the nation-building posture adopted by Ottawa includes large-scale carbon-capture projects, as well as further developing the oil and gas sectors, extending the lives of nuclear power plants, establishing small modular reactors and integrating renewable energy into power grids.
Canada also plans to increase its exports to generate $300-billion in new international trade by 2035, he added.
Mr. Hodgson said he hears constantly from other countries that they want Canadian natural resources owing to the “value proposition” Canada presents its allies and investors, including rule of law, the scale and diversity of resources and “world-class engineering.”
For too long, Canada “did not fully exploit that value proposition,” he said. “Now there is no longer time for half measures. It’s time for bold action, clear decisions and a renewed spirit for building.”