Bloomberg News

Alberta Cancels Funds for Swan Hills Carbon-Capture Project

February 25, 2013

Alberta and Swan Hills Synfuels LP canceled plans to develop a carbon-capture and storage project, the second CCS initiative to be scuttled in the Canadian province in less than a year.

The provincial government won’t provide the C$285 million ($278 million) in financing it had previously committed to closely-held Swan Hills Synfuels, they said in a joint statement today.

The project was meant to convert coal underground into synthetic gas while capturing the carbon dioxide produced in the process. Falling prices for natural gas made Swan Hills’s syn- gas uncompetitive, the company said. The lack of demand for CO2 is making CCS systems economically unviable around the world, said P.J. Partington, a policy analyst at the Pembina Institute in Toronto.

“The main thing is getting the price on carbon,” Partington said in an interview. “We have to start the transformation and need that signal.”

CCS systems siphon off polluting emissions from power stations and factories. The gas may be permanently buried underground or sold to oil companies for use in enhanced recovery projects. Prices for the greenhouse gas are insufficient to stimulate development and need to reach about $100 per ton by 2020 to make CCS a viable industry, he said.

Swan Hills in central Alberta was one of four CCS projects the provincial government had agreed to provide with a total of C$2 billion in financing to offset emissions from its fossil fuel industry, including coal, gas and oil sands. Alberta imposes a levy of C$15 per metric ton of CO2 on large emitters that exceed individual targets and the money helps fund a research and innovation fund.

Canceled Projects

TransAlta Corp. (TA) canceled plans in April to build a CCS coal plant in Alberta because the expected revenue didn’t justify the cost, the Calgary-based company’s Chief Executive Officer Dawn Farrell said at the time.

CCS projects have faced escalating costs and financing setbacks in other regions. Two U.K. projects missed out in November on the first phase of a 1.5 billion-euro ($2 billion) European Commission program after failing to secure funding guarantees from the government.

Vattenfall AB scrapped a 1.5 billion-euro ($2 billion) system in Germany in 2011. American Electric Power Co. also shelved plans in 2011 for the first U.S. commercial-scale carbon-capture initiative.

The International Energy Agency estimates that 3,400 CCS plants are needed by 2050 to meet a global goal of cutting carbon emissions in half.

To contact the reporter on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net

To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net


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