Carbon capture, utilization and storage update

Carbon capture, utilization and storage (CCUS) projects and technologies are playing an increasingly significant role in achieving Canada’s carbon emissions targets. Both the Alberta and federal governments continue to promote and incentivize CCUS projects and technologies and the upcoming federal election has placed a renewed focus on CCUS initiatives across Canada:

• The 2021 budget presented earlier this year highlighted an investment of $319 million over seven years into research, development and demonstrations to advance the commercial viability of CCUS technologies, as well as an investment tax credit for capital invested in CCUS projects that will come into effect in 2022.
• The federal Conservative Party platform states that $5 billion will be invested in CCUS initiatives, including its own version of a tax credit.
• The Alberta Government has committed $1.24 billion through 2025 to two commercial-scale CCUS projects.

Further, on May 12, 2021, the Alberta Government published an information letter [PDF] in which it announced that the it intends to pursue “CCUS hubs” that will be operated by hub operators selected through a competitive process, as opposed to the development of proponent-led, stand-alone CCUS projects. We have previously written about this procurement process for a new CCUS hub on our Energy Transition Blog. The competitive process was expected to begin in the late spring of this year; however, the Alberta Government has yet to formally initiate this process.

The Alberta Government’s information letter also stated that “Alberta Energy is not contemplating changes to existing legislation and regulations, but may in the future, if necessary.” Alberta’s current CCUS regulatory regime largely consists of existing oil and gas regulations for drilling wells, amendments to key oil and gas conservation statutes such as the Mines and Minerals Act to specifically address CCUS (the relevant amendments were primarily made in 2010), the Carbon Sequestration Tenure Regulation (which was adopted in 2011) and directives from the Alberta Energy Regulator and the Alberta Government. It’s unclear whether widespread CCUS developments will require revisions to this existing regulatory regime; however, there will likely be a need for additional regulations applicable to industries connected to the CCUS sector, such as the blue hydrogen industry which we have also previously written about.

Not only is Alberta uniquely placed to be a leader in the CCUS space from an operations perspective, given the province’s geology and know-how, but it is also well positioned to be a regulatory leader in this space, given its existing CCUS regulatory regime. With incentives available at both the federal and provincial levels, the launch of Alberta’s competitive process and the focus on meeting carbon emissions targets being amplified by the federal election (with the Liberal and Conservative parties both supporting CCUS), it is likely that the CCUS landscape will see significant growth in the coming months and years.