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Episode 24: Canadian Energy and Innovation: Part 1

 

The Canadian energy sector is a leading source of sustainable energy and innovation that will make Canada a leader in the decades to come. It is subject to some of the world’s highest environmental and social regulatory requirements, building on Canada’s strong governance approach to these topics. In order to meet international climate goals and raise standards of living, the energy sector requires innovation.

In the first episode of our two part series Canadian Energy and Innovation, Michael Torrance speaks with guests; Chris Slubicki, former President and CEO of Modern Resources, Ray Kwan, Oil & Gas Analyst from the BMO Equity Research team and Jeff Pearson, the President of the Carbon Business Unit at Wolf Midstream on the Canadian energy sector. 

In this episode:

  • Canada’s potential as a leader in a sustainable energy future

  • Carbon Capture Utilization and Storage (CCUS) and the Alberta Carbon Trunk Line CCUS project as a model of Canadian innovation

  • How CCUS will be used in the Canadian energy sector to meet climate and development goals


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Equity Research Public Disclosures

 

TRANSCRIPT:

Chris Slubicki: First of all, it's the right thing to do, which is a good guiding principle, so that's what really set us out on that path. But we've also ended up with better performance, better economics, certainly environmentally it's a lot better. That was the original objective. It doesn't cost us any more to implement. It's more reliable. It lowers our operating costs, plus we receive carbon credits, so I'd really turn the question around. It's not why would you do it; it's why wouldn't you do it? 

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Michael Torrance: Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world. 

Disclaimer: The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries. 

Michael Torrance: Innovation is needed to sustainably meet the energy needs of the future. The Canadian energy sector is subject to some of the world's highest environmental and social regulatory requirements, building on Canada's strong governance approach to these topics. But the global playing field increasingly necessitates innovation to meet international climate goals, while delivering energy the world needs to grow and raise living standards. It is this balance that creates a big opportunity for Canada to distinguish itself on the global market. 

On today's podcast, we'll focus on the Canadian energy sector, its place as a leading source of more sustainable energy, and the innovation taking place that will make Canada a leader in the decades to come. To set the stage, I spoke with Chris Slubicki, President and CEO of Modern Resources, a western Canadian oil and gas producer. Chris has given popular talks explaining how Canada is a global leader and will continue to be a global leader in the energy space. Chris has been active in the Canadian energy sector for over two decades. 

Chris and I discussed how his company has demonstrated its leadership on sustainability and what he thinks the future has in store for the Canadian energy sector. Thanks for speaking with me, Chris. 

Chris Slubicki: My pleasure. 

Michael Torrance: So, Chris, let's just start. If you can tell me about Modern Resources, what is the focus of your business? 

Chris Slubicki: Well, let me give you my elevator pitch. We're an energy company, an oil and natural gas company, but I tell people if you understand our name, you understand our company. So we're Modern Resources, so we have a modern asset base. We have a modern balance sheet, meaning low debt. We apply modern technology. We apply modern ethics and standards of governance, and we apply modern environmental standards. We're Modern Resources. 

Michael Torrance: Is it fair to say that you see yourself as an advocate for the Canadian oil and gas industry? And if so, why do you take that on? 

Chris Slubicki: Well, I call myself the accidental advocate. I spoke to 200 schoolteachers in Edmonton, almost exactly a year ago. It was October last year, and after 10 or 15 of them came out to me and said that was an excellent presentation. Where are you on YouTube? I'd love to show that to my classroom. And, of course, being 60 years old, I was thinking, why would I be on You Tube? But I came back to work on Monday and we had a 20-year-old student working here, a co-op student, and I said to her, "Elena, this is your generation's thing, get me on YouTube." 

So the next time I spoke here in Calgary, her and her girlfriend recorded it and edited it and posted it on YouTube and I thought, you know, 10 or 20 or 30 schoolteachers will show it to their class. And now it's something around 150,000 views and I've put out a second video, a bit of a follow-up one, a few weeks ago. I didn't intentionally do it. I didn't put my hand up. I just started speaking about what's important to me, and it seemed to have struck a chord with people. And I'd also say that there's been such a fight in Canada between energy and the environment for probably at least 20 years now. I very much try to tone down the discussion, you know, this is an important issue, it's a complicated issue, there are no easy answers. If the answer was easy, we would have done it by now. So let's calm down and let's have an informed, intelligent discussion. 

I think there's probably – and I haven't taken a survey, I'm making these numbers up – but there's probably 10% of the population who are very strong on the environmental side, very ideological, and then there's 10% on the other side who just don't want to acknowledge or learn about or even consider climate change and other environmental issues. So I've really dismissed both those sides because there's no use talking there, that's just a fight, and I really aimed my talks, my advocacy, at the 80% of the people in the middle who are smart, rational, intelligent people who may lean one way or the other in their thinking, but appreciate an informed conversation on a complicated issue, and that seems to have struck a chord with people. 

Michael Torrance: Hm, and I heard in listening to one of your talks, that Modern Resources was recognized for environmental performance. Can you talk a little bit about what that award was and what distinguished your company from the other nominees? 

Chris Slubicki: Well, we've won a couple of awards now, and it's really focussed on our efforts on emission reduction. When we started Modern, again, we were starting with a blank slate. We didn't have to inherit old equipment, old thinking, old technology, and we thought there has to be a better way to do things, so we put our thinking caps on. And one of the things that we applied it to is well sites. Most well sites in the world don't have power, you can't plug in for power, you have to provide power on-site. And you provide that power by using the pressure of the natural gas to actuate pumps and valves, and then you release the methane, and methane of course is a very strong greenhouse gas. 

So we took a look at that and our goal was to reduce methane emissions, but the solution we came up with eliminated methane emissions 100%. Our labelled MULE sites, modern ultra-low emission sites, and we emit zero methane and we still emit a tiny, tiny, tiny bit of carbon dioxide, so we can't in good faith call them zero emission sites, so we call them modern ultra-low emission sites. It's not the only thing we've done, but the awards we have won have been for developing the MULE sites. 

Michael Torrance: So as a CEO, what led you to invest in that type of technology? 

Chris Slubicki: Well, I'd almost flip that around. First of all, it's the right thing to do, which is a good guiding principle, so that's what really set us out on that path. But we've also ended up with better performance, better economics, certainly environmentally it's a lot better. That was the original objective. It doesn't cost us any more to implement. It's more reliable. It lowers our operating costs, plus we receive carbon credits, so I'd really turn the question around. It's not why would you do it; it's why wouldn't you do it? 

Michael Torrance: So what in your view distinguishes the Canadian oil and gas sector from other global players in that space from a sustainability perspective? 

Chris Slubicki: We talk about environmental law a lot, but let's look at the other elements of where are you going to source your energy? Items such as worker safety, human rights, ethics, religious freedom, gender equality, Indigenous consultation, environmental standards. When you think about any of those issues, where do you want to get your energy besides Canada? Who has higher standards on any of those measures than Canada? So it is up to us who have the privilege of living here, have the benefit of being born or immigrating to this country, to make sure that we hold ourselves to a high standard and that we give other people a high standard to aspire to. 

Michael Torrance: Tell me about your thoughts on global energy demand in the coming decades and how it's going to change or even accelerate? What do you foresee that it will mean for both producers and consumers of energy? 

Chris Slubicki: Well, I do believe we have to get to a lower greenhouse gas emissions world. And I say that as an oil and natural gas producer, but I am a believer in climate change, and we do have to lower emissions. So I'll say that at the outset, and I support efforts to get us there. Having said that, energy demand on the planet is going to continue to increase and probably increase at faster and faster levels as more and more people not only come out of poverty, but aspire to a higher quality of life. 

So we're going to see an increase in demand of all types of energy: oil, natural gas, solar, wind, geothermal, tidal, nuclear. All of them have a role to play. You know, so frequently these debates are so binary; we should do renewables, we shouldn't do natural gas, we should do wind, we shouldn't do nuclear. You know, that is a debate for the highly, highly privileged. This world needs energy and it needs all kinds of energy. There is no single silver bullet answer. Each type of technology has its place in the energy system. And, you know, the demand for oil, I think, will peak at some point as technology improves. But even when it peaks, it will still be a major source of energy for the rest of this century, for a long time. And that production should come from Canada, which produces it to the highest standards in the world. 

I think when you look at ESG standards worldwide, Canada is not "a" leader, it's "the" leader in energy development. 

Michael Torrance: Leadership and innovation will undoubtedly go hand-in-hand. One of the best examples of Canadian innovation aimed at emissions reduction and sustainability is found in projects applying a process called carbon capture utilization and storage, or CCUS. CCUS is the technological process of capturing CO2 emissions and reusing it in other processes or storing it so that it does not go into the atmosphere. 

To unpack what this technology means, how it's being deployed in Canada and what opportunities remain to be captured, I spoke with Ray Kwan, an oil and gas analyst with BMO Capital Markets Equity Research. Ray and his team recently published an in-depth analysis of Canada's global leadership in CCUS. The analysis draws interesting conclusions about how CCUS technology may position Canada as a leading sustainable low-carbon energy source for the world both environmentally and economically. 

Thanks for speaking with me, Ray. 

Ray Kwan: Happy to be here. 

Michael Torrance: So, Ray, to get started, can you tell us what does carbon capture and storage, or CCUS, mean? 

Ray Kwan: So, carbon capture and storage is basically the technological process of separating and capturing CO2 exhaust from any industrial process. So whether it be coal power plants or fertilizer plants, the process of CCS takes the CO2, separate it, captures it, before injecting it into deep underground in terms of the rock formation, for storage. So another term that's kind of interchangeable to use with CCS, is like you said, CCUS, where the U stands for utilization. So CCUS is like CCS in that it separates and captures CO2, but instead of injecting it straight underground, it's actually used for additional industrial processes. So it could be used enhanced oil recovery, which is the process of injecting CO2 into declining oil fields just to help incremental recoveries, or even something like methanol production. 

Michael Torrance: So why does, based on your analysis, does CCUS matter from both an economic as well as an ESG perspective for Canada and the global energy sector? 

Ray Kwan: The ESG is really a significant movement in Canada, and globally for that matter, and nowadays to access the global capital markets, I mean, energy companies must show that they meet the minimum requirements from an ESG perspective. And that's especially regarding environmental reporting. You know, having said that, to be top tier and considered in many of these ESG-focused funds, energy companies must show consistent reduction in CO2 emissions. In the end, CCUS will matter just because it's one of the few solutions to reduce emissions or emission intensity at scale. And obviously with a more favourable ESG ranking, I think you would largely get more positive capital markets and funds flow. 

Michael Torrance: So is that the primary economic driver then? Is it centred around ESG performance, or are there other economic aspects of CCUS that make it an appealing option? 

Ray Kwan: Yeah, I mean, I think from why it makes it an appealing option, I think carbon taxes, I mean, it's right now where we're priced at. It's about $30 a ton in Canada, moving to $50 a ton by 2022. You know, CCUS I think helps in terms of reducing that tax burden by, you know, obviously sequestering that CO2. But ultimately, it requires a higher cost in terms of a higher carbon tax to actually justify that from an economic point of view. It's more, I would say, the ESG push is the one that's largely driving the trend towards CCUS, at least in Canada, as well as globally right now. 

Michael Torrance: And what would you say would be the reason why Canada is taking a leadership role in this area globally? 

Ray Kwan: I think that's a great question. You know, I personally believe it's a combination of several factors. But, you know, it's cooperative governments, the federal and provincial, in terms of providing support, there's strong industry ties, I think overall, that helps with this. And ultimately, I think it's the entrepreneurial spirit of Canadians in general. I don't know if people know this, but the oil sands sector is a global leader in R&D. They have invested close to $9.3 billion since 2009, and notably it's higher than most global oil majors on a per barrel basis. 

Interestingly enough, Canada ranks fourth in the Global Cleantech Innovation Index, and Calgary is ranked as the top 15 cleantech start-ups ecosystems globally. The last thing I would say is, you know, from an entrepreneurial side, I mean, I've seen, just based on my background as an oil and gas analyst, I mean, several companies that have been very entrepreneurial in terms of discovering new oil and gas pools, tests new CO2 reducing technologies like solvent-assisted SAGD. In addition of that, I mean, Canadians and companies that were created here were one of the first to test multi-stage fracture technology, which, you know, the listeners may or may not know, is the technology that really unlocked the shale gas and the shale oil revolution in North America. 

Michael Torrance: And you've touched on this already, but it stood out to me in your research that you've found that on a per-barrel basis, Canada's resource emission intensity has actually decreased dramatically since 2011 in comparison to other oil-producing regions like Europe or OPEC in the Middle East, Mexico and China, which have actually seen emissions from resource production rise. And that, I think, is a different narrative than we often hear about the Canadian energy sector. And for this reason, you've concluded that Canadian oil and gas should actually be recognized as a template for responsible and environmentally friendly energy production globally. Can you discuss that analysis and why you've concluded that? 

Ray Kwan: Yeah. I mean, of course I'm biased given I cover the oil and gas sector, but the Canadian oil and gas industry has had a history of responsible and environmentally friendly energy development, I mean, largely working hand-in-hand with land owners, government, as well as industry overall. I don't know if people know this, but Alberta was one of the first provinces to actually implement a carbon tax on large emitters more than a decade ago, and that's even before the consumer tax that was implemented in 2019. I mean, that large emitter carbon tax program has actually doled out more than $500 million from projects across Alberta, including venture-backed ideas. 

In addition to that, the Alberta energy regulator has a directive that strictly limits routine flaring and venting at well sites and pipelines, which obviously contributes to CO2 emissions. If you do vent or flare, you know, there's similar guidelines in BC as well too, but as a result of these regulations, flared and vented gas in Alberta has fallen by 57% since the 2000s, despite growth in the oil and gas industry in terms of production. 

Michael Torrance: Canada, of course, is a signatory to the Paris Agreement. We have our own goals and strategies being developed in order to meet our nationally determined contributions. So, innovation and technology is going to be critical for us to be able to do that as a country. Do you have a sense of what role CCUS or these other types of technology will play in meeting Canada's global commitments under the Paris Agreement? 

Ray Kwan: 

Yeah, unfortunately, I mean, Canada doesn't have any hard targets on how CCS will contribute to the country's CO2 reduction initiatives. But just as a reminder, I mean, the Paris Climate Change Agreement is basically… Canada has committed to reduces GSGs by close to 30% from 2005 levels by 2030. So that's almost close to 200 million tons per year of reduction from currently, we're just 2% below 2005. 

Another way to frame it is that the IEA, or the International Energy Agency, I mean, in terms of how they're thinking about it, they're basically saying that in their clean technology scenario, CCUS should contribute to 13% of the cumulative emissions reductions needed by 2060. So, you know, this is going to make CCUS the third-largest contributor to emissions reduction behind energy efficiency, renewables, and ahead of nuclear as well as fuel switching overall. 

You know, for Canada, I think CCUS will actually play a larger role, certainly behind energy efficiency, but could even rival renewables given that a lot of the power that's generated in Ontario and Quebec is already renewables and/or hydro-electric already. So with the Western provinces, CCUS can be a key technology in terms of reducing and meeting the Paris Agreement overall. 

Michael Torrance: Can you tell us more about the development of CCUS technology and its applications in Canada? Like, what kinds of projects are happening, and what stage are we at, and where is this going to be headed? 

Ray Kwan: Yeah. Canada has world-class expertise in CCUS and, you know, it is a global leader in the development of this technology. I mean, interestingly enough, five of the top ten finalists in the $20 million NRG COSIA Carbon XPRIZE competition are Canadian. And we're home to three of the world's 18 largest carbon storage sites. You know, Canadians in general, we're also involved in the global CCUS development efforts. We have world-class academics working on this and a number of start-ups pushing this technology. 

To answer your question in terms of what stage we're on, we're in the early stage or what I would call the activation stage. Right now, what we've seen is only two major CCUS projects that have recently started up. The first one being the Alberta Carbon Trunk Line Project, which just came on over the last month or so, which is a joint venture between North West Refining, Nutrien, their fertilizer plant in Redwater, Wolf Midstream, as well as Enhance Energy. 

The second one is actually the Quest CCS Project, which was initially built by Shell and is now owned by Canadian Natural, and that started up in 2015. Both of these projects can store and sequester up to 2.8 million tons per year of CO2, which is the equivalent of taking out 700,000 cars off the road every year. 

In terms of where we're going, I mean, I think we have a lot of potential. The first one is – just to go back on the ACTL project – I believe it's an important one just because that pipeline that they built is actually a 240-kilometre pipeline that takes CO2 from Redwater or Edmonton down to central Alberta or near Red Deer, Alberta. That pipeline can directly take more than nine times the initial design volumes and could be a huge stepping stone in terms of future CO2 EOR projects in the province. So definitely a lot of potential in Alberta. 

And then even separately in Saskatchewan, the International CCS Knowledge Centre, they provided a feasibility study looking at carbon capture at SaskPower's Shand coal-fired power station, and they believe that by 2024, this CCS project can store up to 2 million tons per year of CO2. 

Michael Torrance: Ray mentioned a couple of large CCUS projects that are going on in Canada right now. One of them is the Alberta Carbon Trunk Line, which is the world's largest CO2 pipeline for CCUS, focussed exclusively on capturing and storing manmade CO2. The Alberta Carbon Trunk Line is developed by Wolf Midstream. My next guest, Jeff Pearson, is the President of the Carbon Business Unit at Wolf Midstream, and he told me about this amazing project and some recent developments. 

Hi, Jeff, welcome to the podcast. 

Jeff Pearson: Hi, Michael. 

Michael Torrance: You and Wolf Midstream are heavily involved in the Alberta Carbon Trunk Line. Can you tell us about that project and the role that you're playing? 

Jeff Pearson: Yeah, so, the Alberta Carbon Trunk Like is a project that has been around for close to 15 years, in development for close to 15 years, and is now, I'm happy to report, operational. And that project essentially has two large emitters, industrial emitters in what's called the Albert Industrial Heartland Area, northeast of Edmonton, and those emitters are a fertilizer manufacturing facility owned by Nutrien, and a refinery, a new heavy oil refinery, which has just been started, named the NWR Sturgeon Refinery. 

And what we do with this project is we take the emissions that would normally be going into the atmosphere from those two projects, and we grab them, we appropriately remove the contaminants so that it's pure CO2 or largely pure CO2, we compress it and which… we own all these facilities to do that. We own the facilities to compress it. And then we built a 240-kilometre pipeline as well so we push that CO2 down a pipeline that we built. We deliver it to a company named Enhance Energy, who owns an oil and gas reservoir at the south end of that pipeline, and they take it and they inject it in the ground and when it gets injected, it mixes with the oil and essentially cleans the oil off the rock and so you get more oil out. So when we refer to the ACTL system it really is the components of all of those; it's the capture, it's the transportation and the permanent storage. 

Michael Torrance: So how did the ACTL come about? 

Jeff Pearson: It was the brainchild of a man named Ian MacGregor, who was looking at building the NWR Sturgeon Refinery in the 2000s. Ian had the foresight to recognize that emissions would continue to become more of an issue over time and so he designed the refinery, actually, with a full carbon capture process within it. So rather than as is traditionally done, having that CO2 emitted to the atmosphere, he looked and said, "Okay, if we're going to build this, how do we actually build it so that we can capture the CO2 right from the beginning?" 

So he designed that into the process, really dreamt up the project which would be the required infrastructure to take that CO2, now that it was captured, to an oil reservoir. And so Ian essentially put the project together and helped create the company called Enhance Energy, which essentially at the outset owned both the infrastructure that we now own and the storage reservoir. So it was a fully integrated project from the outset, which is why I think it actually was powerful in making this project move forward. 

Michael Torrance: So, I know you had a recent big announcement about launching this project. What has led up to this point, and can you just tell us a little bit about the history that got you here? 

Jeff Pearson: We had the pleasure of announcing yesterday that the project is fully operational, and it took a long period of time. We aligned the development of the infrastructure and the construction of the infrastructure to align with when the refinery would be up and running. And so the refinery, large industrial complex, took a long period of time to construct and get operational, and so proud to say that we are now fully operational and I would say we worked through the commissioning challenges that you often get in starting a project up and so we're putting commercial volumes of CO2, capturing it at the north end, transporting it and Enhance is injecting it into the reservoir at the south end of our pipeline. 

Chris Slubicki: It's such a huge project; it is really world-leading in many ways. Why is there a focus on CCUS in Western Canada, and Alberta in particular? 

Jeff Pearson: There are a number of components that are required to really make CCS, or CCUS in this case, attractive. And when we talk about places around the world which have those characteristics, Western Canadian is certainly one of the leading places from that perspective. And the characteristics that we look for are large sources of CO2, so essentially large emitters, large industrial complexes, which we have, suitable geology, so we need the subsurface rock to be appropriate so that we can put the CO2 down there and make sure that it stays there. 

We require the knowledge and equipment to essentially build the capture facilities and to do the appropriate work to drill the wells if the CO2 is going to be used for enhanced oil recovery, to have the appropriate oil reservoirs, or if it's just going to be put into an aquifer, which is called CO2 sequestration, to make sure that you're able to drill those wells to put it in the aquifer. And that requires a certain set of skills and Alberta, again, Western Canada, has got a long history in oil and gas and many of those skills are the same, and we also have the equipment to be able to do it. So we have the drilling rigs, we have the service equipment and so that exists here. And then we've also got a strong regulatory framework. 

We've been producing oil and gas, taking things out of the ground for many years and we've also been injecting products back into the ground for over a hundred years in Western Canada, and so we've got that. So we've got the regulatory framework that makes sure that that gets done adequately. And we've now got the Alberta Carbon Trunk Line infrastructure, which helps to facilitate and have people look at more of this. 

Michael Torrance: So tying it back to sustainability and Canada's own climate targets, we're of course the signatory to the Paris Agreement. BMO research has actually shown that on a per-barrel basis, Canada's resource emission intensity has decreased dramatically since 2011 relative to other regions and really should be actually recognized as a template, really, for responsible environmentally friendly energy production globally. And I think this kind of a project demonstrates why that is the case. 

But looking into the coming decades as to how Canada will achieve its Paris Agreement goals, what role does this infrastructure play in doing that? 

Jeff Pearson: I think this infrastructure is a critical component in that. When I do my research and look to organizations such as the International Energy Agency, they point to carbon capture and storage from fossil fuels as one of the levers available and required levers, essentially, to help us meet our goals. So it's not… I'm not going to say it's utopian, it's not the silver bullet, it's not the only tool, but as long as we continue to burn fossil fuels and use fossils to create carbon essentially as well. Carbon is created through other processes like steel manufacturing, petrochemical process, cement manufacturing, just naturally create CO2. So even if you're not burning fossil fuels, you're still creating CO2. So CSS is necessary with respect to capturing those emissions. And renewables is another thing that the IEA points towards increased use of nuclear, and then essentially energy efficiency are the key tools that they point towards in order to help the world essentially meet their climate targets. 

Michael Torrance: You've already taken us through a little bit of the process, but can you just unpack it a bit in terms of what exactly the Alberta Carbon Trunk Line will do and where the CO2 is going to come from, where it's going to end up, and also what plans would there be to expand it from its current state and build the infrastructure out? 

Jeff Pearson: I would be happy to. So at the north end of our pipeline, we've got two large emitters. So the first is Nutrien, and Nutrien is making ammonia, they're making fertilizer at their plant and have been for a long time. And through that fertilizer manufacturing process, you actually create a pure stream of CO2. And for as long as that plan has been running, that CO2 has been going up essentially a stack into the atmosphere. And we built the infrastructure to, both within their site and then our own facility just south of their site, to go in and essentially capture that CO2 before it goes up the stack, divert it into our facility where that CO2 has a large amount of water in it and it's hot CO2, and we essentially cool it, take the water out of it so it's suitable for transport, and compress it from a gas into a liquid to push down our pipelines. So that's at the one site, at the Nutrien site. 

Our other source of CO2, our larger source of CO2, comes from the newly constructed Sturgeon Refinery, and they're providing us a pure stream of CO2 that comes out of their hydrogen manufacturing process as well. So, we take that pure stream of CO2, we, again, it’s atmospheric, we compress it and turn it into essentially a liquid and put it into the pipeline as well. 

So those two streams mix or blend. They then travel 240 kilometres down that pipeline to a place called Clive, Alberta, which is just east of Lacombe, and from there Enhance Energy takes that CO2 and they put it into an old oil reservoir. And so in that oil reservoir, the CO2 mixes with the oil. You produce the CO2 back with the oil, so it's mixed in the oil and then Enhance takes that product and they separate the CO2 back out again. They sell the oil and they reinject the CO2. So the CO2 just continues to go around and around and bring oil up with it. In the end, at the end of the process, you end up leaving the CO2 in the ground so it's permanently stored. 

Michael Torrance: And how do you intend to expand this project? So those are two sources, is it going to eventually be collecting CO2 from additional sources? 

Jeff Pearson: That's our goal. We deliberately designed the pipeline to be larger than what was required than the available source of CO2 from the first two facilities that we're collecting it from. So the pipeline can handle about 14.6 million tons per annum of CO2, so there's a large amount of spare capacity on the pipeline today. And with that, we're out talking to large emitters and working with them to look at their opportunities to put in the infrastructure that's required to capture their emissions, essentially pull the CO2 out of those emissions. We would either tie them into our pipeline if they're right next to it, or build small pipelines to go from our pipeline to their facility to gather their CO2 that they will have captured with this new infrastructure. 

So we're in conversation with a number of different emitters, and where they wouldn't have been looking at this before, because if they would have put the CO2 capture in they wouldn't have had anywhere to put that CO2, with our pipeline in the ground and now operational, they know that if they capture the CO2 they've got somewhere to put it. They would put it in our pipeline, and we would then transport it down to other reservoirs in central Alberta for continued use for enhanced oil recovery. 

Michael Torrance: So, Jeff, what's the potential scale of CCUS in Canada and globally? And what I mean by that, is this likely to have a material impact on global carbon emissions? 

Jeff Pearson: I believe CCUS has the ability to make a significant impact in our emissions around the world. The IEA, as I mentioned before, has looked at it as one of the key mechanisms for achieving our climate goals and objectives. And CCUS is attractive in that it is industrial in scale and it's implementable today, where a number of demand reduction and a number of those other elements of reducing our emissions are going to be longer and more difficult to achieve. But CCUS is here today, and there's an onus on society to start implementing it. 

Michael Torrance: What challenges are there to getting CCUS to the necessary scale to have those kinds of impacts? 

Jeff Pearson: The key challenges come in the stage of development of some of the technologies around the more difficult to capture emission sources. And so some of those technologies would be more expensive and not yet commercial without some form of price on carbon or government subsidy. And so the good thing is, as we continue to implement new projects and develop the technology, you essentially learn by doing. And as you implement these projects, you see the costs of future projects come down. There have been some good examples of that in Western Canada. Shell, who I discussed before, put the Quest Project in. They would say that if they were to redo that project today, the costs would be 20 to 30% lower than they were the last time they did it. So we're starting to see the costs come down as more people are implementing CCUS and around the world. 

Michael Torrance: What about economically? Is there an economic benefit to utilizing this technology in the energy development process? 

Jeff Pearson: There is value in the capture and utilization of carbon dioxide for the enhanced oil recovery process. And so when you put the CO2 in the ground, as I mentioned before, it mixes with the oil, helps essentially clean the oil off the rocks and so you get increased oil production. And there is value in that, but today it wouldn't be enough value to essentially pay for the infrastructure that's required for all of the capture of the CO2. But I would say that on a go-forward basis, that as we look at implementing other energy solutions like electrification, renewables, those are all expensive as well and each of them has their own challenges. 

In a world where there is no focus on emissions and we're free to emit, then carbon capture utilization and storage would be economically challenged. But in a world where we start to put a price on our desire to reduce our emissions, it starts to become more commercially viable. 

Michael Torrance: High sustainability standards and innovative clean technology coming out of Canada puts the Canadian energy sector on the cutting edge of the global energy landscape. This type of effort will help meet growing energy needs, while advancing the global transition to a lower carbon economy. 

Thanks to Ray, Jeff and Chris for their insights on how Canada is demonstrating sustainability leadership in the energy sector. 

Thanks for listening. 

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Michael Torrance: Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at BMO.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favourite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. 

Our show and resources are produced with support from BMO's Marketing Team and Puddle Creative. Until next time, I'm Michael Torrance, have a great week. 

Disclaimer: The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries. This is not intended to serve as a complete analysis of any material facts regarding any company, industry, strategy or security. This presentation may contain forward-looking statements. Investors are cautioned not to place undue reliance on such statements, as actual results could vary. This presentation is for general information purposes only and does not constitute investment, legal or tax advice and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment, tax and/or legal professional about their personal situation. Past performance is not indicative of future results. 

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Michael Torrance Chief Sustainability Officer

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