The political and business proponents of SaskPower’s Boundary Dam Unit 3 carbon capture pilot project mounted an aggressive defense against criticisms levelled at the project by New Democratic Party opponents this past week.
The criticism spilled into question period in the provincial Legislative Assembly on Oct. 29 as the opposition NDP claimed there was a serious problem with the experiment that was costing the province a further $12 million in penalties revealed in an internal document that was leaked to them a couple of days earlier.
“The government claims we’re already in for a $5 million to $6 million penalty, plus millions in lost revenue for 2015 because their billion-dollar experiment isn’t working properly,” said Cathy Sproule, the NDP’s SaskPower critic.
The losses are associated with SaskPower’s failure to deliver the promised volume of carbon dioxide to Cenovus, a Calgary-based oil producer for use as an enhanced oil recovery agent in their fields near Weyburn.
Sproule maintained the actual losses to Cenovus would amount to about $12 million heaped on top of about $10 million in lost revenue due to the fact the BD3 carbon capture island and power generating unit was only operational for about 40 per cent of the allotted time.
“We deserve to know when this plant will start working well enough to at least break even and stop driving us further into the hole every month. But the Sask Party can’t even tell us that. I want to remind them this is taxpayer and SaskPower customer money they’re losing here,” said Sproule.
Since then, the NDP have called for the Crown and Central Agencies committee to meet quickly to examine the carbon capture project. The opposition stated that significant details about the plant’s shutdowns and revenue losses have been kept secret by the governing Saskatchewan Party.
“The Sask Party hasn’t been honest with people and they got caught,” said Sproule. “It’s time to come clean, put the facts on the table and start working urgently on a go-forward plan to salvage as much as we can.”
The committee referred to is a bipartisan standing committee of the legislature with authority to investigate matters related to Saskatchewan’s Crown corporations. It only meets at the call of government or if the legislative assembly votes in favour of calling it into action.
SaskPower’s president and CEO, Mike Marsh along with Mike Monea, president of CCS initiatives and Premier Brad Wall were adamant in their defense of the Boundary Dam project.
Marsh said due to confidentiality agreements contained in their contract with the engineering and design lead contractor for the BD3 project, SNC Lavalin, he could not go into detail as to what the power company would be pursuing in terms of compensation. He agreed the legal wrangling with SNC Lavalin and possible other sub-contractors, could take time to resolve but all options were being pursued.
“We do expect to recover these losses,” he said, referring to some original construction faults and the ensuing cash penalties that are being paid to Cenovus.
The deal with Cenovus, he said, was a pretty typical, “take or pay contract,” so that if either party came up short, penalties would be imposed and since volume requirements were not met due to the late start-up at BD3, that clause kicked in.
The plant was originally slated to begin operations in April of 2014, but didn’t get the green light until October.
The first few months went well but in 2015, Marsh said, “we encountered a number of technical issues and BD3 is currently on overhaul. They are changing out some components and remedies are being pursued by SaskPower, SNC Lavalin and other contractors.”
Marsh said he didn’t feel the overhaul and delays would affect decision-making regarding similar retrofits for Boundary Dam generating Units 4 and 5 which could be slated next. He said there is a good period of time before any decision has to be made on future carbon capture components and in the meantime the engineering responses have improved performances at the pilot site.
“We expect to have one or two overhauls anyway each year, and we expect there will be a few more issues. There are some we expected that were dealt with and others that we didn’t know we would find, but we’re looking for improved performance.”
Marsh said the one-year report of BD3 was published on the international stage and “those in the industry know how complex it is and interest from industry and other countries is still strong.”
That statement was confirmed by Mike Monea, president of carbon capture and storage initiatives for SaskPower, who spoke with the Mercury just a few minutes before boarding a flight to Saudia Arabia where he was to speak with oil company officials there regarding carbon capture and sequestration for use in enhancing oil recovery programs.
“No, this is not hampering international interest in clean coal and carbon capture or the marketing thrust. The story is great and engineers around the world know what to fix and they also know Unit 3 will be tuned up in November. Of course this chatter over the last couple of days doesn’t help, but we need, and have a clear understanding, that start-up operations would have some glitches. This is what SaskPower does. They detect the problems and fix them,” said Monea.
In response to a question regarding international acceptance of the SaskPower response, Monea added, “The international community is definitely asking questions, but when they get the clear explanation, they understand because they have technical people involved and they just say ‘carry on’ so we will.”
On Thursday night, Premier Brad Wall was in Estevan attending the farewell dinner for Estevan MLA Doreen Eagles, who is retiring this spring. He said the NDP stopped short of calling for an absolute shut down of the project, since they knew BD3 works and there would eventually be recovery of current losses once the issues had been settled with SNC Lavalin.
“They struggled with the synchroton at the University of Saskatchewan for the first year too, but look what that project has achieved since then. They’ve even expanded. And we’ll turn a profit on C02 in the first year. Is the NDP in Saskatchewan wanting to follow the Alberta NDP plan? There is nothing like the BD3 plant on Earth, and what we are telling the world right now is the truth. It works and over the next 18 months we’ll see the level of interest grow, especially in Asia. We’ll keep coal in the mix along with renewables and we’ll keep people in the industry and we will be talking about clean coal when we go to Paris next month and we’ll be putting it on display,” said Wall.
The premier added that all politicians have to be aware they need to be careful to ensure there was balance to all economic issues going forward. “We can’t kneecap the economy. That’s why we say no to cap-and-trade suggestions coming from other areas.”
