Although not a new concept, carbon taxes have become a hot topic around the globe, ever-growing in the last decade. Canada is no different. At home, Canadians are paying carbon taxes on several different services, from fueling vehicles to heating our homes. The same can be said for industrial emitters. They pay carbon tax based on historical emission rates as well as emission reduction targets set by government legislation.
Why? According to the Government of Canada:
A price on carbon pollution is an essential part of Canada’s plan to fight climate change and grow the economy. It is one of the most efficient ways to reduce greenhouse gas emissions and stimulate investments in clean innovation. It creates incentives for individuals, households, and businesses to choose cleaner options.
Alberta has implemented carbon taxes for large emitters since 2007 and many in situ projects are part of the program. In situ projects combust natural gas to generate steam, which is then injected into the underground reservoir to heat and mobilize bitumen. During the natural gas combustion process, carbon dioxide and other greenhouse gases are generated and released into the atmosphere. These emissions are measured and a carbon tax is applied to them.
Over the last 4 years, there have been many changes and updates to legislation at the federal and provincial level. Canada is looking to achieve emissions neutrality by 2050 and a price on carbon is part of our government’s solution to this complicated problem. In this blog, we will discuss the impact of carbon price legislation on in situ projects.
Alberta Technology and Innovative Emissions Reduction (TIER)
- Effective January 2020, replacing the Alberta Carbon Competitiveness Incentive Regulation (CCIR). Granted federal equivalency in December 2019.
- Mandatory for large emitters (over 100,000 tonne CO2/year) but small emitters can apply to opt-in. If a facility does not opt-in, they will pay carbon tax based on federal legislation.
- In situ projects with 4,000 bbl/day of bitumen production and steam-oil ratio (SOR) of 3 would emit over 100,000 tonne CO2 each year.
- For large emitters, project facility emissions history is used to determine a facility-specific benchmark (tonne CO2/m3 bitumen), 10% reduction in year one (2020) followed by 11% in year two (2021) and 12 % in year three (2022), until the project reaches the industry high performance benchmark (HPB).
- New projects (first 2 years) are exempted from compliance. Facility specific benchmarks are based on year two to year four emission rates. Benchmarks tighten each year, until it reaches the industry high performance benchmark.
- For Alberta in situ projects, the HPB is 0.2974 tonne CO2/m3 bitumen. Based on a typical emission rate of 0.14933 tonne CO2/m3 steam, this equates to a steam-oil ratio (SOR) of approximately 2.0.