Sask. Party gifts $12 million to company in bad carbon capture deal

The Sask. Party quietly signed a $12-million cheque to Alberta-based oil company Cenovus for failing to deliver enough carbon dioxide from its carbon capture experiment – despite the fact that Cenovus didn’t need the CO2.

Secret government documents obtained by the NDP say that on Nov. 13, 2014, “The carbon capture facility has not been run at full capacity at this point, partially due to Cenovus not needing CO2 to that level…” Six weeks later, Cenovus sent SaskPower a bill for almost $12 million, as a penalty for not delivering enough CO2 during 2014.

“This money belongs to Saskatchewan families, but it seems the Sask. Party has forgotten that because this $12-million secret payment is disturbing,” said NDP critic for SaskPower Cathy Sproule. “The government's own documents show that Cenovus didn’t need the CO2, and that's why the carbon capture facility wasn't run at full capacity, but the Sask. Party still cut a $12-million cheque to Cenovus as part of a supposed penalty just six weeks later? That makes no sense. Clearly, The Sask. Party's secret deal with Cenovus is an abysmally bad one.

“The cost of this pet project includes sky-high construction costs that won’t be paid off for decades and a secret deal that gives away the CO2 on the cheap and locks Saskatchewan into a harsh penalty structure. That’s a lot to ask taxpayers and SaskPower customers to bear. Now, we have big questions about why the minister’s own briefing material questions the rationale for this $12-million payment. Why did the Sask. Party cut this massive cheque?”

According to the documents obtained by the NDP, SaskPower is required to deliver 2,192 tonnes of CO2 per day to Cenovus, and Cenovus is required to buy all CO2 produced by the Boundary Dam 3 carbon capture facility. The CO2 is used by Cenovus for enhanced oil recovery.

The Sask. Party’s $12-million cheque is equal to the penalty amount for delivering almost no CO2 in 2014, even though the November 13 briefing note says SaskPower was meeting their contractual requirements.

“We've long had concerns about the economics of this government's carbon capture experiment, because the calculations show a huge net loss to Saskatchewan families and a massive financial gain to this oil company from Calgary, because the cheap CO2 they get from SaskPower substantially increases their productivity,” said Sproule. “But now we've learned that the Sask. Party government is paying so-called penalties to Cenovus, while still delivering CO2 at a bargain price. The Sask. Party needs to level with Saskatchewan people about what's going on here.”

Other jurisdictions, including Alberta, have abandoned experimental carbon capture technology because the cost of developing the technology is massive. Saskatchewan doesn’t own the technology used at Boundary Dam, so if other jurisdictions ever decide to pursue carbon capture projects, there will be no commercial or financial benefit to Saskatchewan.

The cost of the facility was about $1.5 billion. If it operated at full capacity, it could reduce Saskatchewan’s greenhouse gas emissions by about 1.5 per cent. According to an internal briefing note dated Feb. 17, 2015, the facility was operating at 45 per cent capacity.

Calgary-based Cenovus was the Sask. Party’s biggest corporate political donor for the last two years and the second-highest donor in 2012.