REGINA – When SaskPower held a grand-opening celebration for its $1.5-billion carbon capture and storage facility last October, it was already well aware the losses were piling up.
Briefing notes prepared by SaskPower show the government knew delivery of carbon dioxide (CO2) was falling behind to the tune of $7 million on September 29, 2014 – three days prior to the launch with much fanfare.
Slow SaskPower carbon capture performance costing millions
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A memo prepared for Bill Boyd, the minister responsible for SaskPower, on October 6, 2014 (four days after the launch), estimated the total to be in the range of $8.7 million to $10 million.
“I think there could have been more disclosure.” – SaskPower minister Bill Boyd
The notes were obtained by the Opposition NDP and provided to reporters Tuesday (see below).
READ MORE: Slow SaskPower carbon capture performance costing millions
SaskPower signed a contract with Alberta-based Cenovus Energy in 2012 to provide a minimum volume of CO2 captured at Boundary Dam, with penalties for not reaching that mark.
By the end of 2014, the deficit reached $12 million, according to notes revealed Monday by the NDP and buried in a single line on page 59 of SaskPower’s annual report.
“I think there could have been more, probably, disclosure around that,” Boyd admitted Tuesday after defending the merits of the project.
“We still believe it’ll meet its targets going forward. Obviously there were some startup problems with respect to it.”
SaskPower CEO Mike Marsh said Monday the facility is still running at less than half its projected capacity and could be penalized for another $5 million this year.
“We’re working through design and technical issues every week, our operating staff are working through them, every week and every month, and performance is getting better and better and better,” he told reporters.
Some of the carbon dioxide released at Boundary Dam is liquefied and sold to oil companies to help extract more crude from the ground. SaskPower has a 10-year contract with Cenovus to buy the captured gas.
The Crown was expecting 800,000 tonnes of CO2 to be produced this year, but Marsh admitted that figure will more likely be around 400,000 tonnes. At the price of $25 per tonne, the shortfall is $10 million.
“Clearly that is not acceptable … we want to see much higher efficiency from this facility,” Boyd said.
It means just a little over one year after launch, the carbon capture facility could already be costing taxpayers $27 million in penalties and lost revenue.
SEE BELOW: SaskPower briefing note from Sept. 2014 (Obtained by NDP – highlighting by government officials)
Penalties in 2015
On Tuesday, NDP SaskPower critic Cathy Sproule asked for confirmation of how much SaskPower expects to pay in penalties for 2015, questioning Marsh’s estimate of $5 million.
The NDP also cited cases where SaskPower officials said the carbon capture facility was operating at over 80 per cent of its capacity, including a committee meeting in November 2014.
QP: Boyd says “There have been some startup difficulties to say the least. That is not unusual.” #skpoli
— Mike McKinnon (@mikemckinnon) October 27, 2015
Boyd argued the projected $5 million loss in 2015 will be offset by $11 million in revenue for selling the carbon to to Cenovus.
A February 2015 report released by the Canadian Centre for Policy Alternatives said the financial costs of the project are high and the environmental rewards remain unproven, arguing that SaskPower could see up to $1 billion in operating losses over the next 20 years.
The briefing notes revealed this week pin responsibility for the delays on SNC Lavalin, saying the engineering firm was slow to address basic design problems and “is more concerned about getting paid … than fixing the deficiencies of our plant.”
Marsh said Monday the province is pursuing legal action to recover some of the money, but it may not happen until some time in 2016.
With files from