Government and industry officials say oil reservoirs and rock formations in western Canada could retain several centuries' worth of carbon-dioxide emissions from the oil sands.
"We have some of the best geological repositories in the world to sequester CO2," said Chris Holly, an official with Alberta's energy department.
In July, the Alberta government said it would put some $2 billion into the so-called carbon-sequestration technology. By capturing carbon, improving energy efficiency and forcing oil producers to buy offsets, Alberta officials say they expect annual emissions to decrease by 5 million tons, or one-eighth of the current total, by 2015.
This month, Shell began drilling test wells to inject carbon dioxide into a porous rock and saltwater formation near its Scotford upgrader, which processes bitumen from the Albian Sands mine. The idea is to liquefy carbon dioxide from the upgrader and send it deep underground, where it would stay trapped in the rock's pores.
If it works, Shell could capture about 40 percent of the upgrader's greenhouse-gas emissions by 2013 or 2014, said Rob Seeley, Shell Canada general manager of sustainable development.
Carbon sequestration has seldom been tested on a large scale, but the experience has been successful so far, according to a recent Rand report.
Biggest test project
The largest test is taking place in Weyburn, Saskatchewan, where carbon dioxide produced by a power plant in North Dakota is injected into a dying oil reservoir to help recover more oil.
In Norway, oil giant StatoilHydro reinjects excess carbon dioxide produced in some offshore natural-gas fields back under the ocean floor.
"The technologies are known," Seeley said. "However, it's new for oil sands. In some ways, it's putting together in a new way different pieces that have been done and proven elsewhere."
Some wonder, however, whether the oil-sands industry is pursuing what Pembina's Dyer calls "phantom mitigation."
Alberta penalizes producers $15 per ton of carbon dioxide if they fail to meet the province's emissions-reduction goals.
But David Hobbs, head of global research at consulting firm Cambridge Energy Research Associates, estimates that carbon sequestration may cost between $80 and $140 per ton. So unless the government makes carbon sequestration mandatory or puts a heavy price tag on carbon emissions, it will be cheaper for oil companies to release the emissions into the atmosphere and pay the penalty.
"It's just talk, basically, at this point," Dyer said.
But many analysts think a carbon-emissions cap is likely, which would make sequestration economically attractive. "It's not yet cost-competitive, in the same way it was not cost-competitive to buy a new higher-fuel-efficiency car right up until the price of gasoline was going to hit $5 a gallon," Hobbs said.
Giant client to south
Canada's biggest customer, the United States, is growing increasingly restless with the oil-sands bargain as it awakens to the climate-change issue.
The 2007 federal energy bill says U.S. government fleets can't buy fuel from the oil sands and other sources whose production emits more greenhouse gases than conventional oil. However, it's nearly impossible for buyers to determine the origin of their fuel, so that restriction is symbolic.
California's low-carbon fuel standard, which goes into effect at the end of the year, also discourages buying such oil.
And in June, the U.S. Conference of Mayors singled out crude from the oil sands as an environmental bad boy. Addiction to Alberta's sludgy brew "slows the United States' transition to clean, renewable energy sources," the mayors declared.
Canadian officials and oil-sands producers are conscious of this image problem. "Canadians are nice people. If you say to them, 'We want you to meet the standards,' they're going to work to meet them," said the Hudson Institute's Sands.
But in a world starving for energy, with no large-scale options to petroleum, Alberta's oil producers hold a lot of cards.
The oil sands are destined to play a huge role in meeting energy needs "provided you deal with the environmental implications," said James Smith, Shell's country chairman for the United Kingdom, who recently toured the oil sands for the first time.
"We want something that's clean and cheap and always on," he said. "None of our current sources of energy fits the bill."
angel Gonzalez: 206-515-5644 or agonzalez@seattletimes.com
Alberta's oil sands
Photo gallery
Canada's Oil Sands Region
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Explore how oil is extracted from Alberta's oil sands
Video
A look at the production of oil in Alberta
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