AT THE MAJOR CCS PROJECTS: BOUNDARY DAM, KEMPER

Tamar Hallerman
GHG Monitor
12/21/12

AT BOUNDARY DAM: CENOVUS TO PURCHASE ALL OF PLANT’S CO2

SaskPower said this week that it signed a 10-year contract with Cenovus Energy for the regional oil company to purchase all of the CO2 captured at Unit 3 of its Boundary Dam facility currently undergoing retrofit work in southeast Saskatchewan. The provincial utility said Cenovus will be utilizing the plant’s approximately one million tons of annually captured CO2 for enhanced oil recovery operations near Weyburn. “By having a really solid offtaker like Cenovus purchase our CO2, it will really help us advance the full concept of capturing carbon, using it for enhanced oil recovery and then storing it,” Mike Monea, president of Carbon Capture and Storage Initiatives at SaskPower, said in an interview. “It’s an important contract for us.” SaskPower did not disclose the value of the offtake contract.

The CO2 agreement will help secure a revenue stream for the 110 MW post-combustion retrofit project, which SaskPower says will be the world’s first and largest coal-fired integrated CCS facility. The utility has also signed offtake agreements for the sulfuric acid and fly ash produced onsite, according to Monea. He said construction on the $1.24 billion retrofit is moving along relatively smoothly. “We’re on time and on budget,” he said. SaskPower plans on taking the unit offline in March to work on the power island before moving into a hot test period in October. From there, engineers can optimize the system’s performance before commercial operations begin in April 2014, Monea added.

SaskPower in Talks with PTRC to Move Aquistore Forward

In the meantime, Monea said SaskPower is currently in contract negotiations with the Petroleum Technology Research Center for its proposed $23 million Aquistore project to take the CO2 generated during the project’s hot test period. “By having Aquistore available, we may be able to put some CO2 into that storage facility as our offtaker sets up their injection wells,” he said. Cenovus must also build a 40 mile-long pipeline from Weyburn to Boundary Dam’s location in Estevan before it can begin siphoning off CO2.

For now, it is unclear which fields in the Weyburn area Cenovus will flood using CO2 captured from Boundary Dam. The oil company has been utilizing CO2 captured from Dakota Gasification Corp.’s synfuels plant in Beulah, N.D. for area EOR operations for more than a decade. “Cenovus’s agreement with SaskPower provides us with a second reliable supply source of CO2 for our Saskatchewan operations,” John Brannan, Cenovus executive vice president and chief operating officer, said in a statement.

Performance Standards Prompted SaskPower to Look at CCS

SaskPower, which relies on coal for more than half of its electricity generation, decided to try CCS after the Canadian federal government announced its intention to enact a performance standard for new and end-of-life coal units, a regulation that was finalized this September. SaskPower’s experience with Boundary Dam’s Unit 3 will likely affect what it does with several of its other aging units at the plant—the utility will have to make similar investment decisions for Units 4 and 5 within the next five years, when both hit the end of their economic lives.

AT KEMPER: LOCAL COURT UPHOLDS PLANT’S CERTIFICATE

The Sierra Club vowed to continue its fight against Mississippi Power’s 582 MW Kemper County integrated gasification combined cycle plant after a local court upheld the project’s construction certificate. The environmental group said this week that it would appeal a Dec. 17 ruling from Harrison County Chancery Judge Jim Persons that affirmed the project’s $2.88 billion rate recovery certificate. “We respectfully disagree with Chancellor Persons’ decision today,” Louie Miller, director of the Mississippi chapter of the Sierra Club, said in a statement. “We know that the [Mississippi Public Service Commission] wrongly approved this dirty, expensive, and unnecessary project, and the economic wellbeing of thousands of families on the coast hangs in the balance.”

In his ruling, Persons said the PSC laid out “substantial evidence” in its 133-page final order from April and that the panel’s approval of the plant certificate should stand. “The court finds that the Commission has acted within [its] authority and discretion in issuing the final order and permitting the construction of the Kemper plant during the pendency of these proceedings before the Commission and courts,” he wrote. Persons said the Sierra Club’s main argument that Kemper should be switched from coal to gas generation is not for the courts to decide and should instead be deferred to the PSC. “It is for the Commission, not the courts, to determine policy preferences on such matters as a 40-year solution for fuel diversity and price stability of fuels used in electric generation,” Persons said.

Sierra Club Says Kemper Will Raise Rates by 45 Percent

The Sierra Club filed the legal challenge after the Public Service Commission approved Kemper’s certificate in April in what was reportedly a less than one minute-long meeting. The NGO had sued against the plant’s original certificate last year. After the chancery court backed the version initially passed by the PSC, the Sierra Club appealed to the state Supreme Court, which ruled 9 to 0 in March that the PSC approved the initial certificate without providing “substantial evidence” of its decision. The high court required the PSC to reexamine the rate recovery proposal, which it did and approved quickly in April without taking new evidence.

The Sierra Club has argued that Mississippi Power will raise electricity rates on its nearly 200,000 customers by 45 percent to pay for the project, but the utility has contested that claim, saying the increase will be closer to 33 percent. Persons acknowledged in his ruling the “substantial and inherent risk” to ratepayers for utilizing IGCC and CCS technology and the rate increases that could occur. However, Persons said there is also “substantial risk” if the plant’s certificate is overturned.

Miss. Power: Customers Will Benefit from Ruling

Mississippi Power praised the court’s ruling. “Mississippi Power customers are the ones who will benefit from this important decision,” Ed Day, president and CEO of Mississippi Power, said in a statement. “The Kemper facility is advancing 21st century coal technology, and will ensure that our customers receive safe, reliable, low-cost and environmentally responsible energy for decades.” Mississippi Power plans on capturing 65 percent of emissions using pre-combustion capture technology and selling the commodity for enhanced oil recovery operations in the area.

This week’s decision brings the project one step closer to legal approval. The PSC barred Mississippi Power from raising rates on its nearly 200,000 in June to help pay for Kemper’s capital costs until after the Sierra Club’s legal challenge is cleared. The Commission is expected to wait until the Supreme Court hears the case before it greenlights a rate increase for the project, which Mississippi Power said this week is nearly 75 percent complete. The utility said Kemper is expected to begin initial startup for the combined cycle portion of the plant this summer and should begin commercial operations in May 2014. However, recent reports have questioned the state of the project’s construction progress, as well as its cost estimates.

Miller this week called on the PSC to void Kemper’s rate recovery certificate. “The Kemper plant was a bad deal when it was first proposed, but in the last few months we’ve seen huge cost overruns and delays, which will make this project even more unaffordable for coastal Mississippi Power customers,” he said.