Another company has pulled the plug on one of the Alberta government's high-profile projects to capture and store carbon created by the energy industry.
Swan Hills Synfuels and the province announced Monday that they will discontinue a $285-million funding agreement that would have seen underground coal converted to gas and then burned to generate electricity.
The carbon dioxide would have been stripped out and sold to nearby oilfields to boost production.
Natural gas prices are too low for the plan to make economic sense at this time, said Synfuels CEO Martin Lambert.
"At present, it's more economical to purchase natural gas than it is to manufacture synthetic gas," he said.
"It's a market reality that has led to significant delays on the CCS side of the project."
Waiting until natural gas prices go up enough to make the project viable would push the project's timelines beyond the funding agreement, he added.
Carbon was to be injected into oil wells
Lambert said when the project was announced that natural gas needed to be above $5 a gigajoule for the plan to work. Current prices have fluctuated around the $3 mark.
The Synfuels project would have sequestered about 1.3 million tonnes of carbon dioxide every year starting in 2015 by injecting it into oil wells.
The operation was expected to generate between 80 million and 100 million barrels of oil that wouldn't have otherwise been recovered.
It's not immediately clear how the Synfuels pullout will affect the province's greenhouse gas projections.
Energy Minister Ken Hughes said Synfuels had not received any payments under the original deal. No decisions on reallocating the money have been made.
Synfuels was one of four carbon capture and storage projects the provincial government was funding out of a $2-billion pot.
Those projects have been a major part of government responses to criticism of the province's environmental record.
Two of four projects going ahead
Two of them remain on the books.
Enhance Energy's $600-million plan to transport CO2 from refineries in Redwater, Alta., to aging oilfields near Clive through the Alberta carbon trunk pipeline is expected to begin later this year.
As well, Royal Dutch Shell is moving ahead with plans to capture one million tonnes of CO2 annually from its Scotford oilsands upgrader northeast of Edmonton.
The gas is to be injected deep into a porous rock formation about 80 kilometres away to prevent it from entering the atmosphere and contributing to climate change.
The Alberta and federal governments are kicking in a collective $865 million toward that project, which is expected to start in 2015.
Hughes said the two projects will eventually remove 2.76 million tonnes of carbon a year.
However, TransAlta backed out of a $1.4-billion carbon capture deal last spring.
CEO Dawn Farrell said the costs of injecting CO2 into old oil wells to enhance production was no longer competitive with other methods of doing the same thing.
Originally, the province had hoped to have five or six working projects by 2015 that would inject up to 10 million tonnes of CO2 a year into the ground.
Even if that had come to pass, it wouldn't have reduced Alberta's overall greenhouse gas emissions, which are expected to keep climbing until 2020.