Documents obtained by CBC's iTeam show that SaskPower failed to monitor the $22-million Aquistore project as it became seriously overspent.
Aquistore is a carbon storage research project operated by the Petroleum Technology Research Centre and funded by SaskPower, the federal and provincial governments and industry.
An internal SaskPower audit, obtained through an Access to Information request, shows that Aquistore was $5.9 million overspent as of March 31, 2013.
The report says "failure to utilize the PTRC Aquistore Advisory Committee as established in the agreement resulted in SaskPower not receiving timely information on the project status including the related financial condition and future obligation of the project."
SaskPower president and CEO Robert Watson acknowledges there was a breakdown.
"We had the right to put somebody on the advisory committee. And we didn't," Watson told CBC News. "We felt the project and the team over there was doing a good job so we just didn't do it. In hindsight, we should have done it."
Aquistore is crucial to the success of SaskPower's billion-dollar carbon capture and storage project at the Boundary Dam near Estevan.
SaskPower plans to capture and ship about one million tonnes of captured CO2 to Cenovus Energy, which will use it for enhanced oil recovery in the Weyburn area.
Robert Watson says Aquistore must be up and running in order to function as a sort of safety valve.
"However at any given time if they [Cenovus] cannot take all of it, in other words pipeline issue or production issue on their end, we need somewhere to put the CO2. We don't want to stop production," he said.
Watson says SaskPower will be ready to start shipping CO2 to Cenovus by April 1, 2014.
Aquistore a research project
Aquistore is not just crucial to SaskPower's Boundary Dam project — it's also a research project aimed at demonstrating that CO2 can be safely and permanently stored underground.
PTRC has led the project and was planning on conducting that research over the next four years on behalf of the project partners.
On its website, the organization says "Aquistore will continue to direct the research project, which will provide monitoring to support the operation of the wells and scientific research."
However, SaskPower is casting doubt on PTRC's future with the project.
SaskPower taking control
Watson says the original plan was for SaskPower to take over the Aquistore project more than four years from now once the research was complete.
However, he says, as a result of SaskPower's concerns with how the project has been run, the Crown corporation is taking over.
"We felt that because the project was overspent and we wanted to make sure that it was still viable in the future ... that's when we went to PTRC ... and said we would like to gain ownership of it sooner than we had planned before."
Watson acknowledges that this will end up costing SaskPower, though he doesn't know how much.
"More costly for SaskPower. Yes, it is a bit costly," Watson said. "And that's what we're negotiating right now."
Watson says SaskPower has independently valued the Aquistore project
"We've valued the asset so we know how much the asset is worth to SaskPower." Watson explains. "And it quite simply is if we had to drill another well how much would it cost us to drill another well? Cause we gotta have a well."
Watson says the Aquistore research program will continue despite this development.
"We will want an independent party to verify the information coming from the well; in other words it is staying down in the ground?" Watson said.
However, he added, it "doesn't necessarily have to be PTRC."
An earlier version of this story stated that two companies which recently signed an Memorandum of Understanding with SaskPower were the companies chosen to do the independent monitoring of the Aquistore project instead of PTRC. This is incorrect. The two companies, Chugai and K-Coal Canada, have signed an MOU with SaskPower to conduct a separate carbon storage program near the same location with a similar start date.Oct 01, 2013 9:58 PM CT