On Saturday, Leader Post columnist Murray Mandryk came out with an excellent analysis of the heavily subsidized Boundary Dam Carbon Capture scheme.

Mandryk's article is the first critical, public review of the economics of this taxpayer-funded project and we felt it important to look at the deal in greater detail. The 20-year project cash flows estimated by Mandryk for both SaskPower and Cenovus Energy are summarized below with notes. A more detailed financial summary follows that.  

The Boundary Dam Carbon Capture scheme actually consists of two separate projects: the coal-fired power station and the carbon capture facility. All figures shown are in millions of dollars. Financial losses are shown in red.

 
Source: 'CO2 Project Sequesters Tax Dollars'. Murray Mandryk Leader Post. 4 October 2014, SaskPower Report & Accounts, U.S. Energy Information Administration, Canadian Association of Petroleum Producers

Source: 'CO2 Project Sequesters Tax Dollars'. Murray Mandryk Leader Post. 4 October 2014, SaskPower Report & Accounts, U.S. Energy Information Administration, Canadian Association of Petroleum Producers

 

The project has been sold to the public as a carbon capture and sequestration initiative. However, Mandryk notes that it is actually intended, first and foremost, to supply carbon dioxide (CO2) to Cenovus Energy. Cenovus Energy will buy virtually all of the CO2 produced at the facility - at least for the first 10 years of operations.

Cenovus is the majority owner and operator of the aging Weyburn oil field, which is near  Estevan in the southeast of the province. Cenovus will use the CO2 to increase crude oil output from the Weyburn oil field in a process known as Enhanced Oil Recovery. 

In addition to CO2, the facility also manufactures sulfuric acid (H2SO4) and produces Fly Ash. All of this material, together with the cash flows for each as estimated by Mandryk, is summarized in more detail below:

 
Source: 'CO2 Project Sequesters Tax Dollars'. Murray Mandryk Leader Post. 4 October 2014, SaskPower Report & Accounts, U.S. Energy Information Administration, Canadian Association of Petroleum Producers

Source: 'CO2 Project Sequesters Tax Dollars'. Murray Mandryk Leader Post. 4 October 2014, SaskPower Report & Accounts, U.S. Energy Information Administration, Canadian Association of Petroleum Producers

 

Mandryk's article reveals that the coal-fired power station will make a net profit of $130-million, while the carbon capture facility will generate a LOSS of $1,170-million over 20 years. Combining the two generates a combined loss, over the estimated life of the Boundary Dam project, of $1,040-million.

What is really striking about Mandryk's analysis is that it reveals that, while SaskPower/Saskatchewan ratepayers are carrying a loss on this project of more than $1-billion, Alberta-based Cenovus Energy will make a gross profit of more than $3-billion: that profit will arise from the sale of increased amounts of crude oil obtained from enhanced oil recovery. 

The project is actually even worse than shown because wind energy could generate the same amount of electricity as this facility for considerably less money. In the next few days we will put together that analysis and will share details when it is complete. (See 9-Oct blog)

(For additional information on references and data sources: Check out out blog post of 18-November)