A plan to save coal, power generation, and the oil industry in southeast Saskatchewan

From the Frontier Centre for Public Policy

Stop moving to shut down Saskatchewan coal – it could be the salvation of our oil industry

What if there was a way to keep coal mining jobs in Saskatchewan, continue to produce low-cost electrical power, and extend the production of a substantial portion of Saskatchewan’s oilfields not by decades, but by generations? And in doing so, we could still dramatically reduce carbon dioxide emissions, and maybe save some money by reducing our nuclear rollout?

All of this is now possible, and it has everything to do with keeping our coal miners digging and our coal-fired power plants going, maybe even renewing them.

There was a potentially major development for Saskatchewan’s energy sector buried in Whitecap Resources Inc.’s year-end financial report released on Feb. 21. Whitecap said about using CO2 for enhanced oil recovery, “We have also recently started CO2 injection at a pilot CO2 flood into the Frobisher formation underlying the Weyburn Midale unit. We drilled two (2.0 net) producer wells and three (3.0 net) injection wells in 2023 and initiated CO2 injection in late 2023. Early results are encouraging with a notable production response coming through approximately one month after injection, increasing oil rates on the two producer wells from approximately 40 bpd to over 200 bpd, per well. Further technical analysis to determine commerciality and large-scale development is ongoing, and we will provide updates as next steps are determined.”

While the Bakken formation got all the headlines starting around 2007, the reality is in southeast Saskatchewan, very few Bakken wells are drilled these days. Most of the activity has been Frobisher wells, especially around Steelman, where it has been targeted for decades. So if the Frobisher responds well to tertiary recovery through carbon dioxide floods, it opens up a lot of possibilities for extending the life of some of Saskatchewan’s most prolific oilfields, taking recovery rates from the mid-20 per cent range to over 50 per cent.

Back in 2012, Canadian Natural Resources Limited president and CEO Steve Laut expressed interest in using CO2 for enhanced oil recovery in the Steelman Unit.

Whitecap’s initial results were not a five per cent improvement, or 50 per cent, but five times higher. That’s something everyone, including the provincial government, should take notice of. Imagine if you could increase crop production from 60 bushels to the acre to 300 bushels? Or quintuple potash or uranium production from certain mines? You’d be an idiot to not at least take a hard look at it.

I’m not suggesting it will remain anywhere close to that level, but the fact the CO2 flood in the Weyburn Unit, in the Vuggy and Marly units of the Midale formation, has already dramatically increased recovery rates and lengthened the lifespan of a field that otherwise would have long gone dry is significant. If the same process can be expanded to the much more prolific Frobisher formation, that’s a very big deal.

Even if it was a 25 per cent improvement – that’s well worth investigating.

Frobisher is a big deal

How prolific is the Frobisher?

Most of the drilling activity in southeast Saskatchewan follows a certain pattern. The majority is along the Frobisher subcrop – the edge of the formation where it pinches out, forming a structural trap. Of the 16 rigs working in Saskatchewan on March 3, it’s a good bet 10, and possibly more, were drilling Frobisher wells. The daily well report for March 3 published by the Ministry of Energy and Resources shows out of 19 wells listed that day in Estevan area of responsibility, all 19, across five oil producers, were either targeting the Frobisher. It may be a fluke all that day showed the Frobisher, but it definitely shows its significance.

So if Whitecap, which has been growing to be one of Saskatchewan’s largest oil producers, has found a way to substantially increase production from this formation, shouldn’t we take a hard look at how we can take advantage of it?

Stop the process of winding down coal

There’s one thing we should do right now – stop this idea of shutting down our coal-fired power plants near Estevan. You hardly hear SaskPower mention coal-fired power anymore. I keep hearing how those plants are getting enough maintenance to just get them to the planned phase out of 2030, but not likely a day beyond that. The way things are going, they’ll likely limp to the finish line, but not an inch past that. Similar things are said to me about the mines and their iron.

I’m suggesting we should strongly reconsider that. Pour some money into keeping both the power plants and the mines viable should we choose to extend their lives beyond 2030.

The Government of Saskatchewan and SaskPower should have some real serious discussions with Whitecap, and possibly other oil companies like CNRL, about the possibility of dramatically increasing carbon capture and producing as much CO2 as we can. That means putting carbon capture on Shand Power Station. But it could also mean either refurbishing Boundary Dam Unit 6 or, shockingly, building Shand Unit 2, and maybe even Unit 3, with High Efficiency Low Emissions (HELE) technology, designed from the ground up with carbon capture running from Day 1.

One might say that’s going to cost billions, and you’d be right. But I dare say doing so will cost less than just one 300 megawatt small modular reactor, whose price is not yet known, but previous SaskPower Minister Don Morgan said could run between $3 and $5 billion.

It’s going to take a long time to squeeze the first megawatt out of that first reactor. If everything goes to plan (and it never, ever goes to plan with nuclear), we might see the first SMR megawatt around 2034-35. Putting CCS on our existing coal fleet, and maybe, dare I say, expanding it, with HELE and CCS, could help bridge the gap in the interim until we get several SMRs up and running, and have become proficient in their operation. That’s baseload power that won’t go to zero like wind does every so often, and solar does every night.

Doing so would keep the Estevan economy rolling, not just from coal mining and power generation, but also oil production.

I’ve been writing about the Saskatchewan oil industry for almost 16 years now, and I am increasingly alarmed by the fact I haven’t seen the “next big thing,” in southern Saskatchewan. Drilling numbers keep on their slow decline. Companies like Crescent Point have largely lost interest and are pouring their capital expenditure money into exciting Alberta plays. That may be great for Alberta, but Saskatchewan needs to do something to keep things going here. That we’ve kept oil production relatively flat for the last 23 years is a small miracle. But if we don’t get a lot more new investment, it won’t stay that way.

The Sask Party provincial government a few years ago set a bold goal of increasing oil production from the current 454,000 barrels per day to 600,000 barrels by 2030. I asked Premier Moe about that in my year end interview with him last December. He said he thought it was a modest goal.

But as I pointed out to him, and Energy and Resources Minister Jim Reiter, I’m not seeing evidence of the province moving to make that happen.

This is something the Government of Saskatchewan, through its Crown corporation SaskPower, can do. If we tell the feds to stick it when it comes to shutting down coal by 2030, if we put carbon capture on existing units and even build new coal units with carbon capture, then supply that CO2 to companies like Whitecap, and maybe others like Canadian Natural Resources Limited, we could extend the life of our most prolific play in southeast Saskatchewan. We might even increase its production while we’re at it. All the while, we’d be ensuring baseload power production.

This plan’s impact would be measured in generations, not an election cycle, or a corporate quarter.

And it might also save us some money by reducing our nuclear expenditure.

But action has to be taken now. Because if we let those power plants and mines slide past the point of no return, an opportunity may be lost that we will be kicking ourselves for later.

We can’t let that happen.

Brian Zinchuk is editor and owner of PipelineOnline.ca, and occasional contributor to the Frontier Centre for Public Policy. He can be reached at [email protected].

Up Next

NATO spending pledge—federal government faces lose-lose situation

Don't Miss

Emperors of woke have no clothes and conservatives should say so

Todayville

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

Buckle Up for Summer Blackouts: Wind Is Already Failing Texas in Spring

Bruce Dowbiggin / 3 hours ago

Why Do The Same Few Always Get The Best Sports Scoops?

Energy / 3 hours ago

Federal government continues to reject golden opportunities to export LNG

Energy

Buckle Up for Summer Blackouts: Wind Is Already Failing Texas in Spring

Published on May 13, 2024

Todayville

From Heartland Daily News

By Jason Isaac

When the wind blows too much, natural gas plants are forced to shut down because they can’t underbid wind producers that can bid zero or negative. But when the wind doesn’t blow when it is needed, wind generators can afford the loss of revenue because they earn so much from tax subsidies.

It’s been all quiet on the electric grid front for a few months — but don’t get your hopes up. Over the last month, electricity prices came near the $5000/MWh regulatory cap three separate times because the wind wasn’t blowing enough when the sun went down.

If this sounds familiar, you’re not wrong.

You may hear from the drive-by media that the problem is unseasonably warm temperatures, or that there are a lot of power plants down for maintenance. But high 80s in April and low 90s in May are not unusual, and the Texas grid used to manage these weather changes with no problems. From 2014 to 2016, real-time prices only went over $1000/MWh twice, but it’s happened three times already this year.

If the grid is already on shaky ground, with many weeks to go before blistering triple-digit temperatures shoot electric demand through the roof, all signs are pointing to an unpleasant summer.

The problem with the Texas grid is so simple it’s infuriating: Relying too heavily on unpredictable wind and solar, without enough reliable reserve capacity, means higher volatility — leading to higher prices and increasing need for expensive interventions by ERCOT to avoid outages. This is why your electric bill is going up and up even though wind and solar are supposed to be cheap.

While Texas certainly has a lot of sun, peak solar output almost never aligns with peak electric usage. The Lone Star State also has plenty of wind, but wind generation is wildly unpredictable — by nature. It’s not unusual for a wind generator’s output to swing 60 percentage points or more in a single week.

Take last month, for example. On Tuesday, April 16, electricity prices reached their cap because ERCOT’s day-ahead wind forecast was off by 50%. Five gigawatts of wind we were counting on to power Texas as the sun went down didn’t show up. That was the equivalent of simultaneously shutting down 10 large natural gas units, or all of the state’s nuclear capacity. If the latter occurred, the news media would be up in arms (and rightfully so). But because the culprit was the political darling of both the left and the right, no one heard about it.

ERCOT hasn’t been the best at predicting wind output, and the problem isn’t entirely its fault. Wind veers so wildly between extremes it’s nearly impossible to plan a sustainable grid around its fickleness — yet wind makes up 26% of our generating capacity.

It’s all because lucrative tax breaks and subsidies at the state and federal level, combined with flaws in ERCOT’s market design, make it almost impossible for wind to lose money — and harder than ever for natural gas to compete, even though it’s far more reliable and affordable. When the wind blows too much, natural gas plants are forced to shut down because they can’t underbid wind producers that can bid zero or negative. But when the wind doesn’t blow when it is needed, wind generators can afford the loss of revenue because they earn so much from tax subsidies.

Imagine trying to open a restaurant when your competitor next door is paying its customers to eat there. It’s no wonder natural gas capacity in ERCOT has barely grown over the past decade, and not enough to make up for losses of coal plants, while demand has been steadily increasing.

All those subsidies are hurting our most reliable, affordable energy producers and putting our economy at risk — leaving you and me, the taxpayers on the hook.

While most political issues are far more complex and nuanced than brazen attack ads and headlines would lead you to believe, in this case, it really does boil down to one simple problem.

And it would be easy to solve — if lawmakers are willing to go against the grain of political correctness and set a clear reliability standard for the wind and solar generators that want to connect to our grid.

Unfortunately, that’s a gargantuan “if.”

As a former lawmaker, I understand the pressures our legislators are under to toe the line on alternative energy. Major utilities embracing World Economic Forum- and United Nations-aligned “energy transition” policies that seek to redefine what’s “clean” and what’s “pollution” are making matters worse. And the incessant misinformation from their well-funded lobby that promise rural “economic development” and “cheap energy” sound too good to be true, because they are.

Elected officials don’t serve the lobby. They serve Texans — or, at least, they should.

And Texans want a reliable, affordable grid. They want to not have to worry about losing power in the heat of the summer or the dead of winter. The Legislature must put a stop to these market-distorting subsidies and make reliability, not popularity, the priority for our electric grid.

Gov. Greg Abbott sent a letter on July 6, 2021 to members of the Public Utility Commission of Texas (PUC) directing them to “take immediate action to improve electric reliability across the state.” The second directive was to “Allocate reliability costs to generation resources that cannot guarantee their own availability, such as wind or solar power.” Unfortunately, the PUC hasn’t acted on this directive or even studied it. The costs of scarcity on the grid are estimated to have exceeded $12B in 2023, which is equal to two-thirds of the property tax relief passed in the 88^th Legislature, all paid for by ratepayers.

“Unfortunately for Texans, the ERCOT grid is moving from a single grid with gas and coal power plants running efficiently all day to two grids: one for wind and solar and one for expensive backup power that fills in the gaps when there is not enough wind and sun,” says Dr. Brent Bennett, policy director for Life:Powered at the Texas Public Policy Foundation. “Every time these scarcity events occur, whether due to real scarcity or artificial scarcity created by ERCOT’s operating policies, ratepayers are shelling out tens to hundreds of millions of dollars for backup power. It is the most expensive way to operate a grid, and Texans will feel the bite as these costs are absorbed over time.”

The Californication of our grid is unfolding before our eyes. If the Legislature and the PUC don’t act fast, the Texas miracle won’t last.

The Honorable Jason Isaac is CEO of the American Energy Institute and a senior fellow at the Texas Public Policy Foundation. He previously served four terms in the Texas House of Representatives

Energy

Federal government continues to reject golden opportunities to export LNG

Published on May 13, 2024

Todayville

From the Fraser Institute

By Julio Mejía and Elmira Aliakbari

A recent report released by the National Bank of Canada underscores the potential environmental impact of transitioning from coal to natural gas in countries such as India. According to the report, by 2030 the cumulative effect of this transition would result in up to four times fewer greenhouse gases emissions than what Canada emitted in 2021.

Once again, Canada has missed a crucial opportunity to supply clean and reliable energy to an ally. Polish President Andrzej Duda recently expressed interest in purchasing Canadian liquefied natural gas (LNG) from Canada but the Trudeau government did not offer any concrete commitment in response. We’ve seen this movie before.

During his recent visit to Ottawa, Greek Prime Minister Kyriakos Mitsotakis received the same noncommitment. In January 2023, Japanese Prime Minister Fumio Kishida came to Canada hoping to secure a reliable energy source. In response, Trudeau expressed the importance of Canada as a global energy supplier, only to add the disclaimer that the world is “aggressively” moving towards decarbonization. And in 2022, after Putin’s invasion of Ukraine led Germany to seek ways to reduce its reliance on Russian energy sources, German Chancellor Olaf Scholz asked to buy Canadian LNG but the prime minister gave him the cold shoulder. Apparently, Trudeau found no compelling “business case” to export LNG to Europe’s largest economy.

Of course, Canada’s vast natural resources could make a significant positive impact on global energy security, reliability and emissions reduction by reducing reliance on coal while also creating jobs and economic opportunity here at home. Energy supply shortages have already forced European countries to revert to coal-fired power plants—coal contributes more CO2 emissions per unit of energy than natural gas. In the developing world, India aims to double coal production by 2030 to meet the demands of its burgeoning economy and population. Similarly, China quadrupled the amount of new coal power in 2022 and has six times as many plants under construction as the rest of the world combined.

A recent report released by the National Bank of Canada underscores the potential environmental impact of transitioning from coal to natural gas in countries such as India. According to the report, by 2030 the cumulative effect of this transition would result in up to four times fewer greenhouse gases emissions than what Canada emitted in 2021. To put that in perspective, the impact would be even bigger than completely shutting down the Canadian economy.

Moreover, a recent McKinsey report anticipates an annual increase in global LNG demand of 1.5 per cent to 3 per cent by 2035. And according to the latest report by the International Energy Agency (IEA), limited new LNG production means supply will remain tight. The Biden administration recently halted LNG project approvals, increasing the need for Canada to establish its own infrastructure if we’re to seize the opportunity and become a global LNG supplier.

Unfortunately, Canada currently has no operational LNG export terminals, with the first LNG facility expected to commence exporting by 2025. The Trudeau government has frustrated the development of other LNG terminals, primarily through government regulatory barriers including long approval timelines. The government’s emissions caps on the oil and gas sector and federal Bill C-69 (which added more red tape and complexity to the assessment process for major energy projects) have also created uncertainty and deterred—if not outright prohibited—investment in the sector. Additionally, the British Columbia government’s “CleanBC” plan to reduce greenhouse gas emissions has added more regulation. Not surprisingly, a recent survey revealed that investors identify regulatory uncertainty as a major deterrent to investment in Canada’s oil and gas sector.

With the proper polices in place, Canada could provide an energy alternative to our allies and other coal-consuming countries worldwide. The Trudeau government should acknowledge the environmental benefits of our natural gas resources, reform regulations for energy infrastructure projects so they’re more competitive, and allow our energy industry to be a leading source of clean and reliable energy, for the benefit of Canadians and the environment.