Canadian Manufacturing

Saskatchewan pays $12M penalty to Cenovus for slow CO2 delivery

Crown utility SaskPower has a deal to sell captured CO2 from its Boundary Dam power plant to Cenovus for enhanced oil recovery

REGINA—The Saskatchewan government has had to pay out about $12 million to an energy company for failing to deliver enough carbon dioxide from its carbon capture facility.

That amount might go up.

SaskPower, the Crown utility, has a deal to sell captured CO2 from its Boundary Dam power plant to Cenovus to be used for enhanced oil recovery.

SaskPower was supposed to start delivering the captured CO2 from the plant in April 2014, but the $1.4-billion carbon capture facility wasn’t ready until October that year.

SaskPower CEO Mike Marsh said that means penalties were incurred.

“So if the plant’s not operating and CO2 cannot be produced, then we have an obligation to pay under the contract,” he said.

The plant is currently only at 40 per cent generating capacity.

“We’re working through design and technical issues every week, our operating staff are working through them, every week and every month, and performance is getting better and better and better,” he said.

However, he added they may owe Cenovus another $5 million or $6 million by the end of this year.

“In the original budget we were certainly anticipating that the power station and the carbon capture facility would be on several months earlier,” he explained. “Certainly we weren’t forecasting a large deficit or payment to Cenovus because we couldn’t make the volume commitments, but it did happen and it’s part of the contract, it’s part of normal business.”

Marsh said the plant produced 400,000 tonnes of CO2 over the past year _ well below its capacity to produce one million tonnes.

He also said the utility is trying to get some of the $12 million back from the company that was responsible for the construction delays.

In the end, SaskPower expects overall to bring in revenue on CO2 sales that compensates for the payment to Cenovus.

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