Edmonton landfill waste carbon capture project inks deal with Canada Growth Fund

A company proposing to use carbon capture and storage technology to create clean electricity from landfill waste has become the second to secure a carbon price backstop contract through the Canada Growth Fund.

Calgary-based Gibson Energy Inc., a publicly traded company that operates crude oil pipelines and crude oil storage terminals in North America, is developing what would be Canada's first waste-to-energy facility with carbon capture technology.

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The Alberta facility would divert solid waste otherwise headed to the City of Edmonton's landfill and incinerate it to create electricity. Carbon capture technology at the site would trap the greenhouse gas emissions produced as part of the process, ensuring none enter the atmosphere.

Gibson said Tuesday it has reached a deal with the $15-billion federal Canada Growth Fund that will help it accelerate the development of the project. 

Under the terms of the deal, Gibson would own 50 per cent of the project, while the Canada Growth Fund would have a 40 per cent stake. Varme Energy, the Canadian subsidiary of Norwegian-based Varme Energy AS, will be involved in the development and construction of the project and will own the remaining 10 per cent stake.

Included in the deal is a carbon price assurance mechanism through which the Canada Growth Fund commits to purchasing 200,000 tonnes per year of carbon credits generated by the project at an initial price of $85 per tonne for a 15-year term.

This type of carbon offtake agreement, sometimes referred to as a carbon contract for difference, essentially guarantees that if the price of carbon falls below a certain level in the future, the Canada Growth Fund will pay the difference.

Proponents of carbon capture and storage, a process which traps harmful emissions from industrial processes and stores them safely underground, say these types of contracts remove some of the risk of investing in pricey emissions-reducing technology. They ensure companies will still be able to make money even if the existing industrial carbon price structure changes or is eliminated. 

This is because captured carbon doesn't have any value on its own as a product, but can lower a company's own carbon tax expenses by reducing its overall emissions. In addition, companies that deploy the technology can generate carbon credits to sell to big polluters looking to offset their own emissions.

The Canada Growth Fund, which was created in late 2022 by the federal government to help reduce the risk private investors assume when they invest in new technologies, has received approximately 100 proposals from companies exploring decarbonization projects. 

The Gibson Energy project is the fund's fourth investment and the second project to be awarded a carbon contract for difference.

"What I like about this project is it clearly fits the mandate of (the Canada Growth Fund)," said Patrick Charbonneau, president and CEO of Canada Growth Fund Investment Management Inc., in an interview.

"And that's to unlock projects that would otherwise not happen relying only on private sector capital."

Charbonneau said the Canada Growth Fund expects to have additional deals to announce in the coming months.

Gibson and its project partners expect to make a final investment decision on the landfill waste carbon capture project early next year, with a target start date in 2027. 

In an emailed statement, Gibson Energy's chief financial officer Sean Brown said the company has made its own commitment to get to net-zero emissions by 2050 and sees the waste-to-energy project as one way to advance that goal.

"It fits well with what Gibson seeks to do in our core business," Brown said. "It presents a platform with stable, long-term cash flows, and a potential opportunity for growth in the energy transition space."

This report by The Canadian Press was first published June 11, 2024.