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Regina鈥� The problems with the SaskPower Boundary Dam Integrated Carbon Capture Project have dominated the debate in the provincial legislature and headlines in the press for much of late October and early November. Pipeline News spoke to SaskPower president and CEO Mike Marsh about the issues at length by phone on Nov. 9.

Pipeline News:Can you describe how operations have gone for the BD3 carbon capture project since it fired up in late 2014? Does it work, and how often does it work?

Mike Marsh: Yes, it works. It works, and as a matter of fact, the first few weeks, we had very good performance out of that plant. We actually pushed it up. We were achieving 80 per cent capture rates in the fall of 2014. We never did achieve the 90 per cent the plant is designed to, but we were in the 60 to 80 per cent range.

Several of the processes, the subprocesses inside the facility we knew we weren鈥檛 going to be able to get started because of the construction delays we had and some of the issues that we knew as we were heading into the startup of that plant. By and large, the plant operated very well in those initial months.

So we know the technology works. We continue to be in discussions with CANSOLV and they work with us and have been for the past year as we completed improvements at various parts of the year.

In terms of the overall operations, we started to experience a few other technical issues in the spring of 2015. We had a number of component pieces that did not perform as expected. We had some issues coming back from an overhaul in April, where some equipment didn鈥檛 perform after we tried to come back up after a short outage in April, which didn鈥檛 help the situation. Although we started very well, we got into other operational matters. Even until very recently, we鈥檝e been able to continue to operate and still achieve about 60 per cent for periods of time.

The issue has become the number of outages the plant has taken has reduced the overall volume capacity over the year down to 40 per cent.

If we can continue to target the mechanical issues, and by that I鈥檓 talking about heat exchangers, some of the valves, some of the control systems, some of the steam and temperature control systems in the plant, then I know we can get the amine capture back up into the 80 and 90 per cent range.

P.N.: How much carbon dioxide has the capture plant been capturing on a daily basis and over the course of the year?

Marsh: The plant has been capturing approximately 65 per cent of the time over the past year. The average capture rate for the days it鈥檚 operating is about 2,000 tonnes. So we鈥檝e had 205 operating days where it鈥檚 been discharging to the pipeline, and we鈥檝e had a little over 400,000 tonnes, which works out to about 2,032 tonnes on average.

P.N.: There seems to have been some contention between the capture plant鈥檚 instantaneous capture rate and its aggregate capture over the year, with the opposition trying to 鈥渟how light鈥� between the premier鈥檚 statements and SaskPower鈥檚. Can you explain what the difference is?

Marsh: Let me clarify that. First of all, there was a statement made when the plant was fully started up and the premier had made the statement the plant is fully operational.

Of course, that鈥檚 an operations term which means when a plant is up and running, after it鈥檚 been on construction, it鈥檚 now into an operations mode, and 鈥渇ully operational鈥� means it鈥檚 operating. Whether you鈥檙e at part load, half load, full load, you鈥檙e still fully operational.

The other point was that various terms have been thrown around about 90 per cent capture rate, 90 per cent efficiency, the volume capacity of the plant while it鈥檚 producing...

To be very clear, the plant has achieved a measured capture rate of 80 per cent. That happened on Nov. 15, 2014. The design capture rate is 90 per cent. If the plant was operating at 80 per cent capture rate, and this would represent 89 per cent, if that happened over the course of the year, you would achieve 90 per cent capacity over the course of the year. Remember the plant is designed for 3,240 tonnes per day at the 90 per cent capture rate for the facility, capturing 90 per cent of the carbon dioxide in the exhaust gas from Boundary Dam 3

P.N.: I understand there have been a lot more operational shutdowns than initially anticipated. What was the nature of these shutdowns? For a complex facility that is the first of its type in the world, what is the expectation of operational efficiency and operational days? Can what is essentially a new chemical plant be expected to have the same uptime we expect of our power generation facilities?

Marsh: The availability we targeted for the plant is 85 per cent. The availability for the generating station is 90 per cent. That鈥檚 the expected target for the station. We didn鈥檛 expect the capture plant to be as available as BD3, but certainly it鈥檚 close.

As I indicated before, there was lots of work needed on auxiliary systems. We had to replace heat exchangers. We had to bring the unit down to do cleaning of ash deposits in the SO₂ absorber, for example. Looking at areas where the design of some of those components where the exhaust gas entered the plant wasn鈥檛 doing the job that we expected it to. We had to take the plant down a number of times for cleaning. That resulted in days offline. That, of course, reduces production.

Was it expected, though? We expected, certainly in the first year, to be running above 50 per cent for sure, and moving towards 85 per cent moving into the second year. It only achieved, on average, 40 per cent capacity, by volume, over the past year.

P.N.: Was SaskPower perhaps overly ambitious in its stated expectation of performance, at least for initial operation? Could any new facility be expected to run at full capacity, i.e., 90 per cent capture, from the get-go?

Marsh: The answer to your second question is 鈥淣o.鈥�

That鈥檚 where I think the clarification as to what the expectations should have been from the get-go we realize in hindsight. We probably should have done a better job in educating not only ourselves here, but the province of Saskatchewan and the rest of the world this is going to take some time. I believe we鈥檝e spoken about that a lot in conferences, but in a lot of the written information, it probably was not as clear.聽

Any industrial facility takes a long time. We probably overstated the expectation, and that鈥檚 probably why we鈥檙e having to explain this today. If we had talked about it鈥檚 going to take two to three years, and we are going to work at getting above 50 per cent in the first year and shooting towards 80 per cent in the second year and 85 per cent availability in the third year, it would have set a different expectation.

So no, no new facility of this size, first of its kind in the world, especially, is going to run at full capture rate for the first year.聽

P.N.: I鈥檝e heard of several issues with regards to commissioning process 鈥� issues with welds, contractors being brought in to redo work of the initial build contractors, and most recently, the replacement of the tile-lined, masonry amine storage tank with a new stainless steel one that made headlines as it was shipped across the province. Have these indeed been some of the teething issues? Or are there other, more significant issues? After a lengthy shutdown this fall, including the replacement of that tank, are we at a point where most of the bugs have been ironed out?

Marsh: First of all, the issues with the welds occurred on the generating station and had nothing to do with the carbon capture facility, per se. There might have been a few. Most of the redo work on the piping was done in the generating station itself.

The amine storage tank had developed a leak actually prior to us going online, but it was something we thought we could live with until the next major overhaul in 2015. But as time went on, it became apparent it couldn鈥檛 be slowed down and was going to result in more problems. Together with the contractor, it was replaced, and it was replaced at the contractor鈥檚 cost. It was one of those items that were identified over the course of first-year operation.

There were certainly other issues that were identified throughout the course of the year. Again, nothing we would consider abnormal in the first year of operation, but it takes time to work through all these systems. There鈥檚 thousands of components and many, many subsystems inside here that have to be brought up to speed, have to be checked, have to be proven out and operating within the engineering tolerances.

P.N.: So do you think you have most of the bugs out now?

Marsh:Yes, we do. That was the reason for this major overhaul. It was always planned, and, of course, dealing with issues we knew when we started it up, together with issues we learned over the first year of operation, allowed us to get many major components replaced. There were heat exchangers replaced. There were pressure vessels. There were a couple of pumps. We鈥檝e done the amine tank, you know about that. And there was some control system modifications so we can continue to fine-tune this facility and drive the capture rate up and the volume capacity of the plant up to where it needs to be.

P.N.: If I buy a truck, I don鈥檛 expect to replace the engine and transmission in the first year.

Marsh:That鈥檚 a good example, perhaps, but on the other hand, manufacturers make thousands and thousands, if not millions of vehicles every year. They鈥檝e been doing it for years and years. This is a first-of-its-kind facility. We鈥檙e using amine technology which has been proven in industry before, but we built a world-scale, production-scale facility next to a power station. So (there鈥檚) lots and lots of learnings on the first-of-its-kind. I think that kind of comparison is not really a fair comparison.

I鈥檝e been comparing this to an oil and gas refinery or petrochemical plant. There鈥檚 a lot of work, especially when you鈥檙e designing specific plants, first-of-its-kind plants. There are teething problems. You鈥檙e going to go through many months of work and re-work as you figure out where the gaps are and where to close the gaps. We have a great technical team that鈥檚 working on that. We鈥檝e just come back from an overhaul. In fact, the facility was producing CO₂ to the pipeline earlier today. It鈥檚 performing very well, according to the plant people. We fully expect we have resolved many, many of the issues we had in the first year.

P.N.: What are your operational expectations for the capture plant in its second year of operation? Are we going to be running close to that 90 per cent capture rate, and 800,000 or 1 million tonnes per year, or is it too early to say and perhaps that might be an expectation for a year or two down the road?

Marsh: Right now I鈥檓 going to say we鈥檙e going to try to demonstrate that we can achieve that 90 per cent capture rate as soon as we possibly can. I鈥檝e set a target for our team for 2016 of 800,000 tonnes, which is double what we achieved last year. I would consider that success.

If we can achieve high capture rates with good reliability, in other words, more days on than off, and achieve close to that 800,000, I think that would be, I think, very good success.

P.N.: With reference to the federal regulations requiring new coal facilities, has the performance of the BD3 project, in its first year, matched that of a combined-cycle natural gas plant, in terms of emissions?

Marsh: On an annual basis, it has not yet achieved the federal targets. If we looked at the days operating, it has achieved the federal targets. It鈥檚 been offline for scheduled outages and other outages, and another two months for unplanned outages over the course of the year. It鈥檚 been off quite a bit of the time. It鈥檚 only been operating 64 per cent of the time, and so it has not achieved the federal regulations, yet. We will achieve that through 2016, for sure.

P.N.: It鈥檚 become clear that the six-month delay in going online has cost SaskPower penalties under its contract with Cenovus. Can you elaborate exactly what these were in 2014 prior to first CO₂ production, and since then? Are we making or losing money under the contract?

Marsh: Yes, the six-month construction delay resulted in us not being able to produce CO₂ for the better part of the year. We were only able to produce from the end of October to the end of the year.

We had, in addition to daily take-or-pay amounts in the contract, we had a volume commitment we had agreed to in the contract that could not be achieved in those three months, and therefore we were obligated to pay a penalty to Cenovus.

That penalty was approximately $12 million. That was offset with some revenue from CO₂ sales from October, November and December, but not enough to make up that entire penalty.

In 2015, it鈥檚 turned mostly the other way. We鈥檙e still going to be somewhat short on volume commitment as we look to the end of the year. We鈥檙e forecasting right now in the area of $5 or $6 million. We鈥檒l see how that works at the end of the year. Our revenues right now are in the $10 to $11 million (range) at the present time.

It will be net positive $5 to $6 million. That鈥檚 our forecast today.

P.N.: How many lawsuits are in play right now with regards to this project, and what are their nature?

Marsh: We have an arbitration process today with our one contractor, SNC-Lavalin. We have an appeal in place with the Saskatchewan Court of Appeal in our dispute with AB Western via either going down the path of litigation or arbitration.

Those are the only two that are in place right now. Of course, throughout the process, there will be other subcontractors and others probably named, but those are the two issues in play right now.聽聽

P.N.: Climate change meetings and conferences don鈥檛 happen down the road where you can stay at the local motel. Isn鈥檛 Mike Monea鈥檚 job in part to be a travelling salesman on a global scale? Can you speak to the questions about his travel expenses?

Marsh: Carbon capture technology on coal-generating stations is of interest around the world. The fact we鈥檝e built the first carbon capture at a commercial scale has attracted a lot of interest. At the same time, we鈥檝e been out sharing our knowledge, sharing our experience. As the community of interest around carbon capture increases around the world, we want to make sure people know where Saskatchewan and SaskPower is and what we鈥檝e done. That鈥檚 been part of Mike (Monea鈥檚) job, to promote the project, promote carbon capture technology, and really look for opportunities where we may have the opportunity to capitalize on the data we have and the expertise that we have.

We do not own the specific technology, the amine technology. That is owned by CANSOLV, a subsidiary of Shell. Some of the intellectual property is owned by the engineering companies that have done work on this. But Mr. Monea鈥檚 role has been one to promote carbon capture and to tell our story and to try to attract attention at this early stage in carbon capture technology, looking for opportunities that may pay off at some point down the road.

His expenses that have been talked about, amounting to $400,000-plus over the last four, five years, has certainly attracted some attention, but travelling internationally is not inexpensive. Most of the organizations interested in carbon capture like we are, are from as many as 30 different countries throughout the world. Europe, southeast Asia, to name two, are very interested in carbon capture. The amount of coal use in Asia is going to stay high for a number of years. Around the world, the percentage of electricity generated from coal is going to remain very high. This technology, we believe, will become part of the industry at some point. It鈥檚 a very effective way to mitigate greenhouse gas emissions and provide cleaner energy from coal.