Is a Nuke Plant really the answer for Alberta's oilsands?
January 11, 2007
CBC News
At first blush it seems like a pretty incongruous idea — to plunk a honking big nuclear reactor in the very heart of Alberta's oil patch, to help steam the raw bitumen from the thick tar sands.
But as of this week, there are two serious oilsands players — Husky Energy Inc. and Total SA of France — who are publicly mulling the nuclear option. As well, four others, according to the biggest proponent of the plan, are quietly thinking about it.
Couple that with the thoughts of ex-premier Ralph Klein, whose parting gift was to suggest the nuclear notion had at least to be considered, and you have the makings of a veritable tipping point.
Oil execs are no dummies. They have tough-minded shareholders and inquiring boards of directors to deal with, so they don't just toss out ideas like this willy-nilly. At the same time, the timing of these announcements and their tone (Husky CEO John Lau went out of his way to note the political reticence) have to be taken into account.
The oilsands industry knows it has a monumental PR crisis coming its way: Extracting all this gooey oil from the reluctant earth of northern Alberta is spewing millions of tonnes of greenhouse gases into the atmosphere — gases even the Conservative government in Ottawa is suddenly taking an interest in curbing.
Plus, under current projections, the need for cleaner-burning natural gas to create the steam that is needed to coax the oil from dense underground cavities is expected to increase fourfold over the next decade. By 2025, the Alberta oilsands could be using basically all the natural gas that will flow south from the proposed Mackenzie Valley pipeline, just to get more "dirty" oil out of the ground.
Seen in this light, a clean-burning nuclear reactor, which won't contribute to global warming and which will replace at least some of the steam needed for oilsands extraction, can look like a pretty shrewd option.
The problem, though, is that reactors are often more costly than they first appear, plus they take an awfully long lead time to get through all the regulatory hurdles and come on stream, raising the question: Is all this talk of nuclear just a smokescreen to keep the politicians at bay?
A real plan
A nuclear option of one sort or another has been floating around the oil patch for at least a decade. But this time it's a bit different, there is a real plan on the table.
Two Calgary-based entrepreneurs, Wayne Henuset and Hank Swartout formed Energy Alberta Corp. and teamed up with Atomic Energy of Canada Ltd. to promote the Candu-6 as the answer to the vast energy needs of the oilsands.
Henuset, the president of the company, said in an interview the group is building the project around two Candu-6 reactors, which would produce a total of 1,400 megawatts of power and which would be built together smack in the middle of oilsands country, just south of Fort McMurray.
The projected capital cost is roughly $4.5 billion and the reason for the centralized location is that one of the biggest needs of oilsands extractors is high-pressure steam, and steam from a central plant such as this only has an effective range of about 24 kilometres when delivered through pipelines.
The Candu-6 is a full-scale 700-megawatt reactor that has been around since the early 1980s. It is the one Canada has exported to China, Korea and Romania, and the same one that is found at Point Lepreau, N.B., and most of the sites in Ontario, including the Darlington, Pickering and Bruce plants.
AECL would build and operate the plant, while Energy Alberta and private equity groups would own it. There is no plan to have any government equity in the project, says Henuset.
In fact, he doesn't even anticipate it going on the province's electricity grid: This will be a dedicated project for designated users who will want either (or some combination of) the steam, electricity, hot water or hydrogen that the reactors can supply.
"The variables are almost unlimited," says Henuset. "Each individual company has different requirements," which is adding to the complexity of the project and even a final decision on where it would be actually sited, he added.
In its sales pitch, Energy Alberta says that its nuclear project could support up to 150,000 barrels a day of tarsands production and would displace up to .26 billion cubic feet a day of natural gas. That sounds like a lot, but it only represents about six per cent of the natural gas that current projections say will be needed by 2025.
Pros and cons
The obvious benefits, of course, of putting a Candu into the oil patch are that nuclear energy doesn't contribute excessively to global warming and that it will free up cleaner-burning natural gas for more appropriate use. It would also be a big shot in the arm for AECL and its attempt to sell more Candus abroad or even in Ontario, which is also considering adding more nuclear power.
Less obvious, a Candu would bring more economic activity and high-paying technical jobs to an often-overlooked part of the country. And, depending on the companies involved, it might also increase provincial royalties as they go up when productions costs go down.
On the downside, timing will be a problem. Energy Alberta would like to see regulatory hearings begin in just over a year from now and the entire plant to be completed by 2016. That's probably overly optimistic, but even so it represents a long delay in getting a start at curbing greenhouse gas emissions, and those companies that opt for the nuclear option might find themselves having to play environmental catch-up with their competitors.
Water is also going to be a big issue here. Already, prominent scientists like the University of Alberta's David Schindler are warning that Alberta's water table has been seriously depleted — some major river systems are down almost a third since the 1970s — and that there will not be enough readily available water for all the future oilsands projects.
Henuset argues that reactors are really just like giant radiators — they heat water but then return most of it to nearby lakes or rivers to cool. Still, this one will be part of a process that effectively ships water from one particular reservoir, where the reactor is situated, to a mine site where it will ultimately end up in a toxic waste pond.
Cost
Henuset's cost estimates for the project seem reasonable. But, just on the face of it, it's hard to see how this will be much of a bargain for extractors, unless they are factoring in huge premiums for future natural gas, environmental mitigation or the right to sell their products in so-called clean markets like the one California is proposing.
Ontario regulators in 2005 pegged the cost of a new Candu-6 at $2,845 a kilowatt, which would make the 1,400 MW unit being proposed for Alberta run about $3.9 billion, not counting the pipeline grid.
The cost of a reactor is normally amortized over an expected 35-year lifetime and at an efficiency rate of 85 per cent, which is not usually achieved, at least in Canada. The one at Lepreau and several in Ontario required very expensive repairs at around 20 or so years, which made the real cost of their output much higher. N.B.'s public utilities board recommended against buying another reactor.
If oilsands operators can find a ready export market for northern Alberta nuclear power then just taking the steam by-product could make this project quite doable. But that is not what they are doing. This is going to be a totally off-grid project, says Henuset. The cost will be shared among those who sign on.
If that's the case, then the electricity costs in particular from this project will likely be higher than the norm for northern Alberta, a region that is already basking in a considerable amount of oversupply. Judging by the cost figures Ontario and New Brunswick regulators have come up with (between 9 and 13.5 cents a kilowatt/hour for nuclear if normal rates of return are factored in), this ain't such a bargain.
What's more, if the oil boom — or even the oil age — does come to an end within the next half century, then somewhere in northern Alberta there is going to be an awfully expensive nuclear reactor just sitting around spinning its atoms.
LETTERS:
An important part of the story that wasn't even touched on is that Saskatchewan has one of the largest natural deposits of uranium ore in the world and that oilsands development is headed toward the Albert-Saskatchewan border and into Saskatchewan.
The real point is the strategic geological placement of huge oilsands reserves right next to huge uranium reserves.
—Gerald Piwowar | Saskatoon, Sask.
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