TORONTO — — The failure of Ottawa and Alberta to set clear rules on greenhouse gas emissions has forced Sherritt International Corp. [S-T]to delay major investment decisions, including giving the green lightto a multibillion-dollar coal gasification plant, the company'schairman warns.
Ian Delaney said yesterday that Sherritt's board of directors can'tgive the go-ahead to the $3.3-billion Dodds-Roundhill Coal Gasificationproject southeast of Edmonton until federal and provincial governmentstable guidelines for carbon emissions. Until then, the economicviability of the project is unknown.
"The absence of clear and articulated rules and regulations andsolutions for greenhouse gases has the effect of absolutely stoppinginvestment dead in its tracks," Mr. Delaney said following Sherritt'sannual general meeting in Toronto.
The outspoken executive complained that neither Ottawa nor Albertaare dealing with the issue, which is critical to industry investmentdecisions.
"I think there has been an absolute lack of leadership on both theprovincial and federal level ... they are sticking their heads in thesand," he said.
Federal regulations regarding greenhouse emission restrictions fornew projects have yet to be drafted while Alberta is still formulatinga plan for carbon capture and sequestration. At issue is whetherfacilities capable of capturing and storing carbon emissions from oilsands producers and projects like Sherritt's coal gasification plantcan be built and who will pay for them.
Alberta Energy spokesman Jason Chance said that the Alberta CarbonCapture and Storage Development Council is expected to table a reportin the fall that will likely serve as a "road map" for Alberta's newrules regarding carbon capture and storage as part of the province'sclimate change strategy.
Alberta has already introduced legislation forcing companies toreduce carbon emissions or pay for so-called offsets, which channelfunds into carbon reducing projects such as wind farms.
"We clearly recognize that there is a need for increased clarity andalignment between both the provincial government plan and the federalgovernment's plan. On a go-forward basis, we recognize that that kindof clarity and stability is needed to encourage additional investmentin Alberta," Mr. Chance said.
The Dodds-Roundhill plant would be the first coal gasification plantin Canada. With more than 11 billion tonnes of thermal coal reserves,Sherritt and the Ontario Teachers' Pension Plan, its 50-per-centpartner, hope to build the plant, which would convert coal intosynthetic gas. Sherritt expects to supply the so-called "syngas" to oilsands producers who require massive amounts of energy (usually naturalgas) to convert bitumen into synthetic oil.
Coal could provide oil sands miners with a lower cost andpotentially more environmentally friendly alternative to current energysources.
The Sherritt project will, however, produce significant amounts of greenhouse gas emissions.
The plant, which won't be commissioned until at least 2012, is onlyin the early permitting stage, but Sherritt chief executive officerJowdat Waheed told shareholders yesterday that Dodds-Roundhillrepresents roughly one billion barrels of oil equivalent. He said thatthe equivalent cost of energy from coal is about $5 (U.S.) per barrel,compared to oil prices that currently exceed $130 per barrel.
"One way or the other if we don't produce it, you just keep drivingthe [oil] price higher. If we can produce the $5 per barrel resource,you will have some ability to keep the prices low and maintain astandard of living," Mr. Waheed told reporters after the meeting.
In addition to thermal coal, Toronto-based Sherritt produces oil and nickel in Cuba, where it is expanding operations.
It is also building the $3.3-billion Ambatovy nickel project inMadagascar slated for production in 2010. Mr. Delaney conceded he'sworried about possible cost overruns at Ambatovy, which have becomecommonplace in the mining industry.
"The only thing I lose sleep over these days is staying on budget, on track and on schedule in Madagascar," he said.
SHERRITT INTERNATIONAL (S)
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