Clean steam. By Christopher Pollon Illustrations by Chloe Cushman. September/Septembre

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3 Clean steam Oil sands operations need steam to extract bitumen, and only two heat sources can feasibly meet the industry s demands: natural gas and nuclear. Supply of the former, though presently abundant, is not endless, but can the latter be brought into service soon enough to offer a real alternative? By Christopher Pollon Illustrations by Chloe Cushman September/Septembre

4 It all sounded like science fiction: Back in May 2005, as natural gas prices were on the rise, Jerry Hopwood, general manager for advanced reactor applications at Atomic Energy of Canada (AECL), put forth a radical idea: The time had arrived for small modular reactors (SMRs), which could be assembled in remote industrial locations like Lego blocks for a fraction of the cost of Canada s legacy reactors. Energyhungry projects in Alberta were of special interest. In particular the increased energy needs of in situ bitumen extraction methods such as steam-assisted gravity drainage (SAGD) reliant on steam production that some SMRs are well suited to provide would increasingly make nuclear attractive. The economics will favour nuclear, Hopwood said at the time. automobile manufacturers have introduced bifuel pickup trucks that can burn both gasoline and natural gas, and the use of natural gas for fleets everything from garbage and transport trucks to buses is already here. Electricity generators are also increasingly leaning towards natural gas. A 2012 long-term outlook from Alberta Electric System Operators (AESO) projected that the future generation mix in Alberta is expected to shift from a predominately coal-based fleet to a natural gas-based fleet within the next 20 years. At the same time, Dinara Millington, principal author of the CERI research, says if some combination of B.C. and U.S.- based liquefied natural gas (LNG) export plants proceed, North American prices for natural gas could rise before the end of the decade. With LNG and a lot of movement of gas over water [for export], there will be the development of a global natural gas market, with an uptick in prices in North America and a downward trend in prices in Asia. And the natural gas market is notoriously unstable, with prices commonly 50 per cent more volatile than those of crude oil. Could the industry s vulnerability to that volatility coupled with new uncertainties around the provincial, national and global carbon pricing schemes eventually make small nuclear attractive again? The main driver for nuclear in the oil sands was the higher cost of natural gas, but that was not all Hopwood had to go on. At the time, Canada had signed on to the Kyoto accord, and greenhouse gas (GHG) emissions from the oil sands threatened to become a liability that would stagger the industry. Flash-forward nearly a decade: fracking has brought newly cheap prices and natural gas remains the primary fuel for Alberta oil sands producers. North America is flush with inexpensive supply at present, but the amount of this fuel required to drive the oil sands industry of the future will be colossal. The Canadian Energy Research Institute (CERI) predicted in July that oil sands natural gas consumption will spike by 2046 rising from 1,474 million cubic feet per day (MMcf/d) in 2013 to as high as 3,753 MMcf/d. (Emissions will rise in lockstep, potentially tripling during this time.) The oil sands are not the only industry angling to devour presently cheap natural gas, however. Caterpillar has announced that mining trucks and locomotives will be among the first of their products that use natural gas. Three major 52 CIM Magazine Vol. 9, No. 6 Micro nuclear power in development The idea of deploying small nuclear reactors to generate electricity and heat is nothing new; both the United States and Russia pioneered nuclear technologies to power their submarines after the Second World War. During the Cold War period, nuclear bombs were even discussed as a means to tap the vast Canadian bitumen resource. This short-lived, radical plan would have seen explosive devices lowered into bitumen-rich deposits to superheat the material. Today China, the United States, Japan, and Russia have all led the research on developing small nuclear plants to power We think the oil sands will be the primary driver [of small nuclear commercialization] because of the huge energy demand they will need Ralph Hart remote communities and mines, add capacity to existing nuclear reactors, and power industrial processes. In July, Russia and China signed a memorandum of understanding to jointly develop six floating nuclear plants designed to serve remote settlements, industrial facilities such as oil platforms, and even large ships that carry heavy mineral ores. The Russian nuclear reactor monopoly, Rosatom, promises to launch the first of these small nuclear plants in 2018.

5 That said, not a single new generation modular nuclear reactor has reached the point of commercial availability. Ralph Hart hopes to change this. With experience at AECL as well as the private sector, he is now chief engineer at Cambridge, Ontario s Northern Nuclear Industries Inc. (N 2 I 2 ). His LEADIR-PS (an acronym for LEAD-cooled Integral Reactor-passively safe) family of nuclear reactors including two models designed to generate 100 and 300 thermal megawatts (MWth) have been conceived with the oil sands in mind. We think the oil sands will be the primary driver because of the huge energy demand they will need, says Hart, who founded the company five years ago. Hart started thinking about his own modular design back in the early 2000s, when he reviewed the existing technology and was convinced that few of the current generation nuclear plants could produce the steam pressure needed for SAGD operations. LEADIR-PS, like all other nuclear power plants, generates steam by transferring the heat of fission from the reactor coolant to water. (Most designs employ low-enriched uranium oxide as fuel). Such plants can be used to generate electricity by supplying reactor-produced heat via steam to a turbine that drives a generator, ultimately returning the water to the reactor to produce more steam. LEADIR-PS units can also be built for process heat applications (like SAGD), which are more economical because they do not require the same turbine generator and condenser capacity, and which offer over 95 per cent energy utilization compared to about 40 per cent in electricity production, according to Hart. The LEADIR-PS draws heavily on established German high temperature gas-cooled reactor (HTGR) technology, and is fuelled by thousands of billiard ball-sized spheres with tiny particles that consist of kernels of uranium oxide at the core, surrounded with multiple coatings that serve as radiation containment. LEADIR-PS uses molten lead coolant instead of the helium coolant used in HTGRs, thereby avoiding a pressure vessel and high-pressure reactor coolant piping. The system, which when assembled would occupy an area about the same size as a hockey rink, can be delivered by rail or water. The LEADIR-PS reactor is installed underground to protect it from external events such as vandalism or fire, and assure passive decay heat removal. N 2 I 2 estimates that a LEADIR-PS plant could go online in less than a decade provided it had a customer willing and able to pay for it. N 2 I 2 estimates the cost of a single LEADIR-PS100 unit to be about $430 million, not including some $45 million for licensing (including public hearings), training, qualifying plant operators, and interest costs during construction. But once built, he says the fuel cost for LEADIR-PS is $ /kWh while the average fuel cost for gas fired plants in the United States in 2013 was $0.056/kWh. Oil sands producers that reduce their carbon footprint will have an economic advantage in the future Nuclear plants, including LEADIR-PS, are capital intensive but have very low and stable fuelling costs, says Hart. Natural gas plants are the reverse, offering low capital cost and high unstable fuel cost. By way of comparison, while it might take up to 60 months (from first concrete to power production) to build modern CANDU nuclear plants, N 2 I 2 believes a LEADIR-PS100 can be delivered as a largely completed plant and ready for operation in under 28 months. These time estimates do not account for the regulatory/ licensing hurdles for new, unproven SMRs in Canada. A spokesman from the Canadian Nuclear Safety Commission the independent nuclear regulator says it currently takes about nine years to get through the regulatory steps, from initial application for a siting licence to granting of an operating licence, and confirmed that as of this writing no SMR designs have been submitted for pre-licensing design review. He added that existing regulations can be applied as is to SMR facilities proposed for deployment in Canada. What it might look like Matt Horne How such modular nuclear reactor facilities could be deployed in the oil sands has been the subject of several recent studies including one by Calgary-based Petroleum Technology Alliance Canada (PTAC) (whose membership includes 30 oil producers), which collaborated with the U.S. Department of Energy s Idaho National Laboratory in late The report was aptly called Integration of high temperature gas-cooled reactor technology with oil sands processes. A conceptual design was developed for a central energy facility including five HTGR reactors capable of supplying September/Septembre

6 multiple oil sands producers with electricity and heat needed for upgrading bitumen to premium synthetic crude across about 40,000 hectares (producing about 150,000 barrels per day of bitumen using SAGD). Such a facility (the $8.25 billion capital cost includes steam turbines, 51 kilometres (km) of 24-inch piping with insulated tubing and 51 km of insulated condensate piping) could recover about half the bitumen reserves across such an area, reduce natural gas consumption by over 200 million standard cubic feet per day (about 4.5 trillion cubic feet over a 60-year plant life) and reduce carbon dioxide (CO2) emissions by 285 million tonnes over six decades. (The authors noted that such a facility would free up natural gas for highervalue uses more productive and irreplaceable applications like producing chemicals.) This approach to energy supply... insulates the oil sands producers over the long term from the potential imposition of carbon costs or issues with natural gas supply and provides a reliable source of energy for at least 60 years at a price that would be affected only by normal inflationary effects on the costs of operating materials and labour, concluded the report, which was co-authored by PTAC president Soheil Asgarpour. The HTGR heat price was found to be considerably higher than comparable current natural gas costs in the oil sands. Asgarpour says nuclear heat prices are only relatively high because they are not adjusted for the potential cost of CO2 emissions that would result from burning natural gas. He says if CO2 sequestration cost $120/ton, nuclear would be competitive with natural gas at $6/thousand cubic feet, adding: My view is the natural gas price 20 years down the road will be more than that. To put this $120 figure in recent context, Sweden s carbon tax is $150/tonne (industry pays less than this), while a European Union permit to discharge one tonne of CO2 has fluctuated wildly from a high of 32 euros (about $47 CDN) to just under three (about $4 CDN.) Uncertainty about carbon cost a boon for nuclear? The July 2014 CERI report predicts that oil sands GHG emissions from burning mostly natural gas will triple from 55 Mt/year in 2012 to as much as 165 Mt/year in The unknown costs associated with these increased future emissions will make nuclear increasingly attractive, but at present, the cost of carbon in the oil sands is very low. Under Alberta s 2007 Specified Gas Emitters Regulation (SGER), facilities producing more than 100,000 tonnes of annual GHGs must reduce emission intensity by 12 per cent from a historic baseline average. Companies not hitting their targets must either buy Alberta-based offset credits or contribute $15/tonne of emissions to a fund that invests in research and carbon reduction technologies (like carbon capture and storage). According to Suncor, Alberta companies have paid nearly $400 million into the fund since the SGER began. The Alberta government is currently contemplating raising both the carbon price and the GHG intensity by which producers have to reduce their emissions. It is not yet known what figures the government will choose, but it has been suggested the tax and intensity reduction figures could nearly triple. B.C. has also introduced its own broad-based carbon tax currently $30/tonne imposed on civil society and most industry. Ongoing uncertainty stems from Canada s signing of the 2009 Copenhagen Accord of the United Nations Framework Convention on Climate Until [the nuclear] technology solution is readily available, we continue to use the most efficient and cleanest alternatives Greg Stringham Change, which could evolve into a binding agreement with penalties and an enforcement mechanism by the end of In the future, the growing emissions from the oil sands have the potential to spook trading partners and investors. While Australia has stepped back from a carbon tax this year, many of Canada s allies and potential trading partners either already have carbon pricing in place, such as the European Union, or are considering various carbon pricing strategies, which contain the potential to one day penalize GHG-intensive energy sources. Oil sands producers that reduce their carbon footprint will have an economic advantage in the future, says Matt Horne, an engineer and climate policy expert at the not-forprofit, clean-energy focused Pembina Institute. If a company invests in technology to use less natural gas per barrel 54 CIM Magazine Vol. 9, No. 6

7 of oil, they ll have better market access and better returns than a company that goes with a business as usual approach. We re still a long way off According to Suncor spokesperson Erin Rees, At this point nuclear isn t feasible. This is not to say no one has made serious attempts to establish nuclear as a power source in the oil sands. In 2008, Bruce Power (a private operator of eight CANDU nuclear reactors on the shores of Lake Huron) proposed a $10-billion plan to build nuclear reactors using CANDU reactor technology in the Peace River area of northern Alberta. In late- 2011, after about four years of work that saw cooperation by Alberta (and vocal public concerns about safety), Bruce Power pulled the plug on the project. This past spring, Babcock & Wilcox Company, one of the pioneers behind the development of small nuclear in U.S. submarines, announced plans to scale back the development of its mpower modular nuclear reactor up to this point considered one of the world s leading candidates to see commercialization. The company cited an inability to secure significant additional investors or customer engineering, procurement and construction contracts this despite the U.S. Department of Energy s willingness to invest a reported $450 million in a cost-shared industry partnership program to help push mpower and other SMRs towards commercialization. The likes of Richard Branson and Bill Gates are also willing to help, and are partnering with some firms, but PTAC s Asgarpour says the future of nuclear in the oil sands remains challenging due to the current low gas price and long licensing process. Nuclear has the advantage that you know what you are dealing with. You are not dealing with these huge fluctuations [in price]. However, it will take a long time to get the licensing in place; the capital cost is very high. But there are also challenges to continuing on the same path we are on, because of greenhouse gas emissions. For the time being, hydraulic fracturing has changed the economics of natural gas and prevented oil sands companies from aggressively pursuing nuclear technologies that have not yet hit the market. With shale gas technology active in North America, natural gas supply is abundant and expected to be so for many years, says Greg Stringham, vice-president of oil sands at the Canadian Association of Petroleum Producers (CAPP), who adds that the industry has been approached with the option of using nuclear power and is keeping an open mind. Until that technology solution is readily available, he says, we continue to use the most efficient and cleanest alternatives. CIM September/Septembre