Keystone XL Algae Investing

Brian Hicks

Written By Brian Hicks

Posted August 13, 2013

The Keystone XL project has been hanging in the balance for several years now. After an initial rejection of the project courtesy of President Obama, TransCanada (NYSE: TRP) submitted a second proposal having revised the pipeline’s route. It’s this second proposal that is awaiting a sign-off by the President.

algaeCanada hasn’t slacked off in its attempts to sway opinion on the project here in the U.S. Even the Canadian Prime Minister, Stephen Harper, made some pointed remarks on the topic on a visit to the U.S. Now, Canadian Natural Resources Ltd. (NYSE: CNQ) is trying a different approach.

The keyword? Algae. Here’s the big idea, as Bloomberg describes it: crude from oil sands is “softened” using heat and steam to allow it to flow through pipelines. But when you burn natural gas in order to process the fuel, the resultant CO2 can be mixed with wastewater and become food for algae. This can subsequently be formed into cattle feed, among other by-products.

It helps that Canadian Natural Resources also happens to be Canada’s third-largest oil sands producer. And Canadian Natural isn’t alone in this project. Several other similar companies, including Imperial Oil Ltd. (NYSE: IMO) and Suncor Energy Inc. (NYSE: SU), are also looking closely at algae as a means of offsetting the inevitable carbon impact from projects like the Keystone XL.

As is well known by now, President Obama has stated he will turn down the proposal if he concludes the global warming fallout from the Keystone project will be significant. This isn’t what TransCanada wants to hear, of course. After all, it’s a $5.3 billion project that would link the tar sands of Alberta to refineries along the Gulf of Mexico.

The Algal Carbon Conversion Pilot Project is the brainchild of the National Research Council of Canada, Canadian Natural Resources Ltd., and Pond Biofuels. Environment News Service notes that the finished product will be a $19 million facility situated in Alberta.

The project, which is planned over three years, will essentially recycle CO2 emissions from tar sands operations into biofuels by using algal processes.

From ENS:

“This discovery has tremendous potential to benefit our environment and our economy, and further establish Canada as a leader in managing CO2 emissions,” said Science and Technology Minister Gary Goodyear.

If it succeeds, algal processing could become a key player in the North American energy industry. Fracking, the highly controversial process that has nevertheless been at the heart of America’s shale boom, results in enormous quantities of wastewater, as well as wasted heat. If an algae-based recycling project could harness some of this water and heat, it would certainly reduce the overall impact to the environment.

Algae Advantages

There are numerous important advantages to the algae approach. Most prominently, you don’t really need large amounts of arable land, since the algae is cultivated in enclosed photobioreactors. As a result, the process doesn’t upset other agricultural activities, nor does it mess up the local ecosystem.

Pond Biofuels is involved since the company focuses on converting emissions from smokestacks into algal biomass. Algae suck up CO2—in volumes twice that of the algae itself. To put this into perspective, Pond Biofuels claims that about one tonne of algae could result in 100 liters of diesel, while the leftover biomass can be repurposed as a substitute for coal.

Canadian Natural expects the facility to be up and operational by Q1. The company already has interested parties asking for dried algae.

All this notwithstanding, the public isn’t all that impressed with Canada in general. It’s the world’s seventh-biggest greenhouse gas emitter. Oil-sands production saw CO2 levels rise by 1.8 percent in 2011 alone to a total of 47.1 million tons. Will these efforts be enough to persuade President Obama that TransCanada is acting in good environmental faith? It’s uncertain.

After all, Canada in general hasn’t really focused its efforts directly on the Keystone XL pipeline. It’s plausible that the second attempt will run into problems if Canada doesn’t do more to clamp down on CO2 and other harmful emissions.


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