INNISFAIL – Deep Sky Labs may only be days away from putting shovels in the ground to build the world’s first carbon removal innovation and commercialization centre.
The company’s announcement last week for the Innisfail project sent shock waves throughout town, the province and even nationally.
It’s a massive undertaking by a young but innovative company with credible backing and finances.
Deep Sky Labs is a two-year-old Quebec-based company funded by private investors that was founded two years ago by Frederic Lalonde, co-founder and CEO of Hopper, one of Canada's largest private technology companies, and the second largest seller of airline travel in the United States.
Damien Steel, a former Hopper board member and company investor, was asked by Lalonde to lead Deep Sky as CEO just under a year ago, and “very quickly” after, a $75 million Series A Financing was raised from the venture capital community.
Steel noted the company had a program called Hopper Trees, an initiative committed to making positive change for the environment.
“And so, we started a program where for every airline ticket we sold we planted two trees to try and offset the carbon footprint,” said Steel. “And Fred is the type of guy who when looking into things goes very, very deep.
“And so, it started his journey into learning about climate and the problems of climate change.”
And now the company is ready to launch its first game-changing carbon removal project; a $50 million, 217,000-square foot facility in Innisfail.
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Deep Sky’s new centre on five acres of land in the town’s new Southwest Industrial Park will have Varme’s future $200 million waste-to-energy plant on one side, and the town’s planned $4 million municipal solar farm on the other.
If everything is realized Innisfail will be well-positioned to become a nationally recognized centre for clean energy innovation and transition.
“Deep Sky and the work they're doing is an emerging industry. Obviously, there's lots of headwinds to their work that they readily admit,” said Innisfail mayor Jean Barclay. “Carbon capture is certainly becoming more of a robust industry in Alberta, whether it's direct from a facility or something new like direct carbon capture from the air.
“I think our mindset here is to have an open mind and to look at opportunities and possibilities,” added Barclay.
Financial benefits for Innisfail
Deep Sky’s new facility is expected to infuse an investment of more than $110 million in the Innisfail community over the next 10 years.
The company has negotiated a 10-year lease-to-own agreement with the town. There is an option to purchase the property during the term of the lease at the advertised sale price of $160,000 per acre.
The annual lease rate escalates throughout the term with an average annual payment of $75,500; funds that will go directly into town coffers for the benefit of local taxpayers.
Deep Sky will be responsible for the payment of all property taxes and utility costs. If the property is not purchased during the term of the lease it will be returned to its original state.
As well, the company said construction for the new plant will generate 80 jobs, with another 15 for annual operations.
“I know Deep Sky has certainly said they are committed to hiring as many local contractors as they can,” said Barclay. “And I understand administration has been connecting them to local contractors, so that is a benefit.”
Choosing Alberta and Innisfail
So why did Quebec-based Deep Sky choose a small town in Alberta for its first big project when many other well qualified communities across Canada were available?
Steel offered three reasons why Innisfail was chosen.
“Once you remove the CO2 from the atmosphere, you have to do something with it. And for us, we store it underground. We store it underground into what's called deep saline aquifers,” said Steel. “This type of geological storage that we look for, which is about two to three kilometres underground, is in abundance in Alberta, and not only do you have the geological storage space but you have the existing wells that have been dug specifically to store CO2 underground.
“And so, Alberta and Innisfail are places where we knew we had access to immediate storage,” he added. “And so, we're partnered with a group out of Legal, just north of Edmonton, called Bison Low Carbon Ventures (BLCV), and they have an existing well, and they're going to take our CO2 and store it in the ground.”
And the collected carbon will not be stored anywhere near Innisfail or the surrounding area.
It will be transported and stored in a saline aquifer deep underground in the Morinville area of Sturgeon County, about 225 kilometres north of Innisfail.
Steel said reason number 2 was the federal government’s creation of the Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS ITC) program that provides a 60 per cent rebate on all capital expenditures related to carbon removal projects.
“And in order to gain access to that CCUS ITC you have to be in a province that has an approved regulatory framework around subsurface storage,” said Steel. “Today in Canada there's only three provinces that have that approved regulatory framework. It's British Columbia, Alberta and Saskatchewan.
"Coming to Alberta allowed us to gain access to that 60 per cent investment tax credit, which is absolutely critical for us because these first-of-a-kind projects are fairly expensive.”
He added Alberta now has its own benefit called the Alberta Carbon Capture Incentive Program (ACCIP) that provides an additional 11.5 per cent rebate on top of the federal program.
And the third reason came after visiting several Alberta municipalities and finding a “welcoming reception” to their plans in Innisfail.
“Innisfail was extremely welcoming. They are very forward thinking in terms of their industrial park they're building. They have an interesting industrial park that has a very energy transition feel to it,” said Steel. “The plot of land that Deep Sky is being built on is right in between a future two-megawatt solar facility (Innisfail Solar Farm), and on the other side of us is going to be a future waste-to-energy plant (Varme).
“And so, from a standpoint of who do you want your neighbours to be, and does it fit? It was an immediate fit.”
Whirlwind deal with town
Typically, it can take up to two or three years to pitch a business idea involving novel technology and costing millions of dollars to not only get a firm agreement signed but to get shovels in the ground.
Deep Sky officials met Innisfail town council in late May, and by Aug. 7 a development permit for the new facility in the Southwest Industrial Park was approved by the town’s development officer.
A town spokesperson told the Albertan that because it’s a permitted use there was no public hearing, which he added is standard practice with development permits in most municipalities.
As for the lease-to-own agreement for the five acres of land it was approved at the June 24 council meeting.
A company spokesperson told the Albertan the lease-to-own agreement was preferred over full ownership at this time as the company opted to use its capital for immediate expenses to get the project off the ground.
Deep Sky is now committed to having shovels in the ground by the end of August for the new centre, with a target operations date of the first quarter of 2025.
“I can’t even explain how welcoming, how friendly and how comfortable the entire town council made me feel,” said Steel, adding he was invited to join them to an event in Red Deer to meet Premier Danielle Smith. “I've been pleasantly surprised at the speed at which the town has been willing to move.
“Most folks we deal with are uncomfortable with the speed at which we try and move as a startup, and yet they (Innisfail council) have been very, very accommodating and quite forward thinking in their approach.”
Selling Deep Sky to Innisfail
Shortly after Deep Sky’s big announcement on Aug. 7 there was immediate passionate public reaction on social media.
Most were excited for Innisfail’s future. Some were in clear opposition. A few chimed in with clear hostility.
“I would hope they would keep an open mind and learn and listen from Deep Sky,” said Innisfail mayor Barclay, adding the Town of Innisfail in collaboration with an "industry leader" is planning to host a carbon capture and storage educational session on Aug. 28.
And Steel will soon be returning to Innisfail.
He told the Albertan Deep Sky takes community engagement “extremely” seriously.
“What form that takes I can’t tell you today,” said Steel. “But the exact message I told Innisfail is ‘we, and specifically I, will be a champion for this town’.
“We will support the town we care about. We will absolutely look to get involved with the community,” he added.
“We'll look to get involved with any of the education systems that are local.”
