Varco: Alberta energy company to be incentivized with new CCUS federal incentives

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Alberta businesses looking to decarbonize their operations through multi-billion dollar carbon capture and storage projects are finally seeing the fruits of their perseverance.

More than two years after Ottawa first announced plans for a federal investment tax credit for carbon capture, utilization and storage development, the Liberal government on Tuesday announced plans for the incentive program and measures to block future carbon prices. He announced that he would proceed with the drafting of the bill. .

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As part of the Autumn Economic Statement, Federal Minister of Finance Chrystia Freeland announced details regarding the long-awaited tax credit for CCUS. The Liberal government will move forward with legislation needed to begin disbursing incentives to eligible projects in the coming weeks.

The Federal Investment Tax Credit (ITC) will be available beginning in January 2022.

In Alberta, several companies, industry groups and the provincial government are waiting to hear more about federal incentives for such projects that capture and store carbon emissions deep underground.

“We are very pleased to see the progress ITC is making,” said Michael Belenky, CEO of Advantage Energy and subsidiary Entropy Inc., which developed the post-combustion modular carbon capture technology.

“Certainly, it can’t be too early, because we have two projects that have been in the works for about a year. . . . Major investments in Canada continue to be halted, and further Details are awaited.”

The Calgary-based company is waiting for Ottawa to release details on how to apply for tax credits and ensure it provides future carbon pricing through contracts for difference.

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Multi-billion dollar CCUS projects related to petrochemical facilities, oil sands plants and power generation facilities have been announced in Alberta in recent years.

Energy consultancy Wood Mackenzie is tracking 80 CCUS projects, hubs and expansions in Canada at various stages of development, including 61 in Alberta.

As Canada aims to achieve net-zero emissions by 2050, making some of these proposals a reality will help decarbonize Alberta’s industries while attracting investment and new jobs. This is extremely important.

Bob Masterson, CEO of the Canadian Chemical Industry Association, said: “We track at least a dozen, and probably more than 15, proposed petrochemical investments in Alberta, and nearly all of them. (CCUS) activities will be included.” he said Monday.

“You’re going to need some support.”

Originally proposed in the 2021 federal budget, the Trudeau government subsequently announced in the April 2022 budget a new investment tax credit of 50 per cent for spending on equipment needed for carbon capture.

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A 37.5% credit is provided for investments in equipment used for transportation and storage for such developments.

“This is critical to Canada’s energy industry as it extends the lifespan of Canada’s largest industrial sector and ensures its long-term competitiveness,” said Scott Crocutt of the Business Council of Alberta.

Several large-scale projects are already under close consideration.

Dow Corporation is proposing to build the world’s first net-zero carbon emissions ethylene cracker and derivatives complex in Fort Saskatchewan, a development that could cost $10 billion. The captured carbon dioxide is sequestered off-site.

Dow CEO Jim Fitterling said on an earnings call last month that a final investment decision (FID) will be made soon “pending the completion of grants and incentives with the Canadian federal government.” Stated.

“We believe the timing is right for the Alberta project. We need to finalize this final issue with the Canadian federal government and have an FID in place by the end of the year,” he said at the time.

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Pathways Alliance, a group of six major oil sands producers, will build a $16.5 billion carbon capture network in the state, creating a CO2 trunk link between oil sands facilities and an underground storage hub near Cold Lake. I’m thinking of doing it.

“We are pleased that the federal government intends to legislate the investment tax credit by the end of the year,” Pathways Alliance Chairman Kendall Dilling said in a statement.

“We look forward to continued discussions with federal and state governments about other fiscal and policy tools for large-scale projects like ours.”

Meanwhile, Edmonton-based Capital Power is working on a proposed $2.3 billion carbon capture and storage development near the Genesee power plant.

Capital Power senior vice president Pauline McLean said the company is encouraged by Tuesday’s federal announcement.

“It’s great to see this tax credit in its final form,” she said in a statement.

The province is working on its own CCUS incentive, but the Alberta government has expressed frustration with the Liberal government’s drag on the program.

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Businesses are watching closely as the Biden administration finalizes aggressive incentives in last year’s U.S. Inflation Control Act, raising concerns that investment money for decarbonization projects will flow south of the border. I’ve been doing it.

Industry leaders are also watching to see whether Ottawa establishes a differential carbon contract that would lock in future domestic carbon prices and provide more certainty for long-term investments.

Ottawa confirmed that the Canada Growth Fund will be the primary federal agency issuing differential carbon contracts, allocating up to $7 billion of the $15 billion to the fund.

However, it is unclear how many projects will fit under this umbrella, given the sheer number of potential initiatives.

“To drive real investment, we need stronger carbon emissions contracts with industry,” Alberta Energy Minister Brian Jean said in a statement.

Prime Minister Daniel Smith said last month that the government would roll out its own incentives for CCUS at the COP 28 climate change summit, which begins on 30 November. An announcement is expected next week.

Chris Varcoe is a columnist for the Calgary Herald.

cvarcoe@postmedia.com

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