Varcoe: 'Small value to pay' — Premier says CCUS incentives underneath improvement, may very well be value practically $2B for oilsands

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Premier Danielle Smith says the province ought to have an incentive package deal able to unveil later this yr for carbon seize tasks — one that would have a price ticket approaching $2 billion over a decade for the nation’s largest oilsands producers.

The initiative, which may very well be structured as an funding tax credit score, could be nicely well worth the expense if it triggers new funding — the mission by the Pathways Alliance group is predicted to price $16.5 billion to construct — and helps decarbonize the province’s largest sector, Smith mentioned in an interview.

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The province is in discussions with the oilsands group and can also be speaking with the federal authorities on the carbon seize, utilization and storage (CCUS) entrance.

The premier beforehand mentioned she expects to have the ability to announce this system’s particulars earlier than the COP28 United Nations Local weather Convention in Dubai, which runs the top of November till Dec. 12.

Whereas actual phrases of the initiative haven’t been finalized, Smith famous the province’s present Alberta Petrochemicals Incentive Program (APIP) supplies grants value 12 per cent of a mission’s eligible capital prices.

“We want to have some sort of construction that we expect is sustainable throughout the complete business. And what we’ve landed on for the APIP program is 12 per cent, what we’ve landed on for our agri-food tax credit score program is in that very same vary,” she mentioned.

And the way a lot would the motivation package deal be value?

“We’re hoping that may be extra achieved as a traditional tax credit score, versus a rebate program,” Smith added.

“Whether it is $16 billion (to construct the CCUS mission) and it’s 12 per cent … that’s $1.92 billion over probably 10 years, which is probably $200 million, $192 million a yr — of them with the ability to preserve extra of what they earn.

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“Let’s be clear that it will be structured that approach — that it will be only a discount of their taxes they usually’re going to have the ability to enhance manufacturing … Folks should be this (as) how will we preserve this business thriving and rising over the following variety of many years.”

Carbon capture map

Pathways Alliance, which is made up of six giant oilsands producers — together with Suncor Vitality, Canadian Pure Sources and Cenovus Vitality — has proposed constructing an enormous CCUS community within the province.

It plans to assemble a CO2 transportation line that may ultimately join greater than 20 oilsands amenities to an underground storage hub close to Chilly Lake.

The Trudeau authorities has beforehand introduced it can present a federal funding tax credit score for CCUS tasks value as much as 50 per cent for capital spending on gear to seize CO2. It’s additionally engaged on the phrases of a federal contract for variations that may assure the long-term future value of carbon.

Each Ottawa and the Pathways group have been calling on the province to supply incentives to assist propel the CCUS improvement ahead.

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Smith famous the oilsands sector will contribute $20 billion to $30 billion in mixed royalty funds and company revenue taxes yearly to provincial coffers, in keeping with some projections.

“We have to guarantee that we’re the most effective barrel available in the market … We don’t wish to have our business having to gear down. We would like our business to have the ability to proceed rising and it’s by means of that progress that we’ll proceed to get the revenues,” the premier mentioned.

“Permitting them to maintain a little bit little bit of that over a 25-year time horizon, as they construct out this carbon seize utilization and storage pipeline, that looks like a small value to pay.”

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The concept will face opposition, nonetheless.

Some environmental teams have criticized the effectiveness of capturing and storing CO2 emissions underground. Others assist the expertise however oppose governments offering further incentives.

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“There are already sufficient proposed incentives on the market to make oilsands CCUS tasks go round,” mentioned Jan Gorski, director of the Pembina Institute’s oil and fuel program.

“We want laws, just like the oil and fuel cap, to make sure these investments occur.”

A report launched Tuesday by the Worldwide Vitality Company reiterated the “essential” nature of CCUS to serving to the world attain net-zero emissions by 2050, as it may possibly curb emissions in industries which have restricted choices to decarbonize.

But, there are challenges to deploying the expertise, together with the working prices and the power to develop such tasks at scale.

Greater than 45 nations now have CCUS tasks underneath improvement. By June, solely about 20 business CCUS tasks underneath improvement had reached the stage of constructing a remaining funding determination.

“For his or her half, governments ought to develop efficient assist packages to assist with working, in addition to capital prices,” the report states.

Shell carbon capture facility
Shell’s carbon seize facility “Quest” close to Edmonton. Picture by Phillip Chin /For AP Pictures

Smith famous the federal and provincial governments beforehand offered incentives to advertise the oilsands.

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In 1996, the governments of Liberal Prime Minister Jean Chretien and Progressive Conservative Premier Ralph Klein struck a deal to assist new oilsands tasks take off. The province created a brand new uniform royalty charge, whereas Ottawa adopted beneficial tax adjustments.

“I take a look at it alongside the identical traces,” she mentioned.

“If we had been ready to do this to permit them to repay the capital price of building, we must always be capable of try this to permit them to repay the capital price related to placing within the emissions-abatement expertise.”

Federal Pure Sources Minister Jonathan Wilkinson mentioned lately the 2 ranges of presidency have been speaking about CCUS at a joint working group. Ottawa is working to make sure the general monetary package deal from the 2 governments is “thoughtfully built-in,” he mentioned in an interview.

“On the finish of the day, we wish to incent deployment, however we don’t wish to overpay. On the finish of the day, corporations need to be invested on this, too.”

Officers with the Pathways Alliance declined Tuesday to touch upon the state of discussions with governments.

Earlier this month, Pathways Alliance president Kendall Dilling referred to as the premier’s feedback of getting its incentive package deal prepared for the COP28 convention “incredible” information.

“We’re inspired at this level by the conversations with all these key events,” he mentioned.

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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