Varcoe: Alberta, Ottawa continue ‘game of chicken’ on carbon capture

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The provincial finances didn’t embody any shiny new incentive packages for an enormous carbon seize and storage challenge deliberate in Alberta’s oil sands.

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However the door will not be closed to assist, says Alberta’s finance minister.

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Leaders in Canada’s oil patch warned this week that the nation is falling behind the US Inflation Discount Act (IRA) by providing monetary help to begin a wide range of low-carbon developments, together with carbon seize initiatives.

Calgary-based Parkland Corp. on Thursday deserted a $600 million renewable diesel growth in British Columbia, citing partly the function of U.S. incentives to favor U.S. producers.

As strain mounts on federal and provincial governments to extend help for degassing companies, Finance Minister Travis Toews known as on Ottawa to step up its personal help for carbon seize developments whereas Alberta critiques its current help.

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“We’re clearly very supportive of carbon seize and storage,” Toews stated in an interview.

“We aren’t closing the door. In actual fact, within the finances we famous that we’re dedicated to working with the business to know what extra could also be wanted.”

The federal and provincial governments have lobbed a sequence of verbal grenades at one another over the previous yr over help for carbon seize, use and storage (CCUS) initiatives proposed in Alberta.

So far, most stay within the planning levels.

This features a $16.5 billion growth supplied by the Pathways Alliance, a bunch of six main oil sands producers.

The businesses, together with Canadian Pure Assets and Suncor Power, plan to construct a 400-kilometre CO2 pipeline to initially join 14 oil sands services to an underground storage hub close to Chilly Lake.

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Canadian Pure Assets president Tim McKay advised analysts on Thursday that there have been “no exhibits” with the challenge to this point. Nevertheless, Canada is behind the US within the race to draw such investments.

“With the Inflation Discount Act, they moved forward of Canada. And a part of that’s you must have a aggressive monetary construction right here in Canada that competes in opposition to different jurisdictions.”

In an interview, McKay stated there’s “nothing” financially within the provincial finances to assist the Pathways challenge, however he urged the province to “take a look at the larger image.”

“Hopefully there might be extra encouragement from the federal authorities,” he stated.

His feedback echo these of Enbridge CEO Greg Ebel, who advised reporters this week that the US has put a whole lot of carrots on the desk to draw funding.

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In final spring’s federal finances, the Trudeau authorities launched a brand new funding tax credit score that may cowl as much as 50 % of CCUS challenge spending.

In August, the Biden administration elevated an current US tax credit score for carbon sequestration initiatives to $85 for each tonne of CO2 sequestered, from $50, eclipsing Canada’s provide.

Lobbying is rising for each Alberta and Ottawa to return off the sidelines, and all eyes might be on the upcoming federal finances.

In January, Prime Minister Justin Trudeau known as on Alberta to advertise extra incentives for carbon sequestration.

Final month, Premier Danielle Smith wrote a letter to the premier saying the province is prepared to take a coordinated method to an incentive program with Ottawa, increasing the Alberta Petrochemicals Incentive Program to incorporate CCUS initiatives.

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At an occasion this week, Calgary Chamber of Commerce CEO Deborah Yedlin in contrast the federal-provincial debate to “a sport of hen.”

At what level will the argument finish?

Parkland stated it will not proceed with a plan introduced final Might to construct a stand-alone renewable diesel advanced at its refinery in Burnaby right now.

CEO Bob Espey advised analysts on Friday that a number of components had affected the challenge’s competitiveness, together with rising prices, an absence of market certainty about rising fuels and the IRA.

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“I might say the largest change in our enterprise within the renewable area was the IRA,” he stated.

Within the provincial finances, the Alberta Know-how Innovation and Emissions Discount (TIER) fund, which collects income from main industrial emitters, is allocating $77 million within the new yr to future carbon seize initiatives.

Funding of $246 million over three years for the province’s carbon seize and storage initiative can also be earmarked to help developments together with the present Alberta Carbon Trunk Line and Quest challenge.

Toews famous the federal government is working to know the worth of the “implicit help” of compensations accessible by way of the province’s royalty system to grease sands operators for investments made in CCUS initiatives.

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Former Prime Minister Jason Kenney typically known as it a “billion-dollar contribution.”

“That work is essential as a result of I imagine it’ll present that Albertans have an enormous stake and are making a big contribution,” Toews added.

“We’re definitely prepared, after the work is completed, to have a look at filling any gaps.”

Offering incentives to the oil patch throughout a time of rising earnings will face opposition.

Greenpeace Canada’s Keith Stewart famous that 5 of the most important Canadian-based oil sands firms posted greater than $34 billion in earnings final yr.

Since 2009, Canadian oil sands manufacturing has greater than doubled and emissions per barrel have fallen 21 %, however whole emissions have elevated by 29 megatonnes, in response to a report final yr by S&P Commodity Insights.

Carbon seize initiatives are a “top-tier know-how” for oil sands producers to realize net-zero emissions by 2050, stated Kevin Birn, an S&P vice chairman.

“We see incentives for CCUS in virtually each nook of the world. So the idea will not be distinctive to Canada,” stated Birn.

“Decarbonisation goes to take initiatives and it’ll take cash. It is going to take traders who’re prepared to place cash in and use it to generate earnings.”

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com