Kenney would ‘sweeten the pot’ for petchem, keep large emitter carbon tax

Alberta UCP leader Jason Kenney and federal Conservative Party leader Andrew Scheer address a rally in Calgary on April 11, 2019. Image: Jason Kenney/Twitter

United Conservative Party leader Jason Kenney has been clear that his first priority if elected Premier of Alberta on Tuesday will be to repeal the province’s economy-wide carbon tax, arguing that it is not "making a measurable impact" on reducing emissions, and punishing Albertans.

However, he would keep in place the levy on large industrial emitters that was introduced in 2007 by Progressive Conservative Premier Ed Stelmach.

Originally, the tax for facilities that emit more than 100,000 tonnes of CO2 equivalent per year was $15/tonne. Premier Rachel Notley increased it to $20/tonne starting Jan. 1, 2017, and again to $30/tonne effective Jan. 1, 2018.

Kenny would reduce the levy back down to $20/tonne, according to the UCP platform.

“We obviously have to do our part to reduce greenhouse gas emissions,” he told reporters with the Daily Oil Bulletin and on Thursday.

“We do have to show continued leadership, and we think the best way to do so is a levy on major industrial emitters that is sensitive to carbon intensity [and} incentivizes investment in technology that reduces CO2 output. That is the premise of our TIER program.”

TIER stands for Technology Innovation and Emissions Reduction fund. This which would replace Notley’s Climate Competitiveness Incentive Regulation, which came into force Jan. 1, 2018.

Kenney calls TIER “kind of a mid-way house” between Stelmach’s regulations and Notley’s CCIR.

“It would continue to provide a revenue stream for a government tech fund that will invest in research and development to reduce carbon intensity and output,” Kenney said.

This is currently the role of Emissions Reduction Alberta, formerly known as the Climate Change and Emissions Management Corporation.

Incentives for petrochemical projects

Kenney said that if elected, the UCP would look to expand the incentive programs put in place by Notley, in order to make Alberta petrochemicals more competitive with other jurisdictions.

Notley’s government has made $2.6 billion in royalty credits available to support petrochemical facility and infrastructure projects through two rounds of the Petrochemicals Diversification Program and one round of the Petrochemicals Feedstock Infrastructure Program.

The province has awarded $630 million to four petrochemical projects, and two of these projects are now under construction.

Kenney said he thinks Notley’s government has “exaggerated considerably” the impact of the PDP program.

“I think the projects likely would have proceeded without the PDP on a strictly commercial basis because the royalty tax credits are relatively modest in the context of these multi-billion dollar capital investments,” he said.

“I don’t think that these things have been the deal maker, but I do understand that in addition to [Alberta’s] cheap gas feedstock, which is a significant competitive advantage in attracting petrochemical projects, that we do have to compete with jurisdictions like Louisiana and Texas that offer all sorts of incentives including property tax holidays, corporate tax breaks, etc.

“That’s why on balance we are open to an extension of the PDP program, but we think we could really sweeten the pot to incentivize more capital investment in petrochemicals by amending the municipal government act to allow municipalities to offer the same kind of property tax holidays that our American friends do. It’s also why we would amend the MGA to allow for pre-approved industrial zones to allow a company to basically plug and play and have much greater certainty about faster regulatory approvals on building plants like that.”

Kenney said it's also critically important to speed up the Alberta Energy Regulator review process.

“The methane plant in Grande Prairie, the president of the company tells me that he would have proceeded with an additional $1 billion component on his plant but it would have taken an estimated three years to get a green light from the AER. If we can get the AER moving at the speed of business, allow local municipalities to provide property tax incentives and create plug-and-play pre-approved industrial zones that include for example, Aboriginal support, those things in addition to the royalty tax credit I think would really put us on an equal footing with competing U.S. jurisdictions.”

Kenney is not so keen, however, on incentivizing investment in bitumen upgrading and refining. Under Notley, in February 2018 the provincial government created the Bitumen Partial Upgrading Program, which made $1 billion available in loan guarantees and grants to support commercialization of this process. It also issued a Request for Expressions of Interest for a new heavy oil refinery in December 2018; the call for submissions closed in February 2019.

This January, Notley announced her government’s intent to award a $440 million loan guarantee to Value Creation Inc. for its proposed bitumen partial upgrader. A final agreement was not reached before the election call in March. Value Creation CEO Columba Yeung recently told the DOB that he expects the next government to complete the agreement, no matter which party takes office. This may not happen if Kenney becomes premier.

“I am openly skeptical about the proposed $440 million loan guarantee for the Value Creation upgrader. That company has had very serious financial problems in the past, and contrary to the premier’s claim that it’s under construction, there have not been shovels in the ground on that site for a decade. So we will be taking a very close look at this,” Kenney said.

“We’d all love to see more major upgraders or refineries in Alberta, but it really does have to happen on a commercial basis. I will not be risking tens of billions of tax dollars to do things that the private sector is not prepared to take onboard itself.

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