Written by Kathryn Shaw, Megan Ollivier and Vivek Warrier
On July 9, 2020, the Alberta government announced the Alberta Petrochemicals Incentive Program. As part of Alberta's Recovery Plan, the Program represents a significant effort to enhance the competitiveness of Alberta and attract investment into the province's petrochemical sector. Such investment aims to promote job creation, infrastructure development, and the diversification of Alberta's economy.
The Program is designed to offer enhanced certainty and flexibility to investors. Key features of the Program include:
- Ten-year grant program during which time eligible projects (new or expanded petrochemical facilities) must be built and operational.
- No picking winners and losers: All projects that meet eligibility criteria will receive funding once built and operational.
- Amount of funding will vary by facility, calculated in accordance with the overall value of the project.
- Funding provided throughout project's duration to better align with typical investment cycles.
- Any projects operational within ten years from the Program's launch date are eligible.
To date, the government has not provided specifics on how much money has been earmarked for the Program. The Associate Minister of Natural Gas and Electricity, Dale Nally, noted that if the market becomes oversaturated, the province will consider annual caps on grants; however, at launch, no hard cap will be in place.
Further details are under development, and the government will work with industry to finalize guidelines, eligibility, application process, and reporting requirements. The Program is expected to launch in Q3 of 2020. Importantly, the Program will work in conjunction with, not supersede, Alberta's Petrochemicals Diversification Program, which offers royalty credits to companies in exchange for building facilities that turn ethane, methane or propane feedstocks into products such as plastics and fabrics.
The COVID-19 pandemic has highlighted the importance of petrochemicals, which are required to manufacture essential products such as medical equipment, computers, and personal protective equipment. Notwithstanding the current crisis, petrochemicals are required to produce everyday items such as car tires, packaging, fertilizer and detergents.
Alberta is well positioned to take advantage of the demand for petrochemicals, due to its long-term supply of natural gas, skilled workforce, and existing energy and research sectors. One of the overarching goals of the Program is to create an opportunity upon which Alberta becomes a global destination for petrochemical manufacturing. Alberta’s Industrial Heartland Association estimates there could be a further $30 billion of private-sector investment in the province’s petrochemical sector by 2030.
Bennett Jones' Oil and Gas group will be continuously monitoring updates as they become available. If you or your clients have questions, or need help submitting a project for funding, please contact any of our Oil and Gas lawyers in Calgary. Please visit our COVID-19 Resource Centre for other material related to Alberta's Recovery Plan and COVID-19.