Alberta announces $500M royalty credit program to build petrochemical plants

The province wants to develop Alberta’s petrochemical industry through a $500M royalty credit program that would encourage companies to build new methane and propane processing plants.
Minister of Economic Development, Deron Bilous announced the new incentive program on Monday.

Alberta's minister of economic development and trade says he's confident the provincial government can help put thousands of Albertans back to work. 

Deron Bilous announced a plan Monday he hopes will convince corporations to build petrochemical plants in the province, a plan the government says has the potential to entice up to $5 billion in new investment.

"This is tremendous for Alberta," Bilous told a crowd of millwright students, media and industry professionals gathered at NAIT. "These facilities will turn our raw energy resources into value-added materials for products and other consumer goods that are in high demand around the world. A first in Canada."

The raw energy he's talking about is methane and propane gas. Only one plant in Alberta currently converts methane to methanol, which has many uses, including as anti-freeze.

Propane gas is mainly shipped out of province to be processed elsewhere. Plants in Alberta could transform the gas into polypropylene, which is used to make all kinds of consumer goods.

"Instead of shipping our raw resources and the jobs that go with it out of province to places like Texas and Louisiana, we are adding value to them here at home and creating a wide array of value-added products," Bilous said. "Everything from detergents, fertilizer, anti-freeze, textiles, and plastics for consumer goods, plastics used to make your cellphone, the dashboard for your car, and toys.

"Most importantly, this program will help create thousands of new, high-paying jobs for Alberta workers."

3,000 jobs for each new plant

The government says construction of such facilities could create up to 3,000 new jobs for each plant, including 1,000 full-time jobs once the plants are operational. 

The government plans to develop Alberta's petrochemical industry through a $500-million royalty credit program intended to encourage companies to build new processing plants. 

The funding won't be used as start up money, but instead would be paid out when the plants are up and running.

I think this puts us on the radar screen, it puts us into the mix.- David Podruzn

Edmonton city councillor Ed Gibbons, who is also vice-chair for Alberta's industrial heartland association, said foreign companies are interested, and the government's incentive program will encourage investment.

He said at least one plant is already being built in Redwater, and there's room for more.

"There's 4,000 people on site at the Redwater plant, this plant can be up to 1,400 construction workers as it's going up, and at the end of the project it can be anywhere from 300 to 400 people employed," said Gibbons.

Alberta has vast supplies of methane and propane. But it costs 30 to 40 per cent more to build processing plants in the province than it does on the U.S. Gulf Coast, where $100-billion in current projects are either proposed or under construction.

"I think this puts us on the radar screen, it puts us into the mix," said David Podruzny, vice-president of business and economics for the Chemistry Industry Association of Canada. He said the timing of the announcement couldn't be better.

"This is a welcome initiative to try and diversify the Alberta economy, because it's going to enhance an opportunity for more investment in the sector," said Podruzny.

"The program is going to improve the attractiveness of Alberta in attracting some of the world-scale investment projects that are already going to come somewhere in North America, and now it puts Alberta in the running for some of these investments." 

$500 million in royalty credits available over the 10-year program

The Petrochemicals Diversification Program aims to encourage construction of such processing plants by awarding royalty credits to companies, which in turn can be sold or traded to natural gas producers.

The government will make $500 million in royalty credits available over the 10-year program. Only new facilities will be eligible for the program.

The province estimates that two or three new plants could be built under the plan.

Companies will have to apply for the program through a competitive process. Applications will open on Feb. 4 and will be approved by early April.

Bilous said he is confident shovels could be in the ground later this year.