Alberta petro projects gain $500M in royalty credits

‘Expensive way’ to create jobs

CALGARY • Alberta’s government will hand out $500 million worth of royalty credits to two pipeline companies planning to build propane-to-plastics plants in Alberta.

But one economist warned the credits are an expensive way to create jobs.

The province’s Energy Minister Marg McCuaigBoyd and Economic Development Minister Deron Bilous announced the subsidies for two petrochemical plants aimed at diversifying the province’s energy industry and encouraging the construction of more downstream projects.

“We want to keep jobs and value here in Alberta,” McCuaig-Boyd said Monday at a press conference in Edmonton.

The government will give Calgary-based Pembina Pipeline Corp. and its Kuwait-based partner Petrochemical Industries Co. $300 million in credits to build a facility by 2021 that will turn propane into propylene and then into polypropylene, which is used to make plastic items like cups, at a cost of $3.8 billion to $4.2 billion.

The province is also giving Inter Pipeline Ltd., also based in Calgary, $200 million to build a $1.85 billion propylene facility that is expected to break ground next year.

The two projects are expected to create 245 direct permanent jobs in Alberta, which will in turn result in an additional 1,225 indirect permanent jobs.

But University of Calgary economics professor Trevor Tombe called the subsidies “a pretty expensive way to create employment.” offering competing subsidies drive down their returns on the projects.

“How we get out of this situation is quite tricky,” he said.

The provincial government, however, said the province had to lure petrochemical project proposals to Alberta from Texas and Louisiana, where existing incentive programs are already in place.

The province “wanted to level the playing field,” adding that “this isn’t a race to the bottom.”

The province received 16 applications from various companies for the subsidies, which Bilous said was more than government officials expected.

“It is our hope that we can build on the interest the program has generated and explore other investment opportunities that will create lasting jobs and benefit our province for generations to come,” he said.

David Chappell, Inter Pipeline’s senior vice-president of petrochemical development, said the royalty credits “significantly helps in building these plants” in a joint press conference with Bilous and McCuaigBoyd.

“It forces companies to advance these projects,” he said.