Alberta trims funding for petrochemical projects
Some of NDP’s diversification programs cited as placing ‘undue risk’ to province
CALGARY Ahead of what is expected to be an austerity budget, the Alberta government said Wednesday it is cancelling diversification programs that relied on grants and loan guarantees to attract petrochemical projects.
Alberta Energy Minister Sonya Savage and Associate Natural Gas Minister Dale Nally announced the provincial government under the UCP government would discontinue the Partial Upgrading Program and the Petrochemical Feedstock Infrastructure Program established by the former NDP government under Rachel Notley to fund new midstream processing facilities in the province.
“These programs relied on grants and loan guarantees that carried a higher financial risk to our province and ultimately to Albertans,” Savage said of the decision to cancel the programs, adding the government “wanted to make sure we do not place undue risk on Albertans.”
At the same time, the ministers said they would continue with petrochemical funding programs that used royalty credits, which carried a lower financial risk. The UCP government under Premier Jason Kenney will reveal its 2020 budget on Thursday evening, which is widely expected to include measures to reduce spending as the province looks to reduce its deficits.
The Financial Post had previously reported that Suncor Energy Inc., Husky Energy Inc. MEG Energy Corp., Fractal Systems Inc., Greenfire Oil and Gas Ltd. and Value Creation Inc. were among the firms that applied for funding for partial upgraders in the province.
Partial upgrading is a technological process still under development that removes some of the heavy components in bitumen so the oilsands product could flow through a pipeline without the need for costly blending agents.
In January of this year, the Alberta government under Notley signed a letter of intent to provide $440 million in loan guarantees to Value Creation, a move which was sharply criticized by Kenney on the campaign trail this past spring. It was the only funding announcement related to the Partial Upgrading Program.
Value Creation did not respond to a request for comment on its next move now that the $440 million in funding for its project had been discontinued by the new government.
Savage and Nally also announced that the government will continue the Petrochemical Diversification Program (PDP), a related initiative that will offer $950 million in yetto-be awarded royalty credits to companies building facilities that turn gas byproducts into plastics.
“Ethane, methane and propane is what we’re looking at,” said Nally, who added there are nine applications for projects currently being considered.
The first round of the NDP’s petrochemical program resulted in $200 million in credits for Inter Pipeline Ltd. and $300 million for Pembina Pipeline Ltd., both of which are building multi-billion dollar projects in central Alberta to turn propane into polypropylene plastic.
“This (credits) program has demonstrated success in developing projects in a financially responsible way with private industry taking the lead,” said Savage on a conference call.