BRIK winning wide support

Politicians like bitumen royalty deal

EDMONTON — Once considered controversial for its potential to impact the free marketplace, Alberta’s bitumen royalty-in-kind (BRIK) program has won the support of politicians from all provincial parties.

And with construction of the Redwater bitumen refinery underway, an all-party committee has issued a report stating it wants to see more such projects, particularly those with carbon capture and storage components.

The standing committee on Alberta’s economic future on Monday released its recommendations for more BRIK program-supported projects “without delay in an ongoing effort to sustain and enhance the diversification” of the province’s petroleum industry.

The committee also wants regulations streamlined to provide investors with “as much certainty and reliability as possible,” and for the government to immediately proceed with additional BRIK programs so new plants can be built as quickly as possible “to provide value-added petroleum products to compete with competitors from other jurisdictions.”

Wild Rose Leader Danielle Smith said the BRIK program is a good idea to stimulate upgrading so long as it makes market sense.

“We just want to make sure the taxpayers aren’t left holding the bag in the event that the prices don’t turn out the way they expected or the investments don’t turn out the way expected …,” Smith said.

In a minority report, Liberal MLA Kent Hehr agreed with the recommendations and said “a balanced and targeted approach to government involvement in bitumen upgrading and potentially elsewhere in the energy sector offers the best way for Alberta to reach its full economic potential.” He added that if proof is required as to why the province should re-enter the energy marketplace — after selling its last shares in the Alberta Energy Company over two decades ago — “we need look no further than the 14 state-owned or governmentbacked, multinational oil companies that are already active in Alberta.”

The New Democrat caucus agrees with the report’s recommendations, although leader Brian Mason told the Herald he doesn’t believe BRIK — which he described as “a bridge program to a more comprehensive approach” — is the best way to expand bitumen upgrading in the province.

“Certainly we could put in place tax and royalty incentives and penalties that would make it more economic to upgrade here without having to use our royalty money to subsidize it,” Mason said.

Alberta Plus, a group of municipal government and industry representatives, has been actively promoting more development of value-added energy products in the province, and was pleased with the report.

“This type of policy initiative supports securing our energy value by increasing revenue, while demonstrating clean energy technology and products to global customers,” said Linda Osinchuk, chair of Alberta’s Industrial Heartland Association and mayor of Strathcona County.

Ian MacGregor, chair of North West Upgrading, said the BRIK program was vital.

“The first phase of the BRIK program has allowed us to start building the first refinery in the world that incorporates carbon dioxide management. The products our refinery produces will be the world’s lowest in terms of CO2 content, they will also be the most valuable, being roughly two-and-a half times the value of the bitumen that is our feedstock,” said MacGregor.

“All of this additional value stays in Canada.”

Under BRIK, the province can collect bitumen royalties “in kind” as raw bitumen rather than cash from sales into the market.

This allows the province to direct its bitumen to specific projects and earn a higher return. Energy Minister Ken Hughes said money committed to help launch the Northwest upgrader project is a “small percentage” of what’s available and that the province is “open to all reasonable, economic projects” from industry.

“So we could actually be doing a lot more if there were other proposals out there that came to us,” Hughes said.

The province is obliged to respond to the committee report within 150 days.

A recent economic study by Alberta Plus examined recent announcements of the refining and petrochemical industry such as the North West Redwater Partnership’s $5.7 billion bitumen refinery, Nova Chemical’s $1 billion expansion as well as other announced and potential projects.

We just want to make sure the taxpayers aren’t left holding the bag. DANIELLE SMITH