Report touts propane plant tax benefits

Province will be asked to chip in for ‘world-class’ Redwater facility

A new report says Alberta would see more than $1.2 billion in new tax revenue over 20 years if a facility were built in the Industrial Heartland to add value to cheap and plentiful propane.

The report, released Thursday, was prepared by Stantec Consulting Ltd. for the Industrial Heartland Association.

The association will use the report to encourage the NDP government to give financial support to a “world-class” facility that would convert propane into propylene and then into polypropylene for export to Asian markets.

Building such a facility would cost $1.6 billion, the report says.

The idea behind the report is “to help bring clarity to the whole argument” around adding value to propane, Neil Shelly, executive director of the Heartland association, said Thursday.

“If you could get a net return of $65 million a year, what would you be prepared to invest up front to make that happen, to create a long-term source of revenue going into the future?”

A government spokesman didn’t respond to a request for comment. But an official with a company that has proposed building a propane-to-propylene facility in the region said the report’s findings on benefits fit with the company’s own projections.

Propane is extracted from natural gas, which is in abundant supply in Alberta. Propylene is a feedstock gas used in plastics manufacturing. Polypropylene, a polymer of propylene, is used to make products from ropes and food containers to auto parts and toys.

In March 2013, Oklahomabased The Williams Companies, Inc., announced plans to build a $900-million facility near Redwater that would convert propane into polymer-grade propylene to be sold to petrochemical producers on the U.S. Gulf Coast. The facility, which would be built near the company’s existing Redwater fractionation plant, was initially scheduled to go into service in mid-2016.

The in-service date has since been stretched to late 2018 and the company’s board hasn’t made a final investment decision, Lorraine Royer, manager of stakeholder and corporate relations with Williams Energy (Canada), said Thursday.

Land has been purchased, clearing has begun, early design work is complete and environmental approvals are in place, but capital cost estimates are higher than what had been originally projected, she said.

Investors were told in 2014 that capital costs had increased to $1.17 billion.

Williams is weighing the merits of building in Alberta versus on the Gulf Coast, where capital costs would be significantly lower, Royer said.

She said Williams would be interested if the government chose to get involved in the industry.

“We would welcome anything that would help to level the playing field on capital cost between here and the Gulf Coast,” she continued.

Shelly said the Williams facility is the most “shovelready” proposal right now, but two or three other international companies have also shown interest.

The report says adding value in Alberta “provides significant direct and indirect benefits compared to the case of shipping the propane out of the province.”

In addition to the royalties the government would collect whether or not the propane is made into highervalue products, the province would see $1.2 billion in tax revenues over a 20-year life cycle, the report says.

The money would come from corporate taxes — the analysis assumes a 12-percent rate — and from personal income taxes, based on a 10-per-cent provincial tax rate.

The Heartland association says that such projects typically create 1,500 construction jobs at peak, and 150 full-time operational positions.