Alberta announces new 10-year program to attract petrochemical projects

Alberta announced a 10-year grant program on Thursday the government hopes will attract multi-billion dollar petrochemical investments.

The Alberta Petrochemicals Incentive Program, launching this fall, will invest in major petrochemical manufacturing projects in the province.Government funding will be provided to every project that applies and meets the criteria once they'reoperational, said Dale Nally, Alberta's Associate Minister of Natural Gas and Electricity.

Nally said a private evaluation program won't be used to select projects, and the program will be open year-round for the next decade with no intermittent application deadlines.

"Our government is no longer committed to picking winners and losers," Nally said. "We're going to let the market do that.

"We're going to stop asking industry to revolve around government schedule. We're going to revolve around theirs."

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Instead of royalty credits, the program will offer grants, which Nally said is a more effective way to encourage investment, since it lets companies better account for the full value of incentive offered.

Nally said there will be significant opportunities to grow the province's petrochemical sector by more than $30 billion by 2030, a figure he said is based on historical development in the sector and industry partner forecasts.

According to the Chemistry Industry Association of Canada, Alberta's chemicals sector, comprised predominantly of petrochemicals, was valued at $12.1 billion and employed about 58,400 people directly and indirectly in 2019.

The province will monitor and assess the program throughout the next decade, and said there will be no cap on how much funding it will provide to investors. Nally said it's possible an annual cap will be implemented, but that hasn't been decided.

Nally acknowledged that too many new projects could risk overheating the sector, but the government's ongoing assessment of the program will watch for that.

"That's always the risk, so that's why we committed to monitoring it throughout the 10 years," he said. "We don't have any hard caps in place. But if we have to look at an annual cap, that's something that we'll do."

Alberta Opposition leader Rachel Notleycalled the programhalf-bakedon Thursday. The Alberta NDP leader criticized the government for not specifying how much it willspend on the program, arguing it creates too much risk for the public.

"They can't even tell Albertans how much it will cost, and yet somehow they can claim to know how much investment their program will bring into the province and how many jobs it will create," Notley said.

"Their inability to provide us with information is jaw-dropping."

Alberta is already one of the country's largest hubs for petrochemical manufacturing, and the province expects global demand to increase further, a demand the government hopes the program will capitalize on.

The program will run alongside the province's Petrochemicals Diversification Program, not replace it, Nally said. The PDP offers royalty credits to companies in exchange for building facilities that turn ethane, methane or propane feedstocks into products such as plastics and fabrics.

During an economic downturn with high unemployment, University of Calgary economist Kent Fellows said it makes sense the government would tend toward spending more right now to get people back to work.

He said many economists, including himself, often argue against corporate welfare and subsidies, but that incurring debt now for more growth later isn't a bad strategy. Fellows also noted there are plenty of resources in Alberta to capitalize on recent growth in the petrochemical sector.

But Fellows said he was disappointed the province didn't explain why an incentive program is needed to bring projects to Alberta in the first place.

"The onus should be generally on the province to articulate that market failure and explain why we need apetrochemical incentive program to bring investment here, why it's not coming on its own," Fellows said.

Sara Hastings-Simon, a senior researcher at the Payne Institute at the Colorado School of Mines and a University of Calgary research fellow, said she was surprised at Nally's comments that the province wouldn't be picking winners and losers,instead leaving it up to the market. Hastings-Simon said having the program at allis a form of picking.

"You've identified this sector and said this is where we should provide support and that should grow," Hastings-Simon.

"And then to quibble about the details of whether or not you're picking one project over another, as long as you have criteria, that is of course a form of picking."

Hastings-Simon said it's possible to do these kinds of incentive programs well and poorly, but it's problematic not to acknowledge the government's role in shaping markets and creating industries. If that's ignored, Hastings-Simon said, those decisions could be made in a way that isn't transparent and doesn't bring in a full perspective.

With files from Ariel Fournier