Mixed reaction for energy diversity plan

By Collin Gallant on March 10, 2018.

cgallant@medicinehatnews.com @CollinGallant

A provincial plan to attract new investment in the petrochemical sector is earning mixed reaction in Medicine Hat.

One local economic observer tells the News if Alberta wants new investment it should consider matching grants and tax breaks given by other governments.

On the other hand, the region’s opposition MLA states government interfering in the marketplace usually has unintended consequences.

“If they hadn’t destroyed the investment environment in this province, these types of programs wouldn’t be necessary,” claims Cypress-Medicine Hat MLA Drew Barnes, the finance critic for the United Conservative Party.

“We’d be further ahead if they would get spending in line and lower taxes for the benefit of all Albertans.”

This week the New Democratic government tabled Bill 1, which gives the authority for the energy ministry to create three programs to “diversify the energy sector” and attract more value added industry to the province.

Medicine Hat is outlined as a potential petrochemical hub in a report that says measures should be taken to account for generally higher construction costs in Alberta. Levelling costs in other ways could bring jobs to the province and benefit upstream petroleum producers with another local marketplace.

Up to $1 billion, mostly for loan guarantees, would go to ward increasing initial bitumen refining capacity.

Two other programs would help develop a feedstock supply chain for components such as ethane from liquid natural gas exports, and likely pay for a second round of petrochemical refining initiatives.

That program, first offered in 2016, was of particular interest to local producer Methanex, which entered its proposed plant twinning into the process.

Invest Medicine Hat GM Ryan Jackson told the News on Friday his group presented its opinions when the government appointed Energy Diversity Advisory Committee that unless perks in other jurisdictions were met, Alberta could expect to keep losing out on new plant construction.

He said the recommendations this week are encouraging.

“It’s always good to have some inducement for business expansion and they (the government) seem to have found something that resonates with industry,” said Jackson.

“No pun intended but they’re going back to the well.”

Methanex and several industry groups have released statements in support of the program goals.

In 2016 the province awarded a total of $500 million in royalty credits to two proposed plastics plants.

The credits can be swapped with upstream petroleum producers to reduce supply costs, which can lower payback period on capital investment.

“To a big degree (construction) costs got out of whack because government got involved,” said Barnes, referring to the previous government’s royalty breaks on oilsands facilities that were related to capacity and drove rapid expansion. “When governments interfere it drives private invest out and doesn’t work in the long term.”

Energy Minister Margaret McCuaig-Boyd told a press conference on Thursday before introducing the bill that the report denotes four areas, including Medicine Hat, Grand Prairie, Joffre (near Red Deer), and the so-called industrial Heartland surrounding Edmonton, as petrochemical hubs.

They deserve some attention in infrastructure planning, the report states, but grants themselves will depend on private sector proposals, said McCuaig-Boyd.

“The process will be competitive,” she said, adding that full details will be available this spring.