By Collin Gallant on May 17, 2018.
A decision by Methanex to advance an expansion project in Louisiana ahead of twinning its Medicine Hat plant was bandied about the Alberta Legislature on Tuesday as MLAs debated new supports to bring industrial investment to the province.
Cypress-Medicine Hat MLA Drew Barnes cited the company’s decision while criticizing the New Democrat’s economic record, while government ministers responded that the United Conservative Party finance critic has “no credibility” on the issue.
The matter arose as the UCP sought to amend Bills 2 and 30. Those would create a second round of $500 million in royalty credits for petrochemical diversification projects and another $500 million to encourage supply network development.
The change, proposed by UCP deputy party leader Leela Aheer, would include revoking the Alberta carbon levy as step one of the economic diversification program.
Barnes argued ending the levy would boost investor confidence, essentially making other measures in the bill moot.
“Repealing the carbon tax would do more to stimulate economic development in the economy than this picking winners and losers,” he said during the debate, according to Hansard. He added that debt and income tax levels are scaring away investment.
“If this government and this finance minister would have the strength to get these things in order rather than kick the can down the road… absolutely Bill 2 would not be necessary.”
In response, Advanced Education Minister Marlin Schmidt stated Barnes “has no credibility on the issue of taxes, just like he has no credibility on the issue of climate change.”
Later he stated, “I wish the members opposite would stop selling this snake oil that our tax rates are driving investment out of Alberta… We maintain overall the lowest taxed jurisdiction in the country. We’re competitive with everywhere in North America.”
The Medicine Hat News was the first to report on April 27 that the company had purchased land next to its Louisiana plant site and could decide to build there in mid-2019.
At the same time, company CEO John Floren said a 2013 proposal to expand in Alberta was still possible, and perhaps likely, if costs on the U.S. Gulf Coast could be defrayed.
Barnes said Methanex, “… like so many others, have voted with their feet.”
Schmidt stated that Methanex hasn’t cancelled plans to expand in Medicine Hat, and later tabled copies of the News articles to support the claim.
The programs in Bill 2 were announced in early April as a way to combat tax subsidies offered in some American states and draw investment to Alberta.
It would give Energy Minister Margaret McQuaig-Boyd the authority to repeat the $500 million petrochemical program that was held in 2015.
At that time Methanex was one of a dozen companies that applied for funds that were awarded to two Edmonton area propylene facilities that are now being built.
Calgary area UCP member Richard Gottfried called the measures in the new program “a Band-Aid to a critical injury of bad fundamental economics.”
Methanex itself has said that it supports the diversification grant and that the major hurdle for Medicine Hat’s project is shipping costs to the west coast for export.
Floren did add, however, during an April 26 call with investment houses, that “capacity expansions are happening in the United States for obvious reasons,” referring to new lower U.S. federal income tax rates, and some uncertainty about Canadian carbon tax rates.
In Alberta, petrochemical and electric generation plants are exempt from paying carbon levy on gas used as fuel stock in processing. They do pay into a decade-old system for major emitters that was updated this year.
Methanex has said the price of bulk of natural gas in Alberta provides a price advantage over the U.S. Gulf coast equal to about US$50 million per year on typical operations.
A tax exemption from Louisiana Economic Development would be about US$16 million per year for five years on the proposed US$1.3 billion plant, according to reports.
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