NEWS FILE PHOTO
Cypress-Medicine Hat UCP MLA Drew Barnes speaks to supporters during the April 16 election. Barnes' UCP government announced last week it would follow through with a $1.1-billion program set up by the previous government to spur petrochemical investment. Barnes believes several business advantages work in favour of this region.
cgallant@medicinehatnews.com@CollinGallant
The petrochemical industry is encouraged that Alberta will continue with programs to entice companies to build more plants, but it is still unclear how much investment could come to the southeast corner.
Last week, the United Conservative government announced it would follow through with a $1.1-billion program set out by the previous government to defray initial operating costs and compete with outright tax breaks in several American states.
Hatters view the program as a way to diversify the local economy, spur construction and bring stable jobs.
Support for the Petrochemical Diversification Program, which was telegraphed in the UCP’s election platform, was largely expected, though two adjacent programs, including $1 billion toward building upgrading capacity, were cut.
Both Energy Minister Sonya Savage and Associate Minister of Natural Resources Dale Nally called the program valuable.
“We’re acting on the Natural Gas Advisory Panel’s recommendation to encourage petrochemical development,” said Nally. “I’m confident this program will further restore Alberta’s reputation with investors as a good place to do business.”
It builds on work laid by the previous government, when an initial $500 million in royalty credits led to two major plants, valued at $9 billion, breaking ground near Edmonton.
The original economic diversification report in 2017 proposed Medicine Hat as one of several centres in the province that could become “hubs” of petrochemical production, but to this point the city appears to be falling behind areas in northern Alberta for big investments.
The current round announced in late 2018 offers $1.1 billion in credits – of which $950 million in still available while the government evaluates nine qualified applications.
Specifics in the proposals are not being revealed, but it’s not believed any are located in the area.
Medicine Hat-based Methanex unsuccessfully applied in round one for consideration of a proposed twinning of the local plant, but has since green-lighted expansion of its Louisiana plant site. It did not apply in round two of Alberta’s current program.
Cypress-Medicine Hat MLA Drew Barnes stopped short of saying the program should make special consideration for the southeast, but said if it is applied fairly, the region can compete due to several business advantages.
“Programs … need to be applied fairly for all parts of Alberta,” he wrote to the News on Monday. “One of the decision points needs to be the fact areas, like Southeast Alberta, has higher unemployment, lower incomes and great workers and companies that could enhance Albertans quality of life.”
As well, Barnes pointed to a general corporate tax rate cut that brings the local rates in line with U.S. rates that dropped with federal rates two years ago.
Medicine Hat has two large plants and a niche refining industry, but is starting well back of other centres.
The Industrial Heartland complex, comprising 40 major companies with large facilities near Fort Saskatchewan, actively promotes the benefits of “cluster development.” Joffre, north of Red Deer, is home to Nova Chemicals complex and Grande Prairie at the centre of major liquid natural gas fields with more and more production coming on line.
Greg Moffatt of the Chemistry Industry Association of Canada said renewed support for the program will lead to investments, and anywhere Alberta has advantages of low-cost feedstock and is closer to export markets in Asia than the Gulf of Mexico.
“At the end of the day, companies decide where they want to make investments,” said Moffat.
“There’s potential for that clustering to take place in Medicine Hat and Grande Prairie. The most important thing is that the government addresses the need to level the playing field.”
While last week’s announcement renewed support for the $1.1 billion PDP, it cancelled two adjacent programs worth $1 billion each for partial upgrading and to bring new feedstock delivery systems.
Those programs, each involving $800 million in loan guarantees and $200 million in grants, exposed tax payers to too much risk, according to Savage.
Last week the Canadian Taxpayers Federation renewed calls for the complete cancellation of the programs as a way to cut “corporate welfare” in the Alberta budget.
