City welcomes federal carbon capture strategy

By COLLIN GALLANT on April 8, 2022.

cgallant@medicinehatnews.com@CollinGallant

A new tax credit for capturing and storing carbon dioxide will put wind in the sails of a City of Medicine Hat-led effort to create a sequestration hub in southeast Alberta, city officials said Thursday.

The 2022-23 federal budget will provide $2.6 billion for companies to claim as tax credits for upgrading equipment and employing technology to sequester carbon dioxide emissions.

The city does not pay taxes but its private sector partners in the hub concept do.

Under the plan, they could offset half the costs of upgrades via the tax breaks, as could companies that might make deliveries to facilities which the province has said must operate on an open-access basis.

“It’s a huge step forward and what we’ve been waiting for,” said Eric Van Enk, head of the city’s Invest Medicine Hat.

“We had been expecting (a tax credit announcement) but didn’t know the number. I think 50 per cent will be viewed very positively by industry, based on the discussions we’ve had.”

Oil and gas producers had lobbied for up to a 75 per cent tax credit, and the region’s MP Glen Motz had called on federal liberal government to support the city’s project specifically, and the energy sector in general, with a tax credit system.

Motz was expected to comment on the budget Friday.

The local effort to create a CCUS hub was announced last summer as an offshoot of the city’s hydrogen production hub study, as an add-on benefit for potential hydrogen production from natural gas feedstock.

It would also lower the carbon compliance costs at the city’s natural gas-fired power plants since emissions form the basis of of the Alberta government’s large-industry carbon charge, known as the TIER program.

Local hydrogen study partners include Methanex, CF Industries and Rockpoint Gas Storage (which operates the AECO natural gas hub near Suffield) among others.

Late last month the province awarded evaluation drilling permits to six proposals focused on the Industrial Heartland heavy industry cluster near Edmonton. That will allow them to study the pore space in the deeper geology to determine storage potential.

The next step in the process is in early May when the province will begin evaluating pore space applications for the remainder of the province.

Van Enk expects a large number of applications, including the potential for others in the region.

The city is also awaiting approval of a grant from Natural Resources Canada to fund hub-related studies, as well as news about potential grants offered by Emissions Reductions Alberta for gathering systems at industrial sites.

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