Canadian chemistry industry seeks government action to support chemical investment

The Chemistry Industry Association of Canada, which lists about 60 members just in its Plastics Division and includes the top petrochemical producers in the country, has requested the government of Canada to enact legislation, specifically in relation to Investment Tax Credits, to support turning planned petrochemical investment into reality.

A recently completed PDH propylene-polypropylene complex in Alberta. Image courtesy of InterPipeline

“As proposed, Canada’s Investment Tax Credits (ITCs) are broadly commensurate in value with similar measures in the U.S. Inflation Reduction Act (IRA),” said by email in mid-September, Bob Masterson, president and CEO, Chemistry Industry Association of Canada.

“We are concerned, however, that proposed limitations and conditions on coverage and eligibility will significantly discount the true value of the ITCs in comparison to similar measures under the IRA. It’s essential the Government of Canada address these issues and enact the ITCs into law as soon as possible,”  Masterson said.

“Failure to do so will contribute to delays or outright cancellations of the more than $20 billion of petrochemical investments currently proposed for Western Canada,” Masterson added.

Needed investment in Canadian chemical industry

Canada currently has $200-300 billion in chemistry production infrastructure, most of which is several decades old, and much investment is needed, according to the Chemistry Industry 2024 Federal Pre-Budget Submission Brief recently published by the chemical industry .

“As we look to the future, this asset base will need to be re-capitalized with decarbonization in mind and greenfield investment will be required to meet growing global demand for chemistry and plastic products. These transformations will require billions of dollars of investment,” it said.

“Over the past two years, 15 major projects to reduce emissions in the chemistry sector worth over $30 billion have been announced. These projects will lower emissions while increasing output. These announcements are welcome but are only a fraction of what is required and as of today they are only announcements, none have moved,” the Pre-Budget Submission Brief added.

"We must create a competitive regulatory and policy landscape that welcomes private capital. Key features of a competitive landscape include: Long-lived, transparent, and broad-based investment attraction programs, based on Canada’s a-political tax code (…),” added the chemistry industry 2024 Federal Pre Budget Submission Brief submitted to the Standing Committee on Finance in Aug 2023.

The Canadian House of Commons Standing Committe on Finance, according to Parliament of Canada´s website, has a mandate that includes "to consider and report on proposals regarding the budgetary policy of the government." The Committee normally presents its pre-budget report in December.

Canadian chemical industry leads worldwide in safety initiatives

The Pre-Budget Submission is published by CIAC, founders of Responsible Care. Responsible Care is described as “the global chemical industry's voluntary initiative to drive continuous improvement in safe chemicals management and achieve excellence in environmental, health, safety and security performance” by the International Council of Chemical Associations (ICCA).

“The Responsible Care initiative began in Canada in 1984, and today, national chemicals associations in nearly 70 economies around the world manage Responsible Care implementation in their individual countries,” according to the ICCA.

A Long-term investment view

“Facilities take five and often more years to construct. Investment decisions are made on the basis of expected long-term structural demand growth over the forty-plus year lifetime of the proposed assets, not on current market conditions,” Masterson said.

“The global petrochemical industry will continue to expand. We want to get the investment conditions right so that the next wave of petrochemical expansion, and this first wave of low-carbon petrochemical investments come to Canada,” he added.

Current CCUS consultation to serve as model for hydrogen

The current consultation is specific to the CCUS (carbon capture, utilization and storage) ITC (investment tax credits). However, it is expected as a model for the other tax credits, such as hydrogen, according to an industry source.

"The government only has two opportunities for these to enter into force, legislate through the upcoming (late Fall) Fall Economic Statement, or in the annual Budget Implementation Act (due mid-Next Spring)," it added.

"So, if we don’t get this done now, its six more months of uncertainty,” the industry source added.

Some proposed projects

Currently proposed projects include the Dow Pathway to Zero expansion project in Fort Saskatchewan, Alberta, as well as the Shell Polaris carbon capture project at its Scotford, Alberta site.

According to the Shell Canada website, the company is contemplating construction of a large-scale carbon capture and storage (CCS) project at its Scotford chemical and refining complex near Edmonton, Alberta. A Final Investment Decision (FID) had been scheduled for 2023, according to the website.

Another project with an FID in 2023 is Dow Canada´s planned expansion of a polymers complex that would significantly increase the company´s plastic resin production capacity not just regionally but globally while helping reduce the carbon footprint. Dow officials said earlier in 2023 that they are working on partnerships and considering incentives with an FID expected before year's end.

Alberta is home to Canada’s largest petrochemical manufacturing industry.

Petrochemicals make up a C$16 billion industry in Alberta that directly or indirectly employs over 30,000 people, according to the province's Ministry of Natural Gas and Electricity. The region recently saw the completion of construction and start-up of a PDH (propane dehydogenator) propylene and polypropylene complex near Edmonton, Alberta and owned by InterPipeline.

By Renzo Pipoli