Government of Alberta Unveils Further Details Regarding the Alberta Carbon Capture Incentive Program

April 09, 2024

Written By David Macaulay, Shawn Munro, Greg Johnson, Luke Morrison, Jessica Kennedy, Brendan Sigalet and Phillip Hanna

On April 3, 2024, the Alberta Government released additional details on the Alberta Carbon Capture Incentive Program (ACCIP), which will support and accelerate the development of new carbon capture, utilization and storage (CCUS) infrastructure in Alberta. It is now open for industry and carbon sequestration hub operators to apply for ACCIP pre-approval, and the ACCIP rollout now includes more detail around the ACCIP's key features, eligibility criteria, eligible costs and the application process.

Key Features

• Under ACCIP, a 12 percent grant will be provided for new eligible CCUS capital costs. Grants will be paid in three installments over three years, starting after one year of operations. This process is similar to the process used by the Alberta Petrochemical Incentives Program.
• ACCIP will support a variety of sectors, including oil sands, conventional oil and gas production, enhanced oil recovery production, petrochemicals, power generation and manufacturing and cement production.
• ACCIP is being designed to build on the federal CCUS Investment Tax Credit (CCUS Tax Credit), and (as discussed further below) will be finalized after the federal government enacts the CCUS Tax Credit. However, as noted below, it appears that there may be some key differences between ACCIP and the CCUS Tax Credit (e.g., ACCIP may apply where the CCUS Tax Credit does not, and vice versa). Links to our previous blogs providing further background on the CCUS Tax Credit are here: Government of Canada Releases Proposed Legislation for Clean Hydrogen ITC and Clean Manufacturing ITC and Canada's Clean Tech Push & Alberta's Carbon Incentive. Bill C-59, which proposes to implement measures involving the federal CCUS Tax Credit, is currently at the committee stage and is yet to come into force.
• ACCIP will also work in tandem with the Canada Growth Fund (CGF), which was established as a subsidiary of Canada Development Investment Corporation in December 2022, and has an allocation of up to $7 billion of its current $15 billion in capital to transact under contracts for difference and offtake agreements in order to absorb certain risks and spur investment in low carbon projects, technologies, businesses and supply chains.
• Partial funding for ACCIP will come from Alberta’s Technology Innovation and Emissions Reduction (TIER) fund, which is comprised of funds from industrial emitters who purchase carbon credits to meet emissions targets (at the prescribed TIER fund price) under TIER's carbon pricing and emissions trading system.
• Along with the ACCIP updates, the Alberta Government indicated that ACCIP is expected to provide between $3.2 to $5.3 billion of support between 2024 and 2035 (based on current projections and development timelines of existing eligible projects). This suggests that the ACCIP will be ended in 2035, however such timeframe is not definitively established in the most recent announcement.

Eligible Projects

ACCIP eligible CCUS projects must be: (1) physically located in Alberta and (2) capture, prepare, compress, transport, store or utilize CO₂. Projects do not require minimum carbon capture rates or similar measures to be eligible.

CCUS projects will be considered eligible retroactively to January 1, 2022, in alignment with the CCUS Tax Credit. Capital costs funded under ACCIP will be stackable with the CCUS Tax Credit.

Projects that have received funding from the Alberta Petrochemical Incentives Program or under any Alberta royalty regimes are not eligible to receive duplicate benefits for the same costs.

Eligible Costs

As with the CCUS Tax Credit, ACCIP support is limited to capital costs, which includes costs for converting existing equipment for use in CCUS projects and for monitoring and tracking CO₂ within buildings or structures dedicated to exclusively support an eligible CCUS project. Eligible expenditures include the cost of purchasing and installing approved equipment used in eligible CCUS projects, provided there is eligible storage or use of the CO₂.

Contrary to the CCUS Tax Credit, ACCIP is proposed to apply to all forms of CO₂ utilization that result in the permanent sequestration of CO₂. Eligible uses for utilization under the CCUS Tax Credit is currently restricted to the use of captured CO₂ in producing concrete using a qualified concrete storage process (in addition to the CCUS Tax Credit being available for CCUS projects that store captured carbon in dedicated geological storage). In particular, the additional guidance appears to imply that captured CO₂ used in enhanced oil recovery may qualify (provided it results in the permanent sequestration of captured CO₂). This would be a significant departure from the CCUS Tax Credit, which expressly defines enhanced oil recovery as an ineligible use. 

Ineligible capital costs include those associated with engineering studies, pilot projects and proof of concept projects. The additional guidance states that the Government of Alberta is considering support for dual-use equipment. As dual-use equipment is currently included in the CCUS Tax Credit, this statement further implies that the ACCIP will not simply copy the eligibility criteria for the CCUS Tax Credit.

Application/Pre-Approval Process

Industry can apply by completing a pre-approval form available from Alberta Energy and Minerals on the Electronic Transfer System (ETS).

As an initial step, project proponents can complete a pre-approval application to obtain (1) feedback on whether their project is eligible under ACCIP, and (2) a high-level estimate of potential ACCIP benefits that may be received.

Following such pre-approval application, proponents will be able to submit a full application under a process that will open later on in 2024 (precise date to be determined). Such full application process will launch once stakeholder information sessions are completed and ACCIP guidelines are finalized.

Conclusion

Many details remain outstanding and draft legislation implementing these proposals is pending, and will come into force and apply to eligible expenditures incurred in 2022. The ACCIP will provide an additional economic incentive to invest in CCUS technologies in Alberta. This incentive will likely continue to drive CCUS development in Alberta and is aimed at ensuring that Alberta continues to be a global leader in CCUS development. From the additional guidance provided by the Alberta Government, it appears that while the ACCIP will build on the CCUS Tax Credit framework, there may be significant deviations from that framework.

Bennett Jones has industry-leading experience in the full life cycle of energy and infrastructure project development including in power, renewables, clean technology and hydrogen/CCUS, and developing strategies for industries to capitalize on current and upcoming initiatives of a low-carbon economy.

To discuss the potential opportunities and implications of ACCIP or the CCUS Tax Credit, please contact the authors, or the Bennett Jones Tax or Energy practice groups.

Authors