Government Of Alberta Unveils Further Details Regarding The Alberta Carbon Capture Incentive Program – Renewables

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.