Dow- a victory for Kenney (of sorts)

On Wednesday 6 October a joyful Premier Kenney announced the biggest hit of his economic recovery plan with Midland, Michigan-headquartered Dow Chemicals committing to a huge petrochemical investment beside its existing Fort Saskatchewan facility.  The full text is worthy to  cite as it highlights Kenney’s possible rising from “political dead man walking” status. The message and excitement contained within was worthy of a crow’s proud call.

“Today Dow announced what could become the largest investment in the Alberta economy in more than a decade. This is a huge win for job creation, economic growth and Alberta’s Economic Recovery Plan. If this project receives regulatory approval and a positive final investment decision, it will lead to a multibillion-dollar investment in our economy and huge job opportunities in both the construction and operating phases.

“Dow is a major global company with operations in dozens of countries around the world. Dow’s decision to build the world’s first net-zero carbon emissions ethylene complex in Alberta is proof that our open for business policies have made us one of the most competitive places on Earth for this kind of major investment in cutting-edge technology. After years of declining investment in our province, we can now say that the Alberta advantage is back.

“Our government has worked very closely with Dow since the spring of 2019 to land this huge project. In my first meeting with Dow executives, they made it clear that Alberta’s Job Creation Tax Cut – a one-third reduction in taxes on employers – was a significant step in making our province cost competitive with other jurisdictions in attracting this kind of massive investment. Policies like the Red Tape Reduction Strategy, the Petrochemical Incentive Program, the Skills for Jobs Strategy, the Natural Gas Strategy, flexibility for municipalities to offer property tax incentives, pre-approved regulatory zones, and investments in carbon capture and storage infrastructure have all helped to make Alberta a magnet for this kind of investment.

“Today’s announcement is good news both for our traditional energy sector and for diversification. Major petrochemical projects like this create long-term additional demand for Alberta natural gas, which in turn will create jobs in the exploration and service sectors. At the same time, this expanded polyethylene and ethylene derivative plant will further diversify our economy and increase global exports. And with Dow’s commitment to net-zero production, this project will highlight Alberta’s growing reputation as a hub for low emissions industrial technology.

“This is a big step forward in achieving the ambitious goals of Alberta’s Natural Gas Strategy – to grow Alberta’s petrochemical sector by more than $30 billion by 2030, resulting in more than 90,000 direct and indirect jobs over the construction and operation periods of new facilities and more than $10 billion in revenue for the Government of Alberta from corporate and personal income taxes.

Dow’s Announcement

The Dow announcement was all about its “net-zero” plans. The release was filled with words like “organic,” “decarbonization,” “carbon capture,” “carbon neutrality,” reducing “carbon emissions,” and of course that go-to corporate gloss “net-zero.” The release credited the “availability of carbon capture infrastructure, competitive feedstocks and attractive government partnerships,” as factors in making the announcement. If and when completed the facility will be the “the world’s first net-zero carbon emissions integrated ethylene cracker and derivatives site with respect to scope 1 and 2 carbon dioxide emissions.” Scope 1 emissions refer to direct greenhouse (GHG) emissions that occur from sources that are controlled or owned by an organization.  Scope 2 emissions are indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company.

The brownfield ethylene cracker will produce approximately 3.2 million ton of “certified low-to zero-carbon emissions polyethylene and ethylene derivatives.” The decision is subject to approval by Dow’s board of directors. The plant will add to the globe’s plastic production in a significant way while supposedly reducing carbon emissions. Dow, like its peers in the petrochemicals and oil and gas industry, also champion “carbon emissions intensity” a sleight of hand that attempts to justify more production to meet rising customer demand.  The result more plastic pollution in the world’s oceans and urban land fills. However, this is not just about fulfilling customer demand or becoming greener, it is also about adding another $1-billion in EBITDA (earnings before interest, taxes, and depreciation). 

Dow’s press release, co-ordinated with the Premier’s office, added Kenney’s stamp celebrating Alberta’s “growing global leadership in emissions-reducing technology like carbon capture utilization and storage, and Alberta’s open for business policies.” In the mix from Dow’s perspective was Alberta’s support for circular hydrogen and CO₂ infrastructure.

Analysis

Praise went to the Energy Minister, Sonya Savage, the Associate Minister of Natural Gas Dale Nally and, ominously,  Environment  Minister Jason Nixon. Praise for Minister of Jobs, Economy, and Innovation Doug Schweitzer was curiously missing.  Surely officials in Invest Alberta and Schweitzer’s department had been part of the team working to  bring massive outside investment into the province? Among the ministry’s responsibilities  are 

• overseeing the implementation of Alberta’s Recovery Plan

• supporting Alberta entrepreneurs, businesses and communities to drive growth and job creation

• attracting, retaining and expanding investment in Alberta

• enhancing trade and export development

• optimizing Alberta’s innovation system to support economic growth

• creating the conditions for growth and diversification of Alberta’s primary and emerging industries

Underneath the Ministry falls Invest Alberta and Alberta Innovates. The dominance of energy, natural gas and environment departments versus the economic development and innovation group may suggest that Invest Alberta and Schweitzer’s ministry had misgivings about making such an expensive long-term bet on petrochemicals.

Predictably the messaging referred to Alberta’s Economy Recovery Plan announced in June 2020 (four months into COVID) with its elements of Alberta’s Job Creation Tax Cut, Red Tape Reduction Strategy, the Petrochemical Incentive Program, the Skills for Jobs Strategy, and the Natural Gas Strategy.  But beyond the trade-marked Alberta Advantage delights were additional goodies offered to one of the world’s largest petrochemical companies. Enticements included “flexibility for municipalities to offer property tax incentives, pre-approved regulatory zones, and investments in carbon capture and storage infrastructure have all helped to make Alberta a magnet for this kind of investment.”

Absent however were the usual suspects supporting these corporate carrots, notably the Industrial Heartland and  municipal politicians from Edmonton’s eastern suburbs. Perhaps this will come later when there is something more concrete like building permits. While there is mention of the Petrochemical Incentive Program, a retreaded NDP program, no costs to Alberta’s taxpayers are attached.

Silent thus far is the taxpayers federation who usually challenges the corporate handouts, and others like the Canadian Federation of Business and the Alberta Institute who support less government intervention, not more.

Silent too was organized labour in Alberta, whose construction workers are no doubt heartened by the announcement.

There is a long time before boots and shovels are on the ground especially because of various regulatory approvals. Over the next 18 months leading up to the next election, we can expect provincial regulators will be urged by their political masters to get with the program and quickly approve the huge facility. The further along the project moves the more difficult it will be for a prospective New Democrat government to stop the process.

The addition to Dow’s existing facilities will produce large quantities of additional CO_2, whether “certified” or not. If the federal government is at all interested in meeting its new commitments, this plant will further damage Canada’s environmental credentials.

For Alberta taxpayers, this announcement continues a long history of handsomely rewarding  large foreign or domestic corporations who employ hundreds of well-paid industrial process technicians and thousands of construction workers. These elephant investments of the fading industrial age however may draw political heat from those who do not think petrochemicals are as necessary or sustainable as made out by corporate and political leaders. The investment will again reinforce Alberta’ s dependence on fossil fuel development and foreign capital. It is true that multinational companies like Dow many choices of where deploy their capital. Should the plant go  into production, it will reinforce Alberta’s fealty to American capital and the north-south trading relationship. 

The deal should be scrutinized by a legislature committee, the Auditor General or a future government to make transparent the costs to Alberta taxpayers.  For example, if Dow is going to be generating $1-billion a year in EBITDA what are the taxes Alberta will receive net of the various government grants, incentives, feedstock commitments, and municipal tax holidays.