On April 3, 2024, the Government of Alberta (Province) provided a further update on the specifics of eligibility and eligible costs for the Alberta Carbon Capture Incentive Program (ACCIP). The ACCIP will support and accelerate the development of new carbon capture, utilization and storage (CCUS) infrastructure in Alberta by providing incentives for facilities to incorporate CCUS technology into their operations. The ACCIP program is expected to provide between $3.2 to $5.3 billion of support between 2024 and 2035. We previously reported on the main features on the ACCIP, which can be read here.

Main Features

• The ACCIP will be finalized following the federal government enacting the CCUS investment tax credit (CCUS ITC) and related operating supports, such as contracts for difference. Since our previous update on the ACCIP, our Tax team has provided an in-depth analysis of the CCUS ITC, which can be found here. The ACCIP is structured to complement the federal CCUS ITC, ensuring the program supports intergovernmental cooperation, emphasizing collaborative efforts across different levels of government. The goal is to highlight and strengthen the leading position of Alberta's and Canada's businesses in the CCUS industry.
• A grant of 12%for new eligible CCUS capital costs which will be paid to operators in three installments over three years, following the first year of operation. This structure is similar to that used by the Alberta Petrochemical Incentives Program.
• Portions of the funding for the ACCIP will come from the Technology Innovation and Emission Reduction Fund.

Eligibility

Eligible projects are those involved in capturing, preparing, compressing, transporting, storing, or utilizing carbon dioxide. These projects must be located within Alberta. However, projects which have already received funding through the Alberta Petrochemicals Incentive Program, or any benefits under Alberta's royalty regimes, will not be eligible for funding from the ACCIP for the same expenses previously claimed.

The ACCIP is structured retroactively to include CCUS project-related eligible costs starting from January 1, 2022. This approach is in alignment with the retroactive eligibility criteria of the CCUS ITC. In addition, the ACCIP is designed without a minimum carbon capture rate or any comparable requirements.

Eligible Cost

The ACCIP is designed to exclusively support capital costs associated with eligible CCUS projects. Eligible expenses under the program cover modifications to existing equipment for CCUS projects, as well as costs for monitoring and tracking carbon dioxide in facilities exclusively used for approved CCUS initiatives. This also includes costs for purchasing and installing certified equipment for CCUS projects, provided that the captured carbon dioxide is properly stored and/or used. Only those forms of carbon dioxide utilization that lead to its permanent sequestration qualify under the ACCIP.

Capital costs for engineering studies, pilot projects, and proof of concept initiatives are not eligible under the ACCIP. The Province is actively engaging with industry stakeholders to explore potential support for equipment that can serve dual purposes within the scope of the ACCIP.

Stages

The Province has structured the ACCIP into a three-stage framework as follows:

Stage 1- Pre-approval notification

Before diving into the application process set to open later in 2024, applicants can determine the potential eligibility of their project for the ACCIP. Industry participants can complete a pre-approval form available from Alberta Energy and Minerals on the Electronic Transfer System (ETS). This initial pre-assessment phase is intended to equip companies with advanced insights into the potential assistance they can expect to receive from the program, facilitating a more informed planning process.

To participate in this pre-approval phase, companies are required to submit specific information as part of their application. This includes basic company details, the location of the proposed project, the type of project being considered, and financial estimates such as the total project costs, the portion of those costs that are eligible as capital expenditures under ACCIP, and the anticipated reductions in emissions.

Stage 2- Final Approval Notification

Stage 2 of the ACCIP is expected to launch by the end of 2024. Stage 2 will follow the completion of stakeholder information sessions and establishment of the official ACCIP guidelines. During this stage, applicants will need to provide an exhaustive breakdown of their project, encompassing all actual costs.

Stage 3 – Payment and Reporting

In Stage 3, which concerns payment and reporting, grants will be distributed to operators of eligible projects in three separate installments, each spaced out over a three-year period beginning after the first year of operations. During the intervals between these grant installments, applicants will be obligated to report on the progress and status of their project. Detailed requirements for these reports, including the specific parameters and expectations, will be provided within the program guidelines once they are made available.

Next Steps

The Province is committed to a collaborative process with industry stakeholders to refine the ACCIP guidelines effectively. Information sessions are scheduled to take place in April and May of 2024 with stakeholders from industrial emitters and CCUS hub operators throughout the province.

As the Province finalizes the details of the ACCIP, and as further information is released, we will continue to monitor any new developments regarding both the ACCIP and the CCUS ITC. To discuss any questions about the ACCIP or the CCUS ITC, please contact your trusted McCarthy Tétrault advisor or one of the authors.