Alberta-Ottawa Deal on Carbon Capture Project Remains Elusive

Cenovus Energy CEO Jon McKenzie remains hopeful about the prospect of a deal on a pivotal carbon capture project, despite negotiations being two weeks past an initial deadline. The project, which would cost $16.5 billion, is part of a 'grand bargain' between Ottawa and Alberta that includes developing a new oil pipeline to the West Coast.

The agreement on industrial carbon pricing between the two levels of government has also slipped past its April 1 target date. McKenzie emphasized the need for regulatory policy reform to make Canada's industry competitive, saying 'without fundamental policy and regulatory overhaul and reform, it's going to be very difficult for industry to grow and backstop that (proposed West Coast) pipeline.'

The federal government has offered an investment tax credit covering up to half of capital costs, while the UCP government has created a program providing a 12% grant to carbon capture developments in Alberta. However, the Oil Sands Alliance says these measures are insufficient, requiring about 75% of capital costs and 50-60% of operating costs to be covered by government.

BMO Capital Markets analyst Randy Ollenberger noted that the complexity of the MOU and the multiple agreements involved may contribute to delays. However, Prime Minister Mark Carney expressed optimism, saying 'what's happened has reinforced the motivations on all aspects of the agreement.'