Canada: Alberta Announces Petrochemicals Diversification Program

Last Updated: February 11 2016
Article by Michael Hurst, Craig T. McDougall and Erik Arnold

On February 1, 2016, the Alberta government announced a new initiative to encourage the upgrading of methane and propane in the province, called the Petrochemicals Diversification Program (PDP). Details of the PDP were issued on February 4, 2016. The PDP closely follows the public release of the Alberta Royalty Review Panel's Report of recommended changes to Alberta's oil and gas royalty framework (the Report).

One of the four recommendations made in the Report was for the government of Alberta to seize opportunities for value-added processing of oil and gas. In particular, the Report recommended that the province should develop a value-added natural gas strategy to "bridge the gap" in electricity generation while coal powered plants are phased out in favor of renewables. This strategy would also involve using natural gas as an input into other value-added sectors, such as bitumen upgrading, gas-to-liquids processing, fertilizers and consumer-oriented products, such as biomedical equipment and pharmaceuticals.

Building on these recommendations, the stated purpose of the PDP is to incentivize investment in Alberta's petrochemical industry, specifically methane and propane upgrading. The PDP will consist of CA$500 million in "royalty credits" being allocated to eligible petrochemicals projects, to be paid out over three years after the eligible project commences production, with a maximum of CA$200 million being allotted to any one project. These royalty credits can be traded with oil and gas producers. Producers can then use royalty credits to reduce the amount of royalties payable to the government on natural gas, natural gas by-products, or bitumen.1 Based on the information available from the government at this time, it appears that producers' receipt of royalty credits will be tied to trading project feedstock for royalty credits. Further clarification is required on this point.

The government estimates that projects eligible for the PDP will represent between CA$3 billion and CA$5 billion in capital investment in the province. The PDP will help processers offset Alberta's high construction costs and incentive programs in other jurisdictions, and is expected to result in significant economic benefit to the province.

Project eligibility

The PDP application season runs from February 4, 2016 to April 8, 2016. To be eligible for evaluation, an application to the PDP must meet the following minimum requirements:

  • The application's proposed facility or facilities must be physically located within Alberta;
  • The application must include a continuous value chain that begins with consumption of either methane or propane as the primary feedstock in a primary facility to produce higher value products; and
  • The application must be for a new greenfield or new brownfield (i.e. expansion) investment (excluding investment for the purpose of facility debottlenecking).

A PDP application can be made in respect of one or more facilities, and can be applicable to either "primary facilities," "secondary facilities," or a combination of the two. Primary facilities are defined as those which consume methane or propane feedstock for conversion to higher value products, the output of which can either be sold on the marketplace or consumed in a secondary facility. Secondary facilities are those downstream facilities, which use feedstock sourced mainly from primary facilities. Examples of secondary facilities include production facilities, polypropylene facilities, and propylene oxide facilities.

The award of PDP royalty credits is discretionary on behalf of the government. In order to be eligible, the government must be satisfied in its sole discretion that a project is in the public interest and is unlikely to proceed without program support. The government will identify the applications that offer the best overall return to Alberta, with regard to:

  • Economic diversification through hydrocarbon value-added development, and other strategic objectives of the government, including environmental performance;
  • Incremental revenue streams over time to the government and local jurisdictions (e.g. corporate income tax, personal income tax, municipal property tax, etc.);
  • The economic benefits that a particular new facility brings to the provincial economy and local communities;
  • The social and environmental impacts of the new facilities; and
  • Any other factors the department considers relevant.

Further eligibility and evaluation criteria can be found on the Alberta Department of Energy's website.

Additional PDP details

Upon a successful application, the government will establish the number of royalty credits that will be available to a project. The project will earn these royalty credits—over a period of three years—through the consumption of feedstock in plant operations. Earning will be validated by the government through a prescribed bi-annual earned credit application process. Royalty credits will be assigned a value using the following formula:

Per Unit Royalty Credit Value = Annual Maximum Valuation / Expected Feedstock Consumption


  • Per Unit Royalty Credit Value = royalty credit value per unit of feedstock consumed for a project;
  • Annual Maximum Valuation = the maximum royalty credit dollar amount a facility is approved to receive on an annual basis; and
  • Expected Feedstock Consumption = the volume of feedstock the facility is expected to consume in a calendar year based on the approval granted by the Minister of Energy in the application season.


The government anticipates that it will receive PDP applications for a number of projects, each valued at more than CA$1 billion in capital spend. Given prevailing economic conditions, it remains to be seen how many project proponents come forward to apply under the PDP. At Dentons Canada LLP, we are monitoring developments in this area closely to provide our clients with practical analysis and market-leading advice.


1 If a processor is also a producer of natural gas, natural gas by-products, or bitumen, it may use royalty credits for its own account.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.