Oil companies ask Canada to pay for 75% of carbon capture facilities

[WINNIPEG, Manitoba] Oil and gas companies have asked the Canadian government to design a tax credit to pay for 75 per cent of the cost to build carbon capture facilities that will curb greenhouse gas emissions, the country's main energy industry group said on Thursday.

The Canadian Association of Petroleum Producers (CAPP) made the request in August to the Department of Finance just before the federal election campaign, setting the tax credit at a level high enough to provide an economic return, Ben Brunnen, CAPP's vice-president of Oil Sands, told Reuters.

Carbon capture facilities are expected to be a key part of global efforts to contain emissions from fossil fuels production. Canada is the world's fourth-largest oil producer and has a set a goal of generating net-zero emissions by 2050.

The carbon captured from oil and gas operations is less concentrated than that of some other large emitters, such as fertiliser plants. That means that capture costs are higher on a per tonne basis for oil companies, Brunnen said.

"Because of that, this (credit) needs to be designed to drive a balance and reflect the economic realities," he said."The government role should be providing the playing field to enable companies to make these investments."

Prime Minister Justin Trudeau's Liberal government began industry consultations in June on the make-up of its proposed carbon capture investment tax credit, before the national election last month. Trudeau won a third term and discussions are expected to resume to put the credit in place next year.

Although the government calls its proposed carbon capture support a tax credit, CAPP wants it to function more as a grant, with Ottawa reimbursing carbon capture proponents a percentage of their costs as they build the facilities, Brunnen said.

REUTERS