Enbridge CEO says federal tax credit needed to boost carbon capture

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Carbon capture should be one of the energy sector’s biggest priorities, says the chief executive of pipeline giant Enbridge Inc. , but Canada needs to nail down a tax credit for the technology if it is to attract vital investment dollars needed to increase the number of emissions-reducing projects in the country.

Al Monaco made the comments at Enbridge’s Investor Day on Tuesday, as Ottawa continues to work on the carbon capture, utilization and storage (CCUS) investment tax credit promised in the 2021 budget. The federal government wrapped up consultations on Dec. 2, and says intends to make the tax credit available starting in 2022, hoping it will reduce Canada’s carbon emissions by at least 15 megatonnes a year.

Calgary-based Enbridge also raised its quarterly dividend to 86 cents per share on Tuesday, up from 83.5 cents, and said it plans to buy back up to $1.5-billion worth of its shares.

In addition, the company announced the approval of $1.1-billion in new capital projects, including a $500-million expansion of its Valley Crossing Pipeline in Texas. It will also spend $300-million on an expansion of its Dawn to Parkway pipeline in Ontario.

The proximity of the Dawn hub to the petrochemical industry in Sarnia, Ont., positions it as a natural hydrogen and CCUS centre, Mr. Monaco said.

Carbon capture projects are facilities that force CO2 emissions deep into the ground to keep them out of the atmosphere. Along with injecting captured carbon underground to enhance oil production, the technology can be used in other major industrial sectors, including power generation and manufacturing.

The technology “is going to be a necessity” when it comes to meeting emissions-reduction goals, Mr. Monaco said, adding he expects to soon see “a very steep ramp-up” in the technology.

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The United States first implemented a CCUS tax credit in 2008, which was rejigged in 2018. Mr. Monaco said that has put the U.S. at the forefront of the sector, but said Canada is close behind with the development of a similar tax credit.

“We need that to really attract private capital to get moving on CCUS,” he said. “I would see this as one of the biggest priorities in terms of energy generally.”

Enbridge agreed last week to partner with Edmonton-based Capital Power Corp. on a CCUS project for the power company’s Genesee Generating Station in Warburg, Alta., that would aim to capture up to three million tonnes of carbon dioxide emissions a year.

Enbridge vice-president Bill Yardley told investors that while Alberta is home to the most immediate opportunities for carbon capture in Canada, his company’s appetite for CCUS projects spans the continent.

He added that Enbridge is evaluating various carbon capture projects on the U.S. Gulf Coast.

As for what the sector might look like in the coming years, Mr. Yardley said given that the CCUS business model is targeted at avoiding costs as carbon emissions taxes increase, projects will need to be cost-effective, from their financing to their design.

Enbridge’s focus on carbon capture plays into its opportunities in the hydrogen sector – a fuel that has seen something of a renaissance in recent years.

Hydrogen emits no pollution when burned as a fuel, making it an attractive prospect for companies and countries targeting net-zero emissions. Producing hydrogen using natural gas is pollution-heavy, but CCUS can reduce or eliminate emissions created in the process.

As demand for the fuel grows, “hydrogen blending and stand-alone new hydrogen pipeline and storage is a multibillion-dollar opportunity for us just this decade,” Mr. Yardley told investors.

Enbridge has 10 to 15 hydrogen projects on the go, including various pilot projects to blend hydrogen with natural gas for home and commercial heating.

The company is also assessing how its long-haul pipelines can move hydrogen more effectively, and ways to pivot some of its pipeline assets to carbon dioxide and ammonia (which can be transformed into hydrogen at its destination).

In its outlook, Enbridge reaffirmed its 2021 full-year guidance range for adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $13.9-billion to $14.3-billion, and distributable cash flow per share of $4.70 to $5.00.

For 2022, the company said it expects adjusted EBITDA of $15.0-billion to $15.6-billion, and distributable cash flow per share of $5.20 to $5.50.

While liquids pipelines are projected to comprise the vast majority of Enbridge’s asset portfolio into 2022, at 58 per cent, Mr. Monaco said renewables will likely “become a bigger piece of the pie.”

“There’s a lot of exuberance out there in renewables,” he said, adding he expects Enbridge will spend about $1-billion annually on them.

However, he said Enbridge won’t set a hard number for renewables growth “because the second you do that, you start feeling like you need to invest in order to reach an arbitrary target.”

With a report from The Canadian Press

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