Energy Ministry News Release Announcing IEEP Changes - Mar. 23, 2011

Alberta to expand ethane incentive
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March 23, 2011

Ethane extraction during bitumen upgrading to reduce greenhouse gas emissions and boost value-added production
Edmonton... A program to increase extraction of ethane to support continued growth of Albertas petrochemical sector is being expanded. Initially designed to encourage extraction of ethane from natural gas, the revisions will help encourage more ethane extraction from off-gases that result from bitumen refining or upgrading. Capturing these off-gases, which are the result of converting bitumen to synthetic crude oil, will reduce greenhouse gas emissions. "Albertas petrochemical industry is the largest in Canada," said Energy Minister Ron Liepert. It depends on ongoing availability of competitively priced ethane to remain viable." The sector employs 7,500 Albertans and helps to diversify the labour market as well as add value to Albertas economy, with annual shipments of almost $9.2 billion and exports of more than $5.4 billion in 2009. Using off-gases for value-added production can reduce emissions from the oil sands by up to one million tonnes annually. That is equal to about 10 per cent of Albertas current reduction obligation under the Specified Gas Emitters Regulation said Liepert. Using offgases in value-added production further reduces the environmental footprint of Albertas oil sands operations. The program requires petrochemical companies to submit an application to Alberta Energy for credits that can be applied to specific projects, including details and a supporting business case. The ethane that is produced must be used for value-added upgrading in Alberta (e.g. consumed by petrochemical companies). Ethane that is exported or used in enhanced oil recovery is not eligible for credits. Capture of significant volumes of off-gases can provide a broader range of feedstocks to diversify the types of petrochemicals manufactured in Alberta. Ethane is a feedstock used to make ethylene which is then used to manufacture petrochemical derivatives such as ethylene glycol, styrene and linear low-density polyethylene. Examples of products include
http://www.alberta.ca/acn/201103/30115E426C4C3-F72A-F4D6-FFC522BDF9E535CF.... 10/18/2011
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film, moulding, wire and cable, flooring, plastics, detergents, synthetic lubricants, and cable. The five-year Incremental Ethane Extraction Program was approved by government and released publicly on September 29, 2006. The program is being extended for an additional five years with no new funding. Approximately $310 million of the original $350 million remains in the program. The program is a royalty credit program whereby fractionation credits are provided to petrochemical companies consuming incremental ethane for valueadded upgrading in Alberta (such as ethylene and derivatives). The program was expanded by Alberta Energy in collaboration with industry and the Alberta Competitiveness Council Petrochemical/Chemical Task Team, co-chaired by LacombePonoka MLA Ray Prins and industry representative Val Mirosh. In reviewing sectors like the petrochemical industry, the Competitiveness Council looked at a variety of factors crucial to success, including productivity, innovation, taxes and fiscal policy, regulation, transportation and infrastructure, labour force development and access to capital markets. These changes to the Incremental Ethane Extraction Program will encourage industry to make the large capital investments in Alberta required to increase the supply of feedstock for our petrochemical industry, said Val Mirosh, co-chair of the petrochemical/chemical task team and former Vice-President of Nova Chemicals. Albertas petrochemical industry has a long history in the province and provides many important benefits to all Albertans. The Alberta government is working to build a better Alberta by fostering economic growth, strengthening our health and education systems, investing in infrastructure, supporting safe and strong communities and ensuring a clean and healthy environment. -30Backgrounder: Incremental Ethane Extraction Program Media inquiries may be directed to: Jay ONeill Communications Alberta Energy 780-422-3667
To call toll free within Alberta dial 310-0000.
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March 23, 2011
Incremental Ethane Extraction Program overview

The Incremental Ethane Extraction Program is designed to: encourage value-added upgrading in Alberta; address the tight supply of ethane in Alberta and help to fill existing petrochemical capacity; encourage new investment in ethane extraction facilities; and attract new investment in petrochemical derivative plants. The credit value for ethane or ethylene from natural gas remains unchanged at $1.80 per barrel. Recognizing that off-gas capture from bitumen upgrading or refining including ethane or ethylene delivers a significant environmental benefit and is considerably more capital intensive than conventional ethane, the credit value for off-gas ethane is set at $5.00 per barrel. The credit is owned by the firm that consumes the ethane or ethylene and can be sold to either a natural gas or bitumen royalty payer to be applied against their royalty obligation. For a company to qualify for fractionation credits, it must be a company that is or will be an owner in a facility located in Alberta that consumes ethane or ethylene as feedstock. Fractionation credits only apply to ethane/ethylene produced in Alberta. Final project approval will be conditional on the Energy Resources Conservation Board approval, where required by legislation. -30Media inquiries may be directed to: Jay ONeill Communications Alberta Energy 780-422-3667
To call toll free within Alberta dial 310-0000.
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Alberta to expand ethane incentive

March 23, 2011

Alberta to expand ethane incentive

Alberta to expand ethane incentive

Alberta to expand ethane incentive

March 23, 2011

Incremental Ethane Extraction Program overview

Alberta to expand ethane incentive

Send us your comments or questions Copyright() 2011 Government of Alberta

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