Action needed to strengthen industry’s competitive edge, CIAC tells House of Commons Standing Committee on Finance

Isabelle Des Chênes, Executive Vice-President of the Chemistry Industry Association of Canada (CIAC), testified before the House of Commons Standing Committee on Finance’s pre-budget consultation hearings in Edmonton Wednesday, October 17.

In her address, she stated that urgent action was needed to ensure that Canada can compete with other jurisdictions for the next wave of chemistry industry investment.

“You might have read the eye-catching headlines last month saying that left un-checked, tax reforms south of the border would put 635,000 Canadian jobs at risk and potentially reduce Canada’s GDP by $85 billion – or nearly five per cent of the economy,” she told the committee.

The Pricewaterhouse Coopers report commissioned by the Business Council of Canada specified that the petrochemical sector will be particularly hard hit by these reforms which pose a ‘serious risk’ to chemistry manufacturing in Canada. These are issues that have been on CIAC’s radar for quite some time and others are finally starting to notice.”

Action items included adopting a temporary 100 per cent Accelerated Capital Cost Allowance (ACCA) for the chemistry industry; investing in programs to allow Canada to become a leader in the commercialization of technologies to recycle, recover or transform all plastics by 2040; and renewing the National Trade Corridor Initiative including investments in rail and ports and re-funding the Rail Safety Improvement Program and expanding it to include education and resources around the transportation of dangerous goods.

Canada to lose 635,000 jobs, petrochemical industry at ‘serious risk’ due to U.S. tax reform, says PwC report

Last year’s U.S. tax reform poses a substantial risk to the long-term viability of a large portion of Canada’s petrochemical and other chemical industry, as well as the Canadian economy at large, according to a PricewaterhouseCoopers report commissioned by the Business Council of Canada and released on September 12.

The impacts of U.S. tax reform on Canada’s economy, looks at numerous sectors in the Canadian economy. Key findings indicate that the U.S. tax reforms would put 635,000 jobs (3.4 per cent of Canada’s employment) at risk and potentially reduce Canada’s GDP by $85 billion (4.9 per cent of the economy).

The petrochemical sector will be particularly hard hit. The report indicates that with the U.S. tax reform, Canada is falling even further behind the U.S. in terms of competitiveness posing a “serious risk” to petrochemical manufacturing in Canada.

“The relative attractiveness of the U.S. is reflected in the fact that, capital expenditure in chemical manufacturing has decreased by 0.3 per cent in Canada over the past five years, while increasing by 10 per cent in the U.S.,” The report states.

These findings echo the concerns raised in CIAC’s 2019 Federal Pre-Budget Submission. The submission notes that although Canada used to enjoy an advantage through its marginal effective tax rate to help overcome construction, utility, labour and logistics disadvantages, that advantage is now gone with the U.S. tax overhaul. CIAC is calling on the government to take urgent action to ensure the Canadian chemistry sector remains competitive to keep business – and jobs – within Canada.

Read more in CIAC’s 2019 Federal Pre-Budget Submission

Read the full Business Council of Canada report

Chemistry sector leads the way in supporting Alberta’s economic diversification

After a tough few years following the global downturn in oil prices, numerous economic indicators now predict that Alberta is set to have one of the fastest growing provincial economies in Canada in 2018.

At CIAC, we are very pleased with the recent measures the provincial government has taken to help push Alberta’s economic recovery along. Their commitment to investing in the chemistry sector serves as a model for the rest of Canada and the rest of the provinces should pay close attention.

Last February, Alberta’s Energy Diversification Advisory Committee (EDAC) released a report recommending new investments in resource value-added chemical manufacturing to help put Alberta on the map for investors. The goals were to increase the value of energy resources, create jobs and attract new investment to Alberta through economic diversification and responsible development.

Days after these recommendations were made, the provincial government quickly moved to table Bill 1, The Energy Diversification Act, launching the second round of the Petrochemicals Diversification Program (PDP) and establishing a Feedstock Infrastructure Initiative.

Shortly after on March 22, the province reiterated its strong commitment to the chemistry sector in its 2018 budget.

The $500-million investment by round two of the PDP and the $500 million Petrochemicals Feedstock Infrastructure Program investment will ensure that Alberta’s resources are manufactured into high-value products before being sold to global markets.

These recent efforts to diversify the energy economy have already resulted in nearly $10 billion in completed, initiated and proposed chemistry projects in Alberta. These new initiatives should lead to a further $10 billion or more in new investments.

The chemistry sector is already a key contributor to Alberta’s energy value-add strategy in which natural gas liquids, such as ethane, and natural gas itself (methane) are converted into high-value chemicals and fertilizers. This strategy has resulted in $16 billion in sales and $8 billion in exports in 2016. We know that the industry also creates high-value jobs with multiplier effects – each job in the chemistry industry results in another five in related sectors and services.

Internationally, by adding value to Canada’s low-carbon energy resources, the chemistry sector helps Canada take a leadership position in meeting global climate challenges. But to do this, we need to enable our chemistry industry to remain competitive to thrive. No where else in Canada are we seeing direct investment supporting the chemistry industry as we are in Alberta.

Alberta’s support will help the chemistry sector to take advantage of our low-carbon feedstock and create wealth and opportunity for Albertans in a socially and environmentally responsible manner. The rest of Canada should stand up and take notice.

Determining chemistry’s role in Canada’s low carbon future

“How can we reconcile our ambitions to grow Canada's chemistry sector at a time when the nation has made a commitment to reduce its greenhouse gas emissions by 30 per cent below 2005 levels by 2030?”

That is the key question Bob Masterson, President and CEO of the Chemistry Industry Association of Canada (CIAC) chose to answer in an upbeat presentation to the Alberta Industrial Heartland Stakeholder Conference in Edmonton on January 25. 

He emphasized that determining chemistry's vital role in Canada's low carbon energy future goes to the very heart of determining the future of the chemistry industry in Canada. 

Masterson noted that Canada's advantage includes the type of feedstock utilized – natural gas, for example, as opposed to other jurisdictions that make the same chemicals using coal as a feedstock – meaning that right from the beginning our chemistry industry is cleaner, more efficient and less carbon emitting.  In fact, Masterson pointed out recent recommendations for lowering GHG emissions of chemistry producers in Europe look a lot like what Canada already has in place. 

“What I want you to understand clearly and be able to communicate to others is that Canada is uniquely advantaged to respond to the growing global demand for innovative, low carbon products, while at the same time addressing the climate change challenge both in our own sector, as well as in others.”

Masterson concluded by noting that to grow and sustain Canada's low carbon chemistry sector, what is ultimately needed are more supportive policies that promote investment and growth in the sector. 

“When it comes to climate change, the world truly needs more, not less, good chemistry, and more not less, made-in-Canada chemistry.”

CIAC attends Alberta Pre-Budget Consultation in Calgary

The Chemistry Industry Association of Canada (CIAC) was invited to participate in an Alberta government pre-budget consultation on Wednesday, January 17, 2018, hosted by Joe Ceci, President of the Treasury Board and Minister of Finance, and Marg McCauig-Boyd, Minister of Energy

This session was part of a broader consultation effort and included representatives from oil and gas (upstream, pipelines, and service companies), electricity producers, labour, and the chemical manufacturing sector.

Minister Ceci provided context to this year’s budget challenges highlighting the historic dependence on resource revenue to fund government spending. While there are signs of growth in the province’s economy, tax revenue to government is lagging due to lower commodity prices and the corresponding impact on royalties and corporate income taxes. The Minister indicated a shift in the coming provincial budget to one of government spending restraint, reduced expenditures while maintaining a focus on core programming, and starting on a path to get back to balance between government spending and revenue.

CIAC focussed its comments on two issues of importance to the chemistry sector in Alberta. First, in addition to reducing government expenditures, the government needs to focus on growing new incremental investment in the value-add chemical manufacturing sector. We have missed the current wave of new investment from our sector in the U.S., and through its response to the pending recommendations from the Energy Diversification Advisory Committee (EDAC), we would like to see a longer-term plan for improving the competitiveness of new investments in Alberta. 

We need to shift from a singular focus on maximizing resource revenue (market access) to one that includes maximizing the impact of Alberta’s oil and gas resources through increased chemical manufacturing in the province. We compete with other jurisdictions for new investment and all levels of government in Canada – municipal, provincial, and federal – need to work together to improve investment competitiveness in Alberta. 

Second, Alberta needs to work with the federal government to understand the impacts of U.S. corporate tax changes relative to maintaining the competitiveness and historical advantage in the combined federal and provincial corporate income taxes. More specifically, we drew attention to the U.S. tax measure for a 100 per cent Accelerated Capital Cost Allowance (ACCA) for five years. The U.S. approach to ACCA is better and broader than what is currently in place in Canada and Alberta. We reinforced our earlier advocacy to Alberta Treasury Board and Finance to work with the federal government to introduce a 100 per cent ACCA for a minimum of one full business cycle of seven years to specifically apply to upgrading resources into manufactured products.

Overall, the Ministers heard from a broad cross-section of Alberta’s energy industry and a dominant theme of discussion focused on improving business competitiveness in the province through both fiscal and non-fiscal measures.

For more information, please review our submission to the federal budget process: Driving Canadian Growth in the Global Chemistry Sector

CIAC voices budget recommendations to Ontario’s Finance and Economic Affairs committee

On January 17, 2018, CIAC President and CEO Bob Masterson addressed Ontario’s Standing Committee on Finance and Economic Affairs. The committee was in Ottawa on their province-wide pre-2018 budget consultation tour.

Masterson’s key message was that only robust economic growth, driven by new investment, would provide the economic opportunities and prosperity Ontarians want and desire.

He reminded the committee the chemistry industry already plays an important role Ontario’s fiscal equation — a $22 billion industry directly employing 45,000 well-paid employees — but noted that more has to be done to retain and attract new investment dollars from the global chemistry industry. In fact, Masterson noted, the province should be attracting a larger portion of the North American chemistry industry investments.

“We would have expected to see 12 to 15 global scale investments totalling $15 billion or more. Instead, until late last year, the province saw no global scale investments, and only about $1.5 billion or 10% of expectations in capital investment.”

CIAC’s recommendations are focussed squarely on improving Ontario’s fiscal and regulatory policies to make the province the “jurisdiction of choice” for new chemistry industry investments.

Read our submission to learn more: Ontario Chemistry Industry 2018 Pre-budget consultation.

Pre-Budget Consultations — Driving Ontario growth in the chemistry sector

As part of the pre-budget consultation process, CIAC recently submitted its recommendations on the 2018 Ontario Budget to the Standing Committee on Finance and Economic Affairs. The chemistry industry is the fastest growing manufacturing sector in North America. There is an urgent need for action that the 2018 budget could address in concert with the federal government to ensure Ontario does not miss out on investment opportunities in the future.

The global chemistry industry is a story of innovation and incredible growth that is well in excess of global GDP growth rates. Bold, timely and co-ordinated action by the Ontario and federal governments is urgently needed for Canada to capture the existing opportunities.

Key recommendations include:

  1. Maintain the chemistry sector as a priority sector within the Province’s economic development strategy, and its eligibility for investment support within the Jobs and Prosperity Fund and other investment attraction initiatives
  2. Implement CIAC recommendations provided in the Red Tape Challenge Chemical Manufacturing consultation to streamline and modernize outdated, redundant and unnecessarily costly, complex and time-consuming regulations
  3. Advocate for and match federal measures to:
  • At minimum maintain the historical advantage in the combined federal/provincial CIT rate for manufacturing and processing to address the impact of upcoming U.S. CIT cuts.
  • Make the 10-year extension of the Accelerated Capital Cost Allowance (ACCA) permanent for manufacturing and processing and broaden the coverage of eligible capital assets to signal Canada is welcoming new investments in value-add resource upgrading. 
  • Introduce a 100 per cent ACCA for a minimum of one full business cycle of seven years to specifically apply to upgrading resources into manufactured products.

There is an urgent need for action in the 2018 Ontario Budget to ensure Ontario does not miss out on investment opportunities in the future.  Only a competitive business environment and a welcoming public policy environment will attract our fair share of new investment and create the high value, long-term sustainable jobs that the chemistry sector generates.

You can view the submission here


Industrial chemical industry data shows strong performance for first half of 2017

On September 1, the Chemistry Industry Association of Canada (CIAC) released a new report titledIndustrial Chemical Industry: Performance Snapshot – First Half of 2017. Overall, industrial chemicals had a strong first half. In the second quarter, all metrics were up except for railcar loadings, which was down slightly.  Data mostly points to the performance being led by improvements in product pricing. 

Key highlights from the report include:

  • Shipments increased 13 per cent in Q2, the second successive quarter of 13 per cent growth. This performance was driven by very strong growth in petrochemicals and good growth in inorganic chemicals and other organic chemicals.  Synthetic resin shipments remained unchanged.
  • Exports for industrial chemicals rose 5 per cent in the first half. Again, petrochemicals led the way with a big surge compared to 2016.  Other organic chemicals and synthetic resins also showed good growth. Inorganic chemical exports fell by 5 per cent repeating the trend that was seen in the Q1 where shipments rose but exports fell.
  • Industrial chemical GDP rose by 2 per cent in Q2 reversing declines that had occurred over the previous two quarters.
  • The quarter-over-quarter change in rail car shipments was down slightly (1 per cent) in Q2.  Volumes have been fairly constant since 2013 with some seasonal variations. 
  • Operating profits remained strong, at $850 million for the quarter and at $1.7 billion for the first half, up slightly from the same period in 2016.   

For comparison, the Q1 report was released in June and can be found here

New Strategic Innovation Fund will drive major investments in Canada’s chemistry sector

On June 5, Innovation, Science and Economic Development Minister Navdeep Bains launched the Strategic Innovation Fund, a new program to attract and support business investments across all sectors of the economy.

Announced in Budget 2017, the $1.26 billion fund is intended to attract and support high-quality business investments across all sectors of the economy.

The announcement and the new fund were warmly welcomed by the Chemistry Industry Association of Canada (CIAC). 

“Consistent with the articulated goals, this fund will assist in attracting and retaining large scale chemistry investments in Canada,” said Bob Masterson, CIAC President and CEO. “Today, more than $12 billion in chemistry investments are under consideration and approaching final investment decision.” 

These projects are identified as economic growth priorities for the provinces of Ontario and Alberta.

“Engagement and support by the federal government sends an important signal to project investors, indicating that Canada is open for business for global scale investments in the chemistry sector,” Masterson added.

CIAC has long been an advocate for allocation of federal funding programs through a merit-based process open to all sectors, rather than restricting opportunities to a small number of targeted sectors. CIAC also continues to call on the federal government to ensure its identified economic growth priorities are well-aligned with those of major economic growth regions such as Ontario and Alberta.

In the past year, those provinces have placed priority on attracting global-scale chemistry investments through: 

  • Ontario’s $2.5 billion Jobs and Prosperity Fund; and
  • Alberta’s $500 million Petrochemicals Diversification Fund, which attracted sixteen expressions of interest totalling over $20 billion in new investment. 

CIAC looks forward to working with its member-companies to facilitate access to the new fund. CIAC will continue to work with the federal government to identify additional measures to attract a growing share of the significant new investments taking place in the global chemistry industry. 

Chemistry industry needs federal engagement to win investment projects

As the Liberal government looks to attract considerably higher rates of foreign investment into innovative sectors with high growth prospects, more attention needs to be paid to Canada’s chemistry sector. Currently, there are more than $12 billion in investments representing four global scale chemistry projects awaiting decision by year’s end that would create hundreds of jobs, drive economic growth, and help the government reach its environmental targets. But, without the direct involvement of the federal government, Canada risks losing out on these, and future, foreign investment opportunities.

Globally, chemistry is a large, fast growing industry. In Canada, it is the fourth largest manufacturing sector with over $55 billion in annual shipments. Structured in highly efficient and consolidated clusters in areas like Sarnia, Ontario and Fort Saskatchewan, Alberta, the sector adds significant value to Canada’s energy and agricultural resources

Contrary to misconception, the industry is also highly supportive of climate action. Since 1992, Responsible Care® — the industry’s sustainability initiative — has driven significant improvements in the environmental performance of the sector, including the reduction of absolute greenhouse gas (GHG) emissions by 68 per cent and a decrease in the release of toxic substances by 86 per cent. In turn, the industry is also the central solutions provider for innovative emissions reductions activities in other sectors, including transportation, buildings and agriculture.

Unfortunately, despite the industry’s proven track record in providing jobs and improving environmental performance, Canada has struggled to win new investment opportunities. Over the past five years, more than 300 global scale projects worth over $US 250 billion have been completed, are underway, or have been announced in North America, with 70 per cent of those representing foreign direct investment. Nearly all those investments, have occurred in the United States. Canada is lagging far behind its historical 40-year performance which traditionally saw our country capture a 10 per cent share of all North American chemistry sector investments. Canada should have had at least 30 global scale investments worth over $30 billion, unfortunately we’ve seen less than a two per cent share.

Despite limited success to date, Canada does have many of the key ingredients for investment success in place – established and integrated clusters, a talented workforce, access to low-carbon, cost-advantaged feedstock, and proximity to key markets. The Governments of Ontario and Alberta have identified this economic potential and have taken the lead in attracting billions in investments through Ontario’s $2.7 billion Jobs and Prosperity Fund which identified chemistry as a priority sector and Alberta’s Petrochemicals Diversification Program which attracted 16 proposals worth over $20 billion. Currently, there are two projects in Sarnia and two in Fort Saskatchewan with a total value of over $12 billion that are targeted for provincial investment support. Without sustained federal engagement, these projects face steep odds.

The potential for Canada’s chemistry industry is well aligned with the government’s economic growth objectives. If the Government of Canada engages today to help win existing investment opportunities, it could open the door for $10 to $20 billion in new investments in the years ahead.