Sask. government, Opposition disappointed enhanced oil recovery excluded from federal tax credit

The Saskatchewan government and the Official Opposition say they are disappointed a federal tax credit for carbon capture and storage announced in last week's federal budget doesn't apply to projects that use a process referred to as enhanced oil recovery.

Premier Scott Moe said the Liberal government's budget "misses the mark" when it comes to projects that use that process.

The government is spending $2.6 billion over five years on the refundable tax credit for businesses to cover costs for what's commonly referred to as CCUS — carbon capture, utilization and storage (or sequestration).

In 2026 and beyond, the tax credit is expected to cost $1.5 billion annually.

The credit will be available for projects that permanently store captured carbon dioxide "through an eligible use," the budget says.

"Eligible CO2 uses include dedicated geological storage and storage of CO2 in concrete, but does not include enhanced oil recovery."

Enhanced oil recovery is a process that sees companies collect CO2 emissions and pump the gases into oilfields to boost production.

The federal government is pledging to cover 60 per cent of equipment for projects that use direct air capture — which filters existing carbon dioxide out of the air — and 50 per cent if the emissions come from an industrial facility. The tax credit also covers 37.5 per cent of other eligible equipment used for transport and storing the carbon dioxide.

Saskatchewan Energy Minister Bronwyn Eyre says if the federal government wants to boost domestic oil production, it should support enhanced oil recovery and include its use in the credit.

"If you can use the CO2 … especially if you're talking about increasing production and while meeting climate goals, then it really makes sense because of the climate footprint, the environmental footprint of enhanced oil recovery," she said in an interview with CBC News.

Eyre said it is "short-sighted" of the federal government to support the development of carbon capture technology but "shut off the idea CO2 could be used for something."

The Saskatchewan Party government supports the federal government offering the credit to cover the infrastructure costs of carbon capture and storage, Eyre said.

"Saskatchewan has been doing [enhanced oil recovery] for decades. It increases the sustainability of a well. Why wouldn't one try to do that instead of drilling a new one?"

But it appears the door is closed on the prospect of a federal credit for enhanced oil recovery as a carbon capture approach, she said.