Central Alberta is home to one of the world’s leading hydrocarbon processing regions with $45 billion in capital investment, supporting 30,000+ jobs.
Mark Plamondon is Executive Director of the Alberta Industrial Heartland Association. He discusses some of the diverse opportunities for the area, including how world-leading carbon capture infrastructure and readily available oil and natural gas feedstocks can drive growing value for Canada’s energy resources: reducing emissions associated with refining and petrochemicals, while taking advantage of emerging markets for hydrogen and battery production.
Holly: Hello and welcome to another edition of the Energy Examined podcast, the podcast that brings you industry insiders and experts to discuss the issues facing Canada’s oil and natural gas sector. I’m your host, Holly Quan. While our podcasts usually feature leaders in the upstream side of the oil and gas industry — that is, in the areas of exploration and production — the downstream side of the industry, including refining, petrochemicals and processing, is a vital link in the overall industry and Canada’s economy. Today, we’re going to take a closer look at the refining and petrochemical side of the industry. So, I’m pleased to introduce Mark Plamondon, executive director of Alberta’s Industrial Heartland Association. Hello, Mark.
Mark: Good afternoon, Holly.
Holly: Thanks for being with us today.
Mark: Well, it’s a pleasure to be here for sure. Thank you for having me on your podcast.
Holly: So, Mark, let’s start with a little bit of personal background on you. Where are you from, a little bit on maybe your education and training? And how did your involvement with the Heartland Association come to be? When did you start with the organization and what’s your role? So, start with a little bit about you.
Mark: Sure. Glad to talk a little bit about myself. I’ve been very fortunate over my career to have a wide variety of experiences. You know, I grew up in British Columbia and I did my metallurgical engineering degree at the University of British Columbia. And from there I started working initially at Cameco’s lead and zinc smelter in Trail, British Columbia.
But after a couple of years there, it was time to look at other opportunities. And at that time, this is now 1995, Sherritt International, and they have a nickel and cobalt refining operation in Fort Saskatchewan, which is in the industrial heartland, they were growing quite rapidly and they were looking for engineers, and they were filling up their roster of people as they had significant growth plans. So, I joined Sherritt in 1995 in Fort Saskatchewan. And when you join a growing company, you know there’s lots of opportunities in front of you.
And so over, you know, two decades with Sherritt, I was able to do a number of very interesting things. But the most interesting things where I was, I was asked to join their Cuban operation. I ran their Cuban nickel mining and refining assets for a number of years and then later, subsequently I was asked to run their Madagascar operations. So, I was able to build up this understanding of international operations, what boards are looking for when you’re investing in large-scale projects, particularly in different jurisdictions.
You know, I had a fair amount of time in front of boards figuring out what exactly needed to be understood from a company that is looking to invest in jurisdictions of large-scale projects. So, I think all of that positioned me quite nicely for when the opportunity came up with Alberta’s Industrial Heartland Association, which that started, so I started with the association in 2017. And so, just coming up five years with them.
And I think that’s, you know, some of that international experience and large-scale project experience has given me a background where, when working with large companies and companies that are looking at their next capital investment around the world, I think it’s helped me, you know, have an understanding what they would be looking for helps me, I think, sort-of baseline what we need to be able to position and be able to present to investors when they’re looking at their next project.
Holly: And it’s my understanding, of course, that the Industrial Heartland is very complex. There are many refineries, petrochemical and processing facilities. So, maybe let’s just talk a little bit about Alberta’s Industrial Heartland Association. What is this organization? Who are the members? What is Heartland’s role?
Mark: Yeah, so I’ll talk about both. So, there’s Alberta’s Industrial Heartland Association, and then there’s the heartland itself. And so, the association, we represent five municipalities that have land in the jurisdictional area called Alberta’s Industrial Heartland. The five municipalities are the City of Edmonton, City of Fort Saskatchewan, Strathcona, Sturgeon and Lamont Counties.
We also have three associate members, Towns of Gibbons, Red Water and Bruderheim. And they just participate in meetings just given their proximity to the heartland. But the jurisdiction itself is this heavy industrial area, is a 582 square kilometres heavy industrial cluster that is Canada’s largest hydrocarbon processing region.
And as you stated, Holly, there’s a significant amount of upgrading, refining capability, petrochemical production as well as specialty metals, fertilizers and then all the midstream type of infrastructure and assets that would service all of these companies, so these are the assets that are in the heartland itself. But the association is, it’s the five municipalities funding the association with the intent of continued investment attraction and economic development of this region.
And so, the association consists, we have about, we have nine of us in the association that we have various roles, how I have it structured, but the sort-of underlying theme, or the key piece that we’re trying to do is market the region internationally. You know, raise awareness to large-scale global companies of this region and all the reasons why they may want to invest in this region when they’re looking at their next capital investment. And then, we want to work with these companies to help them get up the learning curve when it comes to an investment here.
So, we will conduct site selections and services; we will map out, we have a variety of maps of the infrastructure in the region of the assets in the region; we’ll make introductions to appropriate government folks or potential joint venture partners; as well as just all of the marketing that you do internationally with going out and talking to companies and promoting the region worldwide. So, a number of activities, all really with the focus of, you know, how ultimately leading investment to Alberta’s industrial heartland.
Holly: So obviously, such a large industrial complex exists at that location for a number of reasons. And maybe could you talk a little bit about the competitive and economic advantages offered by the heartland region? It’s almost like, it seems to me that once you get a critical mass, then it becomes ever easier to say, ‘these people are here, these people are here. We can, you know, get the feedstock or we can help you with various other ways of getting your industry set up.’ So, could you maybe talk about competitive and economic advantages of the area?
Mark: You know, glad to do that, Holly, but you’re absolutely right in terms of, you know, economies of scale and clustering benefits. The larger the cluster grows, the more opportunities there are for outputs from one facility becoming inputs for another facility. The competitive advantages of one facility help another facility. And then, you begin to build not only the economies of scale, but credibility that ‘okay, wait, a sec company X or Company Y are building here, there’s got to be something going on there. Let’s go have a look.’
And so, definitely there’s advantages to economies of scale and not only from an economic standpoint, but also from a, from an environmental footprint, I think your overall environmental footprint of your industrial complexes can be, there’s greater opportunity to reduce that footprint when you have economies of scale and clustering benefits as opposed to having individual facilities spread out across the landscape.
So, talking about the competitive advantages and some of the advantages to our region, you know, the number one, the main competitive advantage, what has attracted companies to our region is, you know, access to abundant low-cost feedstock. And when we say low-cost feedstock, we have essentially, the lowest cost feedstocks in North America and some of the lowest cost feedstocks in the world. So, if you’re looking for methane or ethane or propane or butane or condensates, the lowest cost opportunities you have are in this part of the world and certainly North America. And so, you know, just to give you some specifics on that. So, you know, we’re often comparing to the Gulf Coast, which is our main competing jurisdiction.
Mark: Just look at natural gas, you look at natural gas prices, you know, if I just take the average sort-of monthly Henry Hub [natural gas commodity] price over the last five years for natural gas and then I take the natural gas here in Alberta for the last five years, you’ve got in the order of a 40 per cent discount, 40 to 45 per cent discount here in Alberta.
Holly: That’s significant.
Mark: It’s significant, but what makes it even more significant is if the majority of your operating costs or at least the largest component of your operating costs is feedstock, if that feedstock is significantly discounted, that creates a huge competitive advantage.
So, if you’re now looking at building a petrochemical facility, where are you going to value-add upgrade these natural resources? And you can build on the Gulf Coast or you can build in Alberta. If your significant or your main operating cost component is significantly discounted, you now have a competitive advantage in the production of that. And then it becomes a conversation of, ‘well, how do I get that to market. Where my markets? How can I compete with a straight feedstock advantage?’ That’s the main economic driver.
So, then you take, that’s your sort-of baseline competitive advantage, but then you build on top of it, all the other things going on in the heartland. So, access to fresh freshwater. Access to salt caverns. Access to two Class One railroads that can get you to the Pacific, Atlantic and the Gulf Coast. Think of the skilled workforce that’s here, right? I mean, just a significant skilled workforce, post-secondary institutions, the supply chain capability in terms of fabrication and meeting all the maintenance needs of facilities. And then to go one step further, you know, you’ve got this sort of collaborative, collaboration in this region between industry and municipalities, whether that’s on emergency response or monitoring of the air shed or on community awareness and interfaced with the community. And you don’t see that in other clusters like you have here. So, you put all of these together and it is a very compelling story and a very strong value proposition that I think is attractive to companies looking to build a large-scale petrochemical facility.
Holly: Yeah, absolutely. And I really appreciate what you just said about the importance of collaboration. Maybe we could explore that a little bit more. How often do you meet with communities, stakeholders, governments? Is that ongoing? Is there a structure, you know, like, I don’t know, community open houses every so often, that kind of thing just to make sure that everybody is networked in together and communicating?
Mark: Yeah. So, I think, you know, I think this region does a lot of really good things in this regard and there really is really strong collaboration. You know, when you’re in it, you may not think so much about it, but you talk to industry participants from other parts of the world and they’ll say, ‘look, you know, we don’t see this level of collaboration like we have in the heartland.’
And so, there’s a few areas. I mean, I’ll mention a few of them. So first of all, you know, our cell, Alberta’s Industrial Heartland Association, we partner with three other regional associations, that’s the Northeast Capital Industrial Association, Fort Air Partnership and NRCAER, which is the emergency response association and the four of us combine on something we call Life in the Heartland.
And this is a collaborative effort specifically to interface with community and communicate to the community about what’s going on in the region with industrial activities in the region. And so, there’s open houses every six months when we could do them face-to-face. Of course, with COVID, those have been virtual for the last little while.
But every six months there’d be open houses where there’s dialogue from the companies to communities as to what’s happening and the end result, the end goal really is just to make sure there’s transparency in what’s happening and to get feedback where necessary from the community and what’s happening in the region. So, you know, we want to ensure that there’s strong community support for continued development in this region, and one of the first steps in doing so is ensuring that there’s appropriate communication between all parties. So that’s one of the areas of collaboration. Another area is, if you look at monitoring of the airshed, so Fort Air Partnership.
Mark: Not to speak for them, but they’re a collaborative effort between industry, the Government of Alberta, and municipalities in this area to ensure that there’s proper data and monitoring of the airshed. So, that’s a real value-add collaborative effort here in the region. And then, you know, we work closely, Alberta’s Industrial Heartland Association, we work very closely with the Government of Alberta at all levels, whether it’s Alberta Energy or Jobs and Economy or now Invest Alberta when it comes to trying to attract large-scale investment into the province.
And those are more just having strong relationships and working with them on a regular basis. You know, it’s a continuous sort-of partnership that we have in a number of areas. So, I think all of these sort-of areas — and I shouldn’t leave out the federal government, either. We also work closely with the federal government where best we can. So, I think there’s lots of dialogue amongst a number of parties and all with the same end goal really to create the best investment framework and environment that you could have for large-scale foreign direct investment into our region.
Holly: Can we change focus slightly and talk a little bit about carbon capture. So, carbon capture, either for storage or for utilization such as enhanced oil recovery, is now at the forefront of helping decarbonize the whole industry. So, can you talk a little bit about the advantages that Alberta presents for carbon capture and particularly in the heartland region?
Mark: Sure, Holly, love to do so. And you know, when I was talking about the competitive advantages earlier and I was talking about, you know, some of the infrastructure that’s here, you know, one of the developing key pillars that is going to underpin investment in Alberta and in the industrial heartland is the carbon capture utilization and storage capability and infrastructure that is here.
You know, as we look at growth, go forward growth as well as decarbonization efforts of industry that’s here already. You know, CCUS is going to play a key role there. And, you know, the International Energy Agency, they’ve even come out and said, you know, in order for the world to meet its net zero objectives, CCUS is going to have to play a key role there. And I think that’s absolutely the case.
So, you know, CCUS is going to be critical for decarbonization and for companies who want to meet market demands for low carbon products. So, you know, we’re just really lucky here in Alberta. So, the geology below the ground here in Alberta and underneath Alberta’s industrial heartland, you know, the basal Cambrian sandstone layer with the sort-of geological layer that is really an almost perfect cross-section between temperature and pressure where storage of carbon dioxide is, you know, it works very well for the storage of carbon dioxide and then hence you see projects like right now, you have two projects already in the region. Shell’s Quest, the first project came online, I think it was late 2016 has been operating for over five years, about a million tonnes a year of CO2 and then the Alberta Carbon Trunk Line, which now owned by Wolf [Midstream].
Mark: And so, you already have these two sort-of pillars of infrastructure, key assets in the region that show to the world that carbon capture and storage not only is it possible, but it’s also actually happening. And so, that carbon dioxide capability, that carbon dioxide storage capability, which is a combination of the infrastructure plus the geology that we have here, you know, creates this, what I think is now this this really fundamental set of parameters that companies are going to be looking for when it comes to their next investments.
And it positions us very well. The amount of poor space capability for storing CO2, it’s according to the Geological Survey, I read one paper, you know, it’s in the order, you know, I’ve read somewhere that at current CO2 rate of emissions, you could store a thousand years of CO2 in that layer. These are just rough numbers, but the point I’m making is that there are lots and lots of storage, CO2 storage capability in the geological layers beneath the ground here in Alberta. And we’re just very fortunate to have that here.
Holly: So, so there is huge potential for the CCUS. and also, all throughout the industry, companies are very focused on innovation and technology to manage water better, to reduce emissions, I mean, the whole industry is really focused on environmental performance and continuous improvement. However, the federal government is moving toward greater reliance on renewable energy sources, possibly an emissions cap, a ‘just transition’ for workers in the industry. So, can you comment maybe on some of those challenges and where you see that going, the federal emphasis on emissions reduction?
Mark: Yeah, I think and Holly, glad to talk through this. I think, how I view Alberta’s industrial heartland, I view it as a jurisdiction where companies can meet essentially, all of their objectives, you know, if, they of course, will have economic objectives, and so they want to go to the most competitive jurisdictions, and we think Alberta’s industrial heartland can provide that. If you know, for companies that are looking to meet their ESG goals and objectives, I think hands down, this is one of the best jurisdictions in the world.
We just talked about CCUS capability. You know, I would say the governance and, you know, the social performance of companies in this region are world leading. But not only that, I mean, there’s I think there’s tremendous awareness and effort as companies are looking to build here to continue to diversify their workforce, employing underrepresented groups, meet their overall ESG performance requirements, whether that’s emissions or plastics circularity or whatever it is.
I think Alberta’s industrial heartland is actually very well positioned to help companies meet these objectives. So yes, the federal government has a number of priorities for the country, and I actually think that this jurisdiction, Alberta’s industrial heartland, can be a key partner for the government in helping the country meet these objectives because I think everybody’s here that companies would want to access to meet those objectives.
Holly: So, looking ahead, then, what else is on the horizon for the heartland region and beyond CCUS? I’m thinking here about hydrogen, biofuels, wind and solar. What’s coming up?
Mark: Yeah, yeah. So really interesting. And again, you know, the hydrogen — lots of excitement around hydrogen — and hydrogen, in my opinion, the Alberta hydrogen story is largely a story around carbon capture CO2 because in developing carbon capture capability in this region, you now position this region to be able to produce hydrogen that has the majority of its CO2 emissions captured, which would then produce a low carbon hydrogen to provide that energy source to either domestic or global markets.
So, you know, there’s a real opportunity for hydrogen. In fact, some of the lowest cost hydrogen, lowest cost, low carbon hydrogen in the world can be produced in the industrial heartland. And so, we think that positions this region to provide domestic demand sources of hydrogen, to provide global markets for either hydrogen as a, in a carrier form, such as ammonia, for example. So, there’s a real opportunity in hydrogen, as you know, there are I’m sure many of your listeners would know this, couple of public announcements by world-scale companies saying, ‘look, we are studying ammonia, blue ammonia or low carbon ammonia production facilities to meet export demand for ammonia.’ So, there’s a couple of announcements on companies looking at those types of projects.
So, certainly we would expect interest in the hydrogen space utilizing the low-cost natural gas and the carbon capture capability here. We would expect that going forward. So that’s really, really interesting and exciting. But on top of that? We’ve also seen announcements of companies looking at their next projects to move to produce ethylene or polyethylene from ethane, again taking advantage of the low-cost feedstock and all the decarbonization efforts in this region. And similarly, you see the same thing around propane.
Now you had mentioned around biofuels, we’re definitely seeing that as well. We’re talking to companies around waste energy products. There’s lots of excitement there, whether you know, whether those get through to final investment decision, we’ll see. But certainly, there’s lots of conversation and interest about that.
And another area that I think is quite exciting is, you know, there’s lots of demand for battery materials and there will be lots of demand for all components of the supply chain for batteries simply because as the world is looking to electrify a lot of sectors of the economy and transportation being one of them, as electrification continues to grow, the need for battery materials and R&D around batteries and all those things is going to grow significantly. And, you know, I think there are components of that supply chain or that value chain that can be produced in the industrial heartland that would serve, you know, eventually it would serve the production for batteries. You know, there’s certain components in that value chain that may make sense in Alberta’s industrial heartland.
Holly: So, you’re speaking there about things like lithium, vanadium, that kind of thing that that could, in theory, be processed out of feedstock that’s otherwise coming into the region for other uses?
Mark: Yes. I’m viewing it more as an intermediate sort-of production step in the supply chain for battery materials. There is an opportunity there, whether it’s components for or materials for anodes or for cathodes for the batteries. I think there’s opportunity there. So, these are just some of the general themes that we’re seeing talking to companies. So, when you’re talking about what does the future look like? For us, the information we get on what the future looks like is what investors are talking to us about. And I’m just giving general themes, but we’re getting a sense globally that these are the themes that investors are looking for.
Holly: So, let’s shift focus again a little bit and just step back a little more broadly speaking, what do you think Canadians should know about this part of the oil and gas industry? You know, I think most people don’t really look beyond gasoline and diesel. I think most people don’t really have a good appreciation for other refined products, for petrochemicals and how petrochemicals really are part of so many products that we all use every day. So, what do you think Canadians should know about this part of the industry?
Mark: Yeah, I think that’s, you know, you sort-of alluded to it there, I think, you know, the value-add component of all of the further downstream processing and value-add production of various components in the oil and gas sector. I don’t know if that’s either appreciated or well understood, the amount of value that is added to Canada as a whole from taking our natural resources and going through a number of processing steps to produce products that command a significant dollar value higher than just the raw, the raw material, it’s significant.
So, the amount of value-add is significant, and the production of products in this region or from the petrochemical sector is, you know, producing products that not only add value but help the world to meet their decarbonization objectives. If you think about, whether it’s insulation for vehicles or components in the chemistry processes for electric vehicles, for example, or plastic components for electric vehicles or food packaging, I mean, we could go on and on and on, and all of these sort-of products help the world reduce its GHG footprint.
And it’s being done in the most responsible way here in Canada while adding value to Canadian resources, and so to me, it’s a triple win. You’re adding value to Canadians. You are doing it in the most responsible manner globally, and then it’s producing products that help the rest of the world or other industrial sectors, for example, meet their greenhouse gas emissions targets. So, I think it’s a really good story here and hopefully Canadians can get a better feel for that.
Holly: So, there is a lot coming up. This is clearly an exciting time to be part of the downstream side of the business of refining petrochemicals, so to maybe close the loop and go back to my initial question, what’s the best part of the job for you? What are you excited about these days?
Mark: Well, I think the best part of any job, in fact, if you speak to almost anybody, the best part of the job, I think most people say, ‘look, it’s the people I work with,’ and I’m definitely, that’s definitely for me. So, you know, the staff that I work with at Alberta’s Industrial Heartland Association are second to none, world class folks, real pleasure to work with. And then everyone that I interface with, whether it’s the company, the companies, the current incumbents in the heartland or new companies that are coming to the area or even the government representatives that we work with and interface with, you know, all of these working relationships, that’s what really adds to your working day, right?
I mean, whether it’s your work life or your home life, it’s relationships that really add to your life. And so, the people that I work with really is the best part of the job, whether that’s directly in the staff or with everyone we interfaced with, that’s what really adds excitement. And so, I’m really lucky and fortunate to be in the position I’m in to work with such great people.
Holly: Well, once again, I’d like to thank Mark Plamondon, executive director of Alberta’s Industrial Heartland Association, for helping us understand some of the linkages between the upstream and downstream sides of Canada’s oil and natural gas industry. Thanks, Mark.
Mark: Thank you, Holly. Really enjoyed talking to you today.
Holly: So, listeners, be sure to subscribe to Energy Examined for future podcast episodes, share with your friends and family, and we’ll meet you back here soon for more insightful podcasts with industry insiders.