Payment exemption for Dow Chemical project draws ire of Calgary Construction Association

Alberta said the exemption, which applies to projects with a minimum $5 billion in costs, is not a ‘Dow-specific’ regulation. The CCA president called consultations ‘typical theatre’

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A quietly passed exemption that will give Dow Chemicals longer runway to pay contractors has provoked the ire of the Calgary Construction Association, which says the province risks setting a dangerous precedent for the construction industry.

Meanwhile, the province says the exemption attracts projects that drive investment and maintains it’s not “a Dow-specific regulation.”

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Applying only to projects that exceed $5 billion in costs, the province-approved exemption removes the 31-day limit companies have to pay contractors.

It therefore applies to any project between Dow and a contractor for the construction of Dow’s $8.9-billion Path2Zero Expansion Project in Fort Saskatchewan announced earlier this month, according to the order passed on Sept. 28.

“This wasn’t a surprise. We never said this was a surprise. We said it was unacceptable,” said Bill Black, COO and president of the CCA.

More widespread exemptions could increase insolvencies among Calgary contractors: CCA

Concerned the Dow exemption could set a precedent for future large-scale projects in Alberta, Black said more contractors risk going insolvent and being forced to quit projects mid-construction due to a lack of consistent revenue, should exemptions be expanded.

“If you don’t think prompt payment needs to apply to you, it’s not going to take much for you to think it shouldn’t need to apply to somebody else,” he said.

In a statement to Postmedia, a government spokesperson said the flexibilities target economic growth while “ensuring the appropriate protections are in place.”

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“Alberta’s government has been supportive of the Path2Zero project from the start. However, this is not a Dow-specific regulation,” the spokesperson said on behalf of the Ministry of Service Alberta and Red Tape Reduction.

Dow’s Path2Zero project is the only one so far captured under the changes. (The project will also benefit from federal carbon capture, utilization and storage (CCUS) credits worth up to 50 per cent of eligible capital expenses on equipment and Alberta’s 12 per cent grants on new CCUS developments.)

“We want to attract large projects that drive investment, create jobs and generate economic spin-offs for our province,” the ministry said.

Ministry consulted with industry; CCA calls engagement ‘typical theatre’

The ministry said it tested ideas with industry, which resulted in the exemptions occurring under “limited circumstances, while maintaining the underlying policy intent of prompt payment.”

Black confirmed the CCA and contractors were consulted on the decision, but he posited industry engagement was “just an exercise” and called it “typical theatre.”

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“There are many reasons Alberta was the right location for this project … I would suggest that the difference between paying contractors in 60 days and 30 days was not a deal-killer.”

Amid increasingly high construction costs and a difficult interest-rate environment, consistent payment has become essential to contractors’ viability, Black said. Contractors are commonly required to pay suppliers within 30 days, he said.

Unstable balance sheets result in a diminished ability to bid on projects and restricted lines of credit for contractors, he said, adding that has downstream effects on finishing major projects like schools and hospitals.

“Unhealthy industry has a ripple effect that, unfortunately, is kind of invisible to regular Albertans unless you’re in the industry,” he said.

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