Canada’s Pathways Alliance has said that a C$16.5 billion ($12.27 billion) carbon capture and storage (CCS) project planned by Canada’s big oil companies will only proceed if the federal government establishes a contract to lock in future carbon pricing.

Pathways, a consortium of the six largest oil sands companies, plans to construct a CCS hub by 2030 to store emissions from 14 oil sands operations in northern Alberta.

Ottawa has committed a 50% investment tax credit to fund the project, and the Alberta government is developing incentives to help defray capital costs, but Pathways President Kendall Dilling said a financial contract to cover running expenses is also required.

The Pathways CCS project will require 400 kilometers of pipeline with special metallurgy to transfer carbon, which only a few steel mills can provide, Dilling noted.

Canada has been in talks with heavy emitters about developing the contract for over a year, but this month it emerged the government is struggling to get the key tool in place.

“Over the life of the project we’ll spend 60% on operating costs versus 40% on capital,” Dilling said noting that “The contract for difference…is absolutely critical in allowing this project to proceed.”

Negotiations with the Alberta government for a provincial investment tax credit are proceeding well, according to Dilling, though he cautioned that incentives must be finalized by the end of the year or early next year if the project is to begin operations in 2030.

“You start doing the math on the schedule and 2024 is when you have to start with some of your long lead items from a procurement perspective,” Dilling said. “That’s creating some positive urgency.”

Alberta is developing CCS tax credits similar to its existing petrochemical incentive program, which awards firms 12% of qualified capital expenses.

“We have not been provided a number for what they’re thinking about for CCS but I think a logical starting point is that it would probably be in that exact same magnitude,” Dilling said.