The Spring Economic Update (SEU) provides key details for the major projects file, including the new sovereign wealth fund and different fiscal measures for the oil and gas sector. 

Prime Minister Mark Carney announced the broad outlines of the new public investment vehicle, called the Canada Strong Fund, on Monday. 

The midyear fiscal update provides more information about the fund, stating its mandate will be to deliver market-rate returns on investment. It is set to have three components : an initial endowment of borrowed government capital, contributions from retail investors, and returns from federal assets. 

The update document didn’t provide a model on the rate of return, but provided numbers suggesting the borrowing rate for the seed capital will range from 2.5 to 3.5 per cent. The government plans on providing $25 billion over the next three years. It does not know how much money will come in from retail investors and federal assets.

The priorities and investment criteria of the new fund have yet to be determined, but the federal government says it will review the mandates of other public funds to avoid duplication.

READ MORE: Feds launch new $25B public fund, invite Canadians to ‘co-invest’ in major projects

Ottawa also says it does not intend on using the fund to acquire a majority stake in any given project, with the budget document specifically stating it will only be used for investment in minority positions alongside private capital. 

The initial projects that could benefit from the fund include those referred to the Major Projects Office and those that have received other forms of federal support, including from other public investment vehicles, according to the fiscal update.

As for the initiative that would allow Canadians to use their savings to ‘co-invest’ in major projects, the government does not yet know what investment instrument will be used, although Carney mentioned the Canada Savings Bond as an example on Monday. 

In terms of protecting the money Canadians invest into the bond, federal government guarantees could be one of the instruments that could be used.

Ottawa has allocated $2 million a year for the next three years to set up a transition office that will work to quickly launch the Canada Strong Fund, but it could take several years before returns on investment materialize. 

It remains unclear if retail investors will be able to apply a ‘screen’ that lets them opt-out of investing in certain projects, like those in the oil and gas sector. 

The fiscal update also asks the Canada Revenue Agency to fast track requests for advance income tax rulings by proponents of major projects.

In terms of fiscal measures, the document suggests rates for the Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit. 

Credit rates are set at 30 per cent for direct air capture equipment, 25 per cent on other capture equipment and 18.75 per cent for transportation and storage/use equipment, which includes enhanced oil recovery. 

The government expects the proposal to increase federal revenues by $395 million over four years, reflecting savings made as some companies switch from storage to enhanced oil recovery under the new rates.

The spring economic update also provided the implementation details of the tax measures for liquified natural gas facilities proposed in Budget 2025. 

It says that, to be eligible for the accelerated capital cost allowance rates, the expected emissions intensity of an LNG facility’s on-site liquefaction activities, measured in tonnes of carbon dioxide equivalent per tonne of LNG produced annually would have to be less than or equal to 0.20. 

All five proposed LNG facilities in B.C. fall under that threshold, with Ksi Lisims LNG aiming for an emissions intensity of 0.02 tonnes per tonne of LNG if it connects to the B.C. grid, and 0.156 if it temporarily uses natural gas as a power source.