Helium is emerging as a promising opportunity for western Canadian drilling contractors, but industry groups say unequal tax treatment is limiting investment in the sector.

Speaking during a media availability at a Canadian Association of Energy Contractors (CAOEC) event in December, its president and CEO, Mark Scholz, outlined the opportunity helium presents for the association’s members, noting that they are resource agnostic when it comes to drilling activity.

“We’re going to drill all of those wells,” he said, noting “one of the challenges with helium is that it's one of the few critical minerals that is looked at differently … within the Income Tax Act.”

The Helium Developers Association of Canada (HeDAC), CAOEC, along with the governments of Saskatchewan, Alberta and Manitoba are urging the federal government to extend key tax measures to helium development, according to HeDAC executive director Richard Dunn.

These include competitive depreciation eligibility for the flow-through share (FTS) program, and targeted measures to bolster critical mineral activity that have been introduced by the federal government in recent budgets.

In CAOEC’s State of the Industry report, Dunn wrote that most mineral projects can write off capital costs over six years, but helium projects are forced to depreciate over 40 years.

This creates a disadvantage because typical project lifespans are less than 15 years, he noted.

Dunn called FTS a proven mechanism that attracts risk capital, but said helium projects remain ineligible, sidelining the sector from a “vital funding channel.”

FTS, as described by Natural Resources Canada, let Canadian companies pass eligible expenses on to investors. Now seen as costs by the investor rather than the company, this lowers the company’s taxable income.  

Budget 2023 expanded FTS eligibility to include lithium from brines, among other existing minerals.  

In an interview with DOB Energy, Dunn said the hope is these tax regime changes could bring significant investment to Canada.”

He noted “proper tax treatment,” could attract “upwards of hundreds of millions of dollars of annual investment.”

However, he added that companies will make their own investment decisions.

“Helium is huge,” said Scholz, noting its role in quantum computing and magnetic resonance imaging (MRI) technology.

Touching on the broader recent conversation around Canada’s place as a global energy superpower, he said “[helium] has to be part of the conversation.”

On that score, this should involve including helium “as an equal player with all the other critical minerals that Canada has … to be able to extract and develop responsibly.”

HeDAC made a submission to the federal government to have these tax treatment changes in Canada’s recent federal budget, but the recommendations were not accepted, said Dunn.

“We definitely haven't given up,” he said. “It's still an important thing to get across the line.”

HeDAC has had discussions with provincial governments on how to best partner to move these recommended changes forward and looks to advance advocacy in the first part of the new year.

Another HeDAC priority is to work with the provincial and federal governments to lay a “pathway” for purpose-built helium liquefaction facilities in Canada, said Dunn.

Currently, all Canadian-produced helium in gaseous form is trucked to the U.S. for liquefaction, adding costs to the process, he continued, noting helium is largely used in liquid form.

Highlighting recent trade tensions between Canada and the U.S., Dunn said this reliance increases supply security challenges for Canadian end users, as well.

Other energy sector opportunities

Beyond drilling activity, Dunn said helium development could benefit other parts of the oil and gas value chain. This extends to processing facility fabricators and engineering firms.

Facilities that extract helium from the carrier nitrogen gas require specialized infrastructure. Some of these facilities could be built by companies that already service conventional oil and gas operations, he noted.

Looking at engineering firms that design processing facilities for oil and gas operations, Dunn said helium “offers the same potential.”