Just how uneven is the oil and gas playing field?

After taking a more careful read through the new Budget I’ve been able to add a few more numbers to my prior post on oil and gas subsidies.

I’m still not up to Mr. Duceppe’s $3.2 billion in subsidies but I’m getting closer.

First off, we have the temporary 15-per-cent Mineral Exploration Tax Credit (METC), first implemented in 2003 and now extended until 2011. (At least they didn’t increase it to 30% as they were lobbied to do by PDAC last August.) The METC is mentioned on page 97 of the 2010 Budget but is only supposed to cost $65 million over the next two years so that can’t be the main item (p338).

The METC is a tax-incentive that investors and companies involved with renewable energy can not hope to match because you don’t have to explore for the sun and wind, nor do you have to damage the Earth to harvest them because they are above ground, not buried in a rock. It is part of the Green Party of Canada platform to change the Income Tax Act to level the playing field between renewable and non-renewable energy development.

Or, Mr. Duceppe could have been referring to the 5-year, $1 billion Clean Energy Fund “to support research, development and demonstration of promising clean energy technologies, including carbon capture and storage technologies” (p103 Budget 2010). $800 million has already been given to various carbon-capture projects including the Alberta Carbon Trunk Line (ACTL).

This one is a total joke, carbon capture and storage (CCS) is an unproven technology at this scale that our government is relying upon to reduce our greenhouse gas emissions from the oil and gas industry to acceptable levels. If they invested directly in Green technologies, this would be unnecessary.

But that still doesn’t get us to $3.2 billion – I’m stalling out at less than $1.1 billion. Numbers that I’ve run into around the internet are $1.4 billion. Still pretty uneven.

There is particular concern about the Accelerated Capital Cost Allowance program which allows tar, excuse me, oil sands developers to write off capital expenses faster than normal. Apparently, though, the government is planning to phase this out by 2015.

I have to agree with PDAC on one thing – if you are going to have a tax incentive, or any investment incentive, it needs to be predictable. Investors do not like temporary programs.

This entry was posted on Thursday, March 11th, 2010 at 12:57 pm and is filed under Canada, Economics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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