Oil industry gets almost $3B in subsidies: Report
TorontoSun.com – money
Wednesday, December 29, 2010. By Michel Munger, QMI Agency
MONTREAL – Canadian governments spent almost $3 billion subsidizing the oil industry in 2008, according to a recent report by a Winnipeg-based research institute.
The International Institute for Sustainable Development is also predicting the subsidies will more than double as a share of government expenditures in 2020, along with oil production.
The policy research institute found federal and provincial governments provided $2.84 billion to support oil production in Alberta, Saskatchewan and Newfoundland that year.
A breakdown of the numbers showed Ottawa injected $1.38 billion in funds while Alberta gave $1.05 billion; Saskatchewan, $327 billion and Newfoundland, $83 million.
The researchers found 63 separate subsidy programs across Canada, mostly meant to increase exploration and development through a mix of tax breaks and royalty reductions.
The report identified where oil producers receive a financial benefit that isn’t available to other industries in Canada and used the World Trade Organization’s definition of subsidy to determine which programs to highlight.
But the Canadian Association of Petroleum Producers defends the injection of government cash into the sector.
“A subsidy implies special treatment for an industry,” said Janet Annesley, a spokeswoman with the Calgary-based lobby group.
“In fact, the programs available to our industry are similar as those in other sectors in Canada and worldwide. “
She also noted that tax breaks made tough-to-extract oilsands products more competitive on the international market and that the funds allow the industry to launch profitable endeavours that sends money to government coffers down the road.
“Newfoundland is now a rich province, thanks largely to oil and gas royalties,” she said. “Same for Saskatchewan.”
But in the 2020 forecast, the research institute doesn’t see much benefit for taxpayers in the various federal and provincial subsidy programs.
It calculates the subsidies will boost provincial economies by between 0.1% and 0.16% in the next decade while increasing oil production by 5% and oil exports by 13.6%.
It’s good news for the oil industry but not for taxpayers – the research institute indicates the money won’t flow back to government coffers despite more corporate taxes and royalty payments.
According to the report, more production also means more greenhouse gas emissions.
Annesley says governments shouldn’t tackle environmental issues by cutting funding to the industry.
“If you want to regulate the social and environmental impact, do so,” she said. “But don’t do it through economic policies. Let the industry compete on an equal footing.”
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