Canada’s principal oil industry lobby group is calling for tax breaks from the federal government, arguing they would “level the investment playing field” and draw cash injections to the beleaguered sector at time when it needs them the most.
The Canadian Association of Petroleum Producers (CAPP) wants Ottawa to implement an immediate 100-per-cent tax deduction for capital investments in the sector, including those in clean technology and to reduce emissions. The industry has struggled for months with low oil prices and weak demand as the COVID-19 pandemic has kept people at home and throttled the global economy.
Association president Tim McMillan told The Globe and Mail Thursday a new deduction program would be a “thoughtful tax change” to position Canada for a postpandemic recovery.
But he dismissed the notion that such support would equate to a subsidy for the industry, adding that similar programs are in place for manufacturing and other sectors.
“We hear from coast to coast – from the offshore of Newfoundland to the investments that we’d like to see in Western Canada – that it would be a key thing the government could do to level the playing field and to be consistent with other industries within Canada,” Mr. McMillan said.
The capital investment deduction proposal was one of three requests in a letter CAPP recently sent to federal Natural Resources Minister Seamus O’Regan.
Mr. O’Regan’s press secretary Ian Cameron said in an e-mail the federal government’s support of sector workers is “steadfast,” pointing to programs including $1.7-billion to clean up inactive oil and gas wells, the federal wage subsidy and liquidity access for companies. He did not say whether Ottawa would consider a tax break.
The association also wants Ottawa to display a visible show of support for the industry in an effort to woo international investment here, and create a panel made up of senior industry representatives and government departments to work on a recovery strategy. CAPP said the group should formulate goals for economic growth, job creation, Canada’s climate targets, clean technology export ambitions and economic reconciliation.
CAPP’s call for tax breaks comes amid growing frustration with the liquidity support programs Ottawa offered to the sector through Export Development Canada and the Business Development Bank of Canada, which were launched in April as part of the overall fiscal response to COVID-19.
Mr. McMillan said his members still don’t have the clarity they need to access the programs.
“The government in Alberta has said if this liquidity response from the federal government has gaps, they would be open to a discussion [about a provincial support program], but that’s part of the frustration,” he said.
Until the industry’s questions are answered, he said, “it’s a bit of a black box, and we haven’t had a fruitful conversation because neither the province nor us have the clarity as to how it’s going to function.”
Although the International Energy Agency recently forecast that oil demand won’t return to prepandemic levels for “months, maybe years,” Mr. McMillan said it’s important to make investment in the Canadian patch more attractive immediately.
“Just to maintain production at well over 100 million barrels a day is dramatic global investment," he said.
“As we look at the opportunity Canada has to come over this recession, oil and gas is the strongest card we have as a nation and [it] likely will be for quite some time to come.”
Still, CAPP isn’t placing any bets on how much oil Canada’s industry will produce this year. The association has deferred its 2020 crude oil forecast, citing the rapidly changing capital budgets of oil producers and continuing uncertainty in the market due to COVID-19.
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