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July 12, 2021 | The Oil-Gas Subsidies That Aren’t

Stewart Muir is founder and executive director of the Resource Works Society, a Vancouver-based group open to participation by British Columbians from all walks of life who are concerned about their future economic opportunities. He is an author, journalist and historian with experience on three continents including a financial editor of The Vancouver Sun responsible for mining and markets coverage. Since Resource Works was established in 2014, the group has gained international recognition for its practical approach to the public challenges of responsible natural resource development and use.

A new report claims Canada’s oil and gas pipelines received over $23 billion in federal subsidies. But is that really true?

A remote northern community has no effective way of generating power other than using a diesel-fuelled generator provided by government.

Now: Is that a subsidy to the oil industry?

Some of the anti-petroleum activists in Canada think so and happily definite it as such.

Do roads and airports count as fossil-fuel subsidies? Sure. Just ask the activists  that have a hate-on for “big oil.”

Once more, such wild definitions —and questionable math — are in the daily headlines.

Mainstream media are citing them as the result of a report carried by news outlets without any stated effort to investigate if the report is accurate and fair.

They quote from the latest “report” from the International Institute for Sustainable Development (IISD) on three pipeline projects: Trans Mountain, Keystone XL and Coastal GasLink.

IISD insists: “Oil and gas pipelines in Canada received over CAD 23 billion in Canadian government support over the past 3 years — including CAD 10 billion since COVID-19 began. “

And it adds: “CAD 23 billion is likely an underestimate because calculating full levels of subsidies and other government support is impossible due to a lack of government transparency.”

We probably don’t have to point out that IISD gives thanks for “support and advice” on this report to such helpers as BC’s Tzeporah Berman, international program director at Stand.Earth, chair of the Fossil Fuel Non-Proliferation Treaty Initiative, and a media-star of the current anti-logging protests on Vancouver Island.

If IISD had consulted the industry, then Jack Middleton of the Canadian Association of Petroleum Producers (CAPP) would have replied:

“Groups like IISD often take aspects of tax measures and royalty programs – tools that generate revenue for governments – and mischaracterize those as subsidies, which creates confusion. Things like roads, airports, and reductions in vehicle registration fees are often included. It seems they can’t make up their minds on what to keep in and what to exclude when it comes to claiming what constitutes a subsidy. . . .

“Resource production in Canada is subject to royalties, charged by the provinces that own the resource, and taxes from every level of government. The exact opposite of a subsidy, these are significant drivers of income for municipalities, provinces, and the federal government. From 2017 to 2019, the upstream oil and natural gas sector contributed an average of $10 billion per year to governments across Canada through royalties, taxes, and other revenues.

“Since 2003 when B.C. introduced the Deep Royalty Credit program, the natural gas and oil industry has invested $90 billion into the province, which has, in turn, generated $24 billion in direct provincial government oil and natural gas revenues – an average over $1.3 billion of direct resource revenues every year.”

To be fair, IISD does mention that the federal government has made “climate investments” of nearly $54 billion.

Ah, but that $54 billion is in “investments” while the claimed $23 billion amounts to “support” to the pipeline sector in the form of loans, loan guarantees or liabilities.

Now, IISD did not use the word “subsidies” because the elements of “support” may not have been, technically, subsidies as defined by the World Trade Organization.

But, without any qualm or qualification, IISD absolutely used the word “subsidies” for these various kinds of support in a 2020 article: “Unpacking Canada’s Fossil Fuel Subsidies. . . . Their size, impacts and why they must go. . . . Fossil fuel subsidies hold us back and incentivize pollution.”

And it said those “subsidies” amounted to “at least CAD 4.8 billion per year.”

Then there’s the Environmental Defence group, a partner in the latest IISD report. It’s promoting a petition these days, with this message:

“Oil and gas companies are wealthy, multi-billion dollar businesses with big lobbying power. And despite big earnings, they use their influence to extract tax breaks and handouts from the Canadian government. These payouts are called fossil fuel subsidies, and they make it less expensive for industry to pollute, and leave less money for public goods like education, health care, and clean drinking water. In fact, in our latest report, we were able to track nearly $18 billion in subsidies and support in 2020.”

But as the Canadian Energy News Network notes: “Most of their $18 billion claim comes from the Export Development Bank, an organization that is financially self-sufficient and raises money just like a bank, mostly through fees and global markets. This means that they aren’t using public funds to finance these industries.

“(And) $3.2 billion of actual government funding was used for cleaning up wells and other environmental initiatives.”

The network also notes: “The oil and gas industry contributes an average of $26 billion per year in taxes which goes to important civil services like health care.”

And it adds: “The oil and gas industry invests the most of any other industry in the expansion of clean technology to produce reliable energy while lowering environmental impacts.”

We leave you with sage advice from Jack Middleton of CAPP:

“When you see vague reports and claims about subsidies, dig a bit deeper. The oil and natural gas sector is vital to Canada’s recovery and contributes to communities across the country. We need to think about ways to attract more investment, not drive it away.”

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July 12th, 2021

Posted In: Resource Works

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