[IPSM] Jim Prentice: Harper's Point Man On Environment and the Oil Industry

[Macdonald Stainsby]

http://www.theglobeandmail.com/servlet/story/RTGAM.20070208.wrcapp08/BNStory/Business/home


Oil patch girds for battle with Ottawa
Fears grow Conservatives may unveil tough new policies on taxes, emissions
SHAWN MCCARTHY AND BILL CURRY

 From Thursday's Globe and Mail

OTTAWA - Canadian oil executives have moved to defend their industry as 
"a major driver of the Canadian economy" amid growing fears in Calgary 
that the Conservative government is preparing to unveil tough, 
politically motivated environmental and tax policies.

In a letter obtained by The Globe and Mail, Kathleen Sendall, the 
chairwoman of the Canadian Association of Petroleum Producers, takes 
issue with suggestions that the booming oil sands developments are 
unfairly subsidized and that the highly profitable industry can easily 
afford tax increases and new environmental regulations that would drive 
up costs.

Her letter was sent last week to Indian Affairs Minister Jim Prentice, 
an MP from Calgary who is Prime Minister Stephen Harper's point man in 
dealing with the oil industry on climate change strategy.

Mr. Prentice, Environment Minister John Baird and Natural Resources 
Minister Gary Lunn are scheduled to meet with senior oil industry 
executives in Calgary on Friday for further consultations on the climate 
change policy.

But top of mind for the industry executives will be Ottawa's plans for 
the accelerated capital cost allowance, a controversial tax break that 
provides generous writeoffs for oil sands companies.

New Democratic Party Leader Jack Layton - whom Mr. Harper is courting to 
get his environmental legislation through a minority Parliament - has 
long campaigned against the tax break, calling it a subsidy for oil 
sands production that is a major contributor to Canada's greenhouse gas 
emissions.

Industry sources say executives are worried that the Conservatives may 
agree to eliminate the tax break as part of a deal to win Mr. Layton's 
co-operation.

So far, the oil industry has taken a low-key approach in its own defence.

The approach is in stark contrast to the public campaign it mounted 
against the former Liberal government's decision to ratify the Kyoto 
Protocol, which committed Canada to reducing emissions to 6 per cent 
below 1990 levels.

In her letter to Mr. Prentice, Ms. Sendall - a senior vice-president of 
Petro-Canada - said the oil industry paid out $27-billion to the federal 
and provincial government in 2006 and expects to invest $40-billion 
across the country this year.

She added that the accelerated capital cost allowance - which allows 
companies to depreciate the full cost of equipment in the year it is 
purchased - was extended to the oil sands projects by the Liberals in 
1996 in recognition of high capital costs, long investment horizons and 
financing risks.

While crude prices have climbed, so too have costs, Ms. Sendall said, 
echoing the industry's argument that oil sands investment could dry up 
if both Alberta and the federal government impose new environmental 
regulations and raise taxes.

Companies now require prices of about $50 (U.S.) a barrel to earn a 
reasonable rate of return, she said. "The economics are just as 
challenging now" as they were in the era of lower oil prices, she said.

While Finance Minister Jim Flaherty has also indicated he will review 
the capital cost allowance, Mr. Lunn defended the provision Thursday, 
echoing the industry's own argument. "What they're doing is they're 
getting to write off their depreciations in the year they make their 
investments. So it's not a tax break," he said.

Sources in the industry say that, until recently, oil executives were 
confident that they had an ally in Mr. Harper and that they would be 
able to maintain the generally favourable treatment that they had 
received from previous Liberal governments.

The Liberals were reluctant to impose tough greenhouse gas emission 
standards on the industry for fear of provoking a political backlash in 
Alberta. It was a fear that the oil industry, the provincial government 
and opposition Conservative MPs played on by raising the spectre of the 
hated national energy program of the 1980s.

Now, with Mr. Harper facing mounting political pressure for tough action 
on climate change, industry executives worry that the Conservatives can 
afford to impose some pain on the oil patch in order to win political 
support in Ontario and Quebec.

Still, environmentalists argue the government is unlikely to introduce 
tough new emission standards, but is more likely to follow the lead of 
the Alberta government, which is expected to impose modest targets that 
would gradually reduce emissions per barrel of oil produced but would 
not impose major new costs on oil sands producers.






-- 
Macdonald Stainsby
http://independentmedia.ca/survivingcanada
http://lists.econ.utah.edu/mailman/listinfo/rad-green
In the contradiction lies the hope
    --Bertholt Brecht.