Committee report urges end to oilsands tax break
http://www.thestar.com/Business/article/187693
Mar 02, 2007 05:35 PM
Dennis Bueckert
Canadian press
OTTAWA – The federal government should cancel its generous tax treatment of the Alberta oilsands industry, putting it on the same footing as the rest of the energy sector, says a draft report by a House of Commons committee.
The tax break, estimated to be worth $1.4 billion annually, has been a point of growing controversy as oilsands operators reap record revenues.
The accelerated capital cost allowance was introduced when oilsands technology was still considered experimental, and this preferential tax treatment has been criticized for years.
Environment Minister John Baird recently said he has doubts about it, and there is speculation the tax break may be revoked in the budget set for March 19.
The 93-page draft report, obtained by The Canadian Press, is the result of more than three months of work by the Commons natural resources committee, and likely represents the most comprehensive review to date of policy issues raised by the oilsands.
Sources say the release of the report has been delayed by Conservative members who are expected to issue a dissenting report. New Democrat and Bloc Quebecois MPs may also issue separate but complementary reports.
The document says the rapid expansion of the oilsands provides an enormous economic and strategic advantage to Canada, but important environmental, economic and social issues have yet to be addressed.
"In particular, greenhouse gas emissions from oilsands activities are of increasing concern and have yet to be tackled head on. As one witness from the Pembina Institute put it, Canada risks becoming known `not as an energy superpower but as a superpolluter.' "
It says the Alberta government owns the oilsands and should determine the pace of their development, but Ottawa has jurisdiction to intervene through legislation such as the Fisheries Act and the Canadian Environmental Protection Act. It calls for a firm limit on greenhouse gas emissions from the oilsands.
"The committee recommends that the federal government, specifically the Department of Natural Resources, base all of its actions in the area of oilsands development on sustainable development and polluter-pays principles."
Alberta is likely to react strongly against any suggestion of a stronger federal role in resource development.
The report raises concern about the use of natural gas in oilsands processing, saying gas is too valuable to be used that way. It also recommends against using nuclear power, saying much more study is needed.
It also proposes a major increase in research on the impact on the Athabasca River system, and deplores the fact that aboriginals in the area are living in poverty despite the massive revenues being generated.
The oilsands sector has been expanding much faster than expected: in the mid-1990s a task force predicted production would reach one million barrels a day by 2020, but that level was in fact achieved in 2004. It's now expected production could triple by 2015.
"Additional sustainable investments in upgrading and refining, both value-added activities, should be encouraged, with a view that such investments would provide substantial economic benefits to Canada," the draft report says.
"Mounting environmental and social costs associated with oilsands activities in particular make it increasingly clear that it would be irresponsible to continue on a `business-as-usual' course. It is time to begin the transition to a clean energy future."
