Thursday, February 19, 2009

Hypocrite Harper’s move to kill income trusts, contradicts his pledge today on clean energy

Canada and the United States have announced plans to work on clean energy technology today, including technologies such as carbon sequestration.

Perhaps the Harper government needs to reread the following report that was delivered to Jim Flaherty in December 2006, and these excerpts:

Canadian Energy Trusts | December 2006
An Integral Component of the Canadian Oil and Gas Industry

Environmental Considerations:

Perhaps the most significant unintended consequence of the government’s proposed tax changes relates to the environment, which is important to all Canadians. Canada’s greenhouse gas (“GHG”) challenges are well documented. As the Western Canadian Sedimentary Basin has matured, ownership and control of the vast majority of Canada’s legacy conventional oil reservoirs has transferred to the oil and gas trust sector. The large corporations chose not to retain control of these properties and pursue enhanced oil recovery (“EOR”) activities through CO2 injection, instead selling the majority of these large ‘in-place’ oil reserve assets to the trusts.

The oil and gas trust sector’s low cost of capital and business model has allowed these projects to become more attractive economically such that trusts are now at the forefront of CO2 sequestration initiatives. In two large fields alone, Pembina and Redwater, CO2 EOR projects could reduce emissions of GHG to the atmosphere by 30,000 tonnes per day, or 11 million tonnes annually. These projects represent the only truly meaningful opportunities to dramatically reduce Canada’s GHG emissions in the near term.

Unfortunately these projects would be targeted to come on stream around 2011, just as the government’s revised tax treatment for trusts would come into effect. The proposed changes will drive energy trusts back into a corporate model.

As history has shown, this business model and a growth-oriented investor base is not aligned with the pursuit of CO2 EOR projects in Alberta. At the very least these projects will be delayed but more likely many may not proceed at all.

Do Energy Trusts Cause Federal Tax Leakage?

No. Federal and provincial government revenues are actually enhanced by the energy trust structure. During the past five years, CCET member trusts have generated greater taxes both provincially and federally than would have
occurred had they been structured as corporations.

In 2005, the oil and gas trust sector generated over 30 percent of the tax revenue collected from publicly-traded Canadian entities in the oil and gas sector while representing only 16 percent of the revenue. Oil and gas royalty trusts have also generated over 40 percent more taxes than Canadian publicly traded senior independent producers on a unit-of-production basis.

Do Energy Trusts Threaten Canada’s Long-term Economic Growth?

On the contrary, energy trusts are the ideal model for Canada’s mature hydrocarbon basins. Since their introduction in 1986, they have played a unique role in maximizing oil and gas production and reserve recovery and providing essential capital to Canada’s energy industry.


Dr Mike said...

In 2006 when pirate Jim received this report , he must have been having another one of his 2 eye patch days & missed it!!!!!

Dr Mike.

Anonymous said...

Hmm I suspected this when researching some green or alternative energy companies for possible investments.

Thank you for doing the homework and substantiating my suspicion along with providing some other insights. Hopefully some environmentalists use these points as ammunition when dealing with the government over the next few months.