Canadian oil and gas producers made their second appeal Thursday for a national corporate tax break to counter depressed sales and prices blamed on the Covid-19 pandemic, global supply gluts and environmental movements to curb fossil fuel use.
Favorable taxation would enable homegrown firms to compete for international investment, said the Canadian Association of Petroleum Producers (CAPP) in an open letter to Natural Resources Minister Seamus O’Regan.
“In the wake of the Covid crisis, Canada will be competing with every other jurisdiction in the world for more limited investment dollars,” said CAPP.
The requested break would make all Canadian oil and gas sector capital spending, including carbon emission reduction and clean technology commitments, immediately 100% deductible from corporate taxes.
“This change would be consistent with the tax treatment of other capital intensive industries in Canada, and is a powerful tool for attracting large scale investment and jobs back into Canada’s economy,” said CAPP.
A forecast issued in May by the Petroleum Services Association of Canada predicted there would be only 3,100 wells drilled this year in the country, the fewest since activity slid to 2,934 in 1971, according to CAPP records. The projected 2020 well count would be 88% less than the 2005 Canadian peak of 25,068, 31% below the 4,499 drilled after the 1980s oil and gas price slump, and 63% lower than the 8,137 bottom in the 2008-2009 global financial crisis.
No official reply has been made yet to CAPP’s first version of the corporate tax break request, which was made in a letter in late March appealing for help.
Canadian federal fossil fuel industry aid to date includes C$2.47 billion ($1.8 billion) in grants and loans for cleaning up abandoned wells and reducing methane emissions. Oil and gas producers have also been granted eligibility for last-resort government loans available to firms in all sectors with annual revenues of at least C$300 million ($225 million).
Complicated approval procedures and a vague requirement for applications to show support for hitting the Liberal government’s net-zero carbon emissions target have delayed use of the emergency loan program, according to industry officials.
CAPP’s new aid appeal also calls for creating a standing committee of corporate and government leaders to establish a clear path for oil and gas sector recovery as Canada emerges from the induced economic coma of the Covid-19 public health emergency.
The CAPP letter called for “visible federal government commitment to work with industry to provide clarity and certainty to capital markets that Canada is a supportive and competitive jurisdiction to invest in over the long term.”
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