Energy sector critical to economy
By Lethbridge Herald Opinon on April 16, 2020.
COVID-19 crisis can’t be excuse to kill a key industry
Mark Milke and Lennie Kaplan
CANADIAN ENERGY CENTRE
While the world grapples with the COVID-19 pandemic and an economic downturn, anti-energy activists have spotted an opportunity: to kill off Canada’s oil and gas industry – the one that provides hundreds of thousands of jobs and hundreds of billions of dollars in tax revenues to governments.
The anti-oil and gas activists are busily making three claims to that end:
– that the oil and gas industry is massively subsidized (some claim the figure is over $3 billion annually);
– that fossil fuel extraction shouldn’t continue in Canada, given carbon emissions from oil and gas;
– that the sector is destined to die.
Let’s examine each assertion in turn.
In 2011, economists Jack Mintz and Ken McKenzie examined the faulty assumptions behind the claim the industry received billions in subsidies, which originated with a Winnipeg think tank and was taken up by others, including the International Monetary Fund.
Mintz and McKenzie found four flaws, including using a subsidy definition designed for a different purpose and inappropriately adding individual tax expenditures and royalty relief items up without accounting for critical interactions.
In 2014, the Montreal Economic Institute found actual energy sector subsidies amounted to just $71 million. In 2017, when one of us wrote a study on subsidies, scouring Alberta and Ontario disbursements and Natural Resource Canada, it turned out most subsidies to energy companies were for green energy projects.
Let’s flip this over now to the taxes actually paid by the energy sector. According to Statistics Canada data, between 2000 and 2018, the energy industry paid $359 billion in corporate taxes, royalties and other taxes to provincial and federal governments.
That $359 billion doesn’t include personal income taxes from hundreds of thousands of people employed in the energy industry; any rents and royalties paid between 2000 and 2007 (omitted due to a change in Statistics Canada reporting); property and other taxes paid to municipalities; and payments to First Nations governments.
To put that $359 billion in perspective, the federal government paid out $366 billion in employment insurance between 1996 and 2018. Those who think Canada can live without the oil and gas sector are engaged in magical thinking on government revenues and much else.
That oil and gas activity emits carbon emissions is accurate. However, those who wish to kill off Canada’s oil and gas sector too easily omit critical context: Worldwide trends mean oil and gas consumption and such emissions will continue even if Canada’s energy industry disappears.
Consider natural gas trends. Between 2000 to 2017, the U.S. Energy Information Administration noted that worldwide natural gas consumption soared by 52 per cent and it forecasts another 50 per cent rise by 2050.
Here’s the problem: Canada sat out that boom in natural gas exports while competitors soaked up the new investment, jobs and incomes.
So by 2017, Canadian natural gas exports relative to 2000 were down by 17 per cent. Meanwhile, Canada’s main competitors were setting record export levels in 2017 relative to 2000: Russia (up 13 per cent); Norway (up 146 per cent); Australia (up 562 per cent); Qatar (up 801 per cent) and the United States, where natural gas exports soared by 1,200 per cent.
The same holds true for oil, though less dramatically. Consider investment in Canada’s upstream oil and gas sector. Canada has steadily lost global market share since 2011, falling to seven per cent in 2017 from 11 per cent in 2011. Meanwhile, U.S. market share of global upstream oil and gas investment grew to 35 per cent by 2017 from 28 per cent in 2011.
Thus, while other countries carved out competitive advantages, Canada’s potential was hamstrung. That came care of activists, a few recalcitrant politicians, and more than a few investment gurus who believe – against all empirical evidence, according to Bill Gates and energy expert Vaclav Smil – that the world can do without the industrial economy powered by oil and gas.
Lastly, consider another measurement of the importance of oil and gas to Canada: jobs.
Looking at just oil and gas extraction (excluding pipelines and other energy activity), employment was 89,900 in 2018. Compare that to employment in the automotive and aerospace sectors at 89,100 and 64,200 respectively.
And a broad measurement from Natural Resources Canada found that in 2018, the energy sector directly employed more than 269,000 Canadians.
The short-term outlook for oil and gas has obviously weakened because of COVID-19. However, demand for both products will one day resume their upward trajectory, just as they did after the 2008-09 financial crisis.
The only question is if Canada will have an energy sector or if the activists will succeed in using the current downtown to get what they want: The death of one of Canada’s largest, best-paying industries, which benefits everyone from First Nations to blue-collar workers to government coffers.
Mark Milke is executive director of research and Lennie Kaplan is chief research analyst at the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of “$359 Billion: What Canada’s energy sector paid governments from 2000 to 2018.” Distributed by Troy Media.
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The oil and gas activists are busily making three claims:
– that one can ‘define’ your way out of acknowledging the massive subsidies to the oil & gas sectore;
– that one can laud the revenues from this industry without admitting that we sold the farm;
– that one must not accept that the sector must die, which requires that one does not accept the scientifically-based impacts of climate disruption.
Let’s examine each assertion in turn.
Reducing the definition of subsidies to ‘disbursements’ belies the evidence before our very eyes: $71 million in ‘subsidies’ is offered by Mintz, while governments underwrite billions of dollars of pipelines, builds infrastructure, provides tax breaks and reduces royalties. In other words, public spending on infrastrcuture and not collecting taxes and royalties are also ‘subsidies’, though it is not specifically a ‘disbursement’.
And, certainly, the most profitable industry in history of humankind (oil and gas) has had to pay some taxes, though not nearly enough. Norwegian negotiators famously stood up to the threats of industry to walk away and leave the oil and gas in the ground – they didn’t leave and Norway won much greater tax rates and royalties (which they actually saved); Alberta negotiators, by comparison, curled up in bed, spooning their corporate lovers who left a few bucks on the night stand. The good news is that by having limited the income from oil & gas in the past, it will be easier to wean ourselves off of it in the low-carbon future.
And to write an article about energy without addressing climate change shows that there is no balance nor credence in this opinion. Saying ‘there is no alternative’ and that we must ‘get what we can while we can get it’ ignores the long-term impact of burning fossil fuels on our environment and our economy (which is, after all, a wholly owned subsidiary of the environment). Money has no value without ecological integrity and a functioning, egalitarian society.
Does it seem strange that what is, not, making headline news today in Alberta, is that a Montana judge, yesterday, revoked a key permit for the Keystone XL pipeline there….a significant blow to the project.
And, while this decision is supposedly being reviewed by the ‘players,’ how much of the $1.5 billion Alberta taxpayer’s money went out for the project already?
And, this is while, as reported by the CBC, health care professionals on the front lines in Alberta are putting up with substandard surgical masks and having to collect N95 masks from ICUs in Edmonton and Calgary for recycling, and while $20,000 of AB taxpayer money was spent on Facebook ads touting the medical mask giveaway. It seems that the Kenney UCP’s seemingly manic actions (including the iffy letter from Kingston, Ontario) with regard to the oil and gas sector is verging on being seemingly crazed.
“Alberta spends up to $20K touting medical mask giveaway on Facebook to build social licence for pipelines”
http://www.albertapolitics.ca
Priorities?
ty fes and so.ab. you kids seem to always restore my faith that we are all not a bunch of numbskull scammers and scammed.
No kidding. Who pays these guys, anyway?
Oh, ya. We do.
what will prove to be most critical to our economy is the two-headed fallout from the energy sector: our one horse dependency; and, the orphan wells and toxic mess that will cost use dearly in clean up and in health related issues.
Oil and gas will continue to have some importance, but Kenney’s UCP have failed miserably in supporting this declining industry. They have invested billions of our dollars needlessly and AimCo the investment company that invested billions of our retirement funds made a really bad bet under UCP direction in fossil fuel and lost an unprecedented $4Billion in one quarter.
Kenney’s UCP is failing miserably, like a drunken gambler chasing his losses by further bad bets. He claims that the lack of pipelines to tidewater is our problem, but the pipeline to the west coast has not used more than 25% capacity in the past few years. The sooner we can get this con man out of government, the better for our future. He is delusional.
This is the future we are looking at https://www.oxfordstudent.com/2020/04/20/oxford-university-passes-motion-banning-investment-in-fossil-fuels/?fbclid=IwAR2zL32O-23Twez6wY1x8ft9abSqAxBAO6ck9IlJ57DhpWFmBlK8utuQ4bU