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Elizabeth May is wrong about oil and gas

Elizabeth May is wrong about oil and gas

By Robert Lyman

In her May 19 comment responding to John Ivison, Elizabeth May attempts to reinforce her previous claims that investment in Canada’s oil industry is not worthwhile but investment in renewables is. Among other things, she argues that Canada’s oil industry makes only a small contribution to government revenues — though she does so by focusing on revenues generated in the years since 2015, when oil prices declined.

Let’s look at the financial contribution of the oil and gas industry over a longer and more representative period. According to the Canadian Energy Centre, an Alberta crown corporation, between 2000 and 2018 Canada’s oil and gas production industry directly paid almost $240 billion to provincial governments and $66 billion to Ottawa. In addition, its employees paid another nearly $54 billion in federal and provincial taxes. According to Statistics Canada, from 2000 to 2018, the energy industries provided $65.9 billion in federal corporate taxes alone, more than banking ($60.9 billion), construction ($44.7 billion) and real estate ($44.6 billion).

Ms. May notes that in recent years investment dollars have left the Canadian oil and gas industry so that the industry currently finds itself in difficult financial circumstances. But she fails to mention why the industry has fallen on hard times. Over the past three years, federal government decisions encouraged by environmental organizations like the one Ms. May leads were responsible for the loss of $32.5 billion of capital investment in oil pipelines that would have assured Canadian producers’ access to export markets — not to mention created 3,500 long-term jobs. Over that same period, $67 billion in capital investment in three liquified natural gas plants was foregone due to delays and opposition from the same groups. Earlier this year, the Teck Frontier oilsands mine, a $20-billion investment that would have provided 2,500 long-term jobs, was cancelled due to federal delays and procedural obstacles promoted and encouraged by environmental groups. From 2014 to 2018, Canadian producers of heavy crude oil lost $40 billion due to market discounts directly resulting from inadequate pipeline capacity.

Taxes are making matters worse. Canadian oil producers now pay $30 per tonne on carbon dioxide emissions that competing energy producers in other countries don’t pay and the rate of tax is scheduled to continue increasing.

It is not mainly the market that has harmed the oil and gas industry. It is Canada’s own citizens, including Ms. May and her followers

The problems faced by the Canadian oil industry are not due to a lack of global demand. World oil demand grew by over one million barrels a day per year from 2012 to 2019 and is at its highest level in history — or at least was until the pandemic struck. Almost every other major oil-producing country has been able to benefit from this growth through increased investment and production and there is no good reason to think they won’t continue to do so after the coronavirus emergency passes. By contrast, investment in Canada’s industry has declined, largely because of government policies.

To be sure, declining international crude prices have also reduced the funds available for investment in the Canadian industry. But investment has increased sharply elsewhere — the U.S., for instance — even as it has declined in Canada. It is not mainly the market that has harmed the oil and gas industry. It is Canada’s own citizens, including Ms. May and her followers.

Activists contend that renewables offer the prospect of higher employment. But studies in the U.K., Germany and Spain show that, for every job created in the renewables industry, two to three are lost in other industries because of higher energy costs. Moreover, the manufacture of wind and solar equipment takes place in China and a few European countries, not Canada.

Ms. May seems to think that governments should decide which energy industries will be the beneficiaries of additional investment, as if central planning were a wonderful new idea. Perhaps this is because the industries she favours, wind and solar, are uneconomic sources that cannot survive in the marketplace without subsidies. Support for the renewable energy industry runs the gamut from R&D assistance, to supply subsidies, to favourable regulations, to tax exemptions. According to a report from the United Nations Environment Program, from 2006 to 2017 nearly US$2.5 trillion was funnelled into government-mandated renewable energy investments worldwide. The public justification for such extensive, multi-faceted government support for renewable energy was that it would reduce greenhouse gas emissions. Yet, despite that monumental expense, from 2006 to 2017, global emissions increased almost 20 per cent. Renewables are just not worth it.

And regarding revenues to governments? Just try finding out how much the renewables industry pays in taxes. You can’t. Because it doesn’t.

Robert Lyman is a retired energy economist.

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