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New federal financial assistance given to the oil and gas sector in 2018

Canada has failed to honour its promise to eliminate subsidies to the production of fossil fuels, specifically by announcing a number of new financial assistance measures granted to oil and gas companies in the Fall Fiscal Update and in December 2018:

  • Assistance of CAD 275 million for infrastructure and support for the protection of the marine environment, together with tariff exemptions worth one billion dollars for the LNG Canada project; [1]
  • A new accelerated investment incentive announced in the Fall Economic Statement 2018 allowing oil and gas companies to immediately write off the capital costs of goods manufacturing and processing machinery and equipment; [2]
  • The announcement made on December 18, 2018 included new financial support measures for the oil and gas sector totalling CAD 1.65 billion, including:[3] 
    ○ CAD 1 billion in financial support to oil and natural gas exporters from Export Development Canada;
    ○ CAD 500 million over three years in commercial financing for “energy diversification” from the Business Development Bank to support small oil and gas companies;
    ○ A new CAD 50 million investment in the oil and gas sector through Natural Resources Canada’s Clean Growth Program;
    ○ CAD 100 million through Innovation, Science and Economic Development Canada’s Strategic Innovation Fund for energy and economic diversification-related projects.

Federal tax measures aimed at Canada’s oil and gas sector

  • The accelerated Capital Cost Allowance for liquefied natural gas projects (up until its planned elimination in 2025);
  • The deduction for Canadian Development Expenditures (CDEs);
  • The deduction for Canadian Exploration Expenditures (CEEs), including unsuccessful explorations;
  • The deduction for flow-through shares still in effect granted to the oil and gas sector;
  • The Canadian Oil and Gas Property Expense (COGPE) deduction;
  • The Foreign Resource Expense deduction;
  • The Accelerated Investment Incentive deduction for new Canadian Development Expenditures (CDEs) and expenditures on Canadian oil and gas assets. [4]

Source: Public Cash for Oil and Gas: Mapping Federal Fiscal Support for Fossil Fuels

Financial Support provided by Export Development Canada

EDC supplies more public financing for fossil fuels than for clean technologies. It supports the exploration, expansion and transportation of fossil fuels in Canada and abroad, often for projects that are too risky for the private financial market.

  • Between 2012 and 2017, EDC provided twelve times more support for oil and gas than for clean technologies, facilitating an average of more than CAD 10 billion in oil and gas financing each year.
  • In the first two years of Prime Minister Justin Trudeau’s government, EDC provided more support for oil and gas (CAD 22.4 billion) than did his predecessor, Stephen Harper, in his last two years (CAD 20.9 billion).
  • Available data shows an average of nearly 30 percent of EDC’s support for oil and gas is aimed at financing the domestic operations of Canadian companies, rather than fulfilling EDC’s original mandate of export-focused international finance. (Unlike the export credit agencies in most other countries, the Harper government had expanded EDC’s mandate during the 2008 financial crisis to allow the agency to also provide Canadian businesses with direct government-backed financial assistance for projects in Canada, a practice that continues to this day.)
  • In August 2018, EDC financed Ottawa’s purchase of the Trans Mountain pipeline at a cost of CAD 4.5 billion, and it is EDC that would finance the Trans Mountain expansion project.

Source: Risking it all: How Export Development Canada’s support for fossil fuels drives climate change

Sources:

[1] https://environmentaldefence.ca/2018/10/26/whats-behind-bcs-new-lng-mega...
[2] https://www.nationalobserver.com/2018/11/21/news/morneau-bets-new-tax-gift-wind-and-solar-also-helps-out-oil-and-gas
[3] https://www.canada.ca/en/natural-resources-canada/news/2018/12/government-of-canada-announces-support-for-workers-in-canadas-oil-and-gas-sector.html
[4] https://www.budget.gc.ca/fes-eea/2018/docs/statement-enonce/anx03-en.html