|
Massive Canadian spending program leaves petroleum industry pondering
Gary Park for Petroleum News
The Canadian government has shrugged off three decades of fiscal restraint at the federal level by rolling out a big spending post-pandemic economic recovery budget, including C$17.6 billion to stimulate green and climate initiatives.
That, along with C$30 billion of day care and early education spending, make up the largest items in C$101 billion of new spending.
Finance Minister Chrystia Freeland said her budget is “about finishing the fight against COVID-19 and healing the economic wounds” left by the devastating virus.
To some observers, the record 700-page document seems premature at a time when the pandemic is raging across Canada’s four largest provinces - Ontario, Quebec, British Columbia and Alberta - overloading hospitals and intensive care units.
Freeland vigorously disagreed, noting that Canada’s employment levels are 460,000 below pre-2020 levels in a population of 37 million.
“Canada needs jobs. We need to get back to work. This budget will do that,” she said, pointing to the sluggish recovery after the 2009 recession.
“The world did not respond fast enough and hard enough (in 2009). We let economic hardships fester.”
The result from last year’s multibillion-dollar wage and rent subsidies and support for small businesses will be a deficit of C$354.2 billion and be followed by another C$154.7 billion in 2021-22 before starting a gradual return to levels around C$30 billion in 2025-26.
Natural resources Left in the lurch amid Freeland’s spending spree is Canada’s natural resource industry, despite plans for a 50% tax cut for manufacturers of technologies to achieve net-zero carbon emissions and C$5 billion over seven years to create a fund for projects to reduce greenhouse gas emissions by 36% over the next decade from the original target of 30%.
“We are at a pivotal moment in the green transformation,” Freeland told Parliament. “We can lead, or we can be left behind. Our government knows that the only choice for Canada is to be in the vanguard.”
Three days before the budget was released, Canada’s Natural Resources Minister Seamus O’Regan, who said carbon capture “was an important part of how we get to net-zero,” gave hope to Alberta Premier Jason Kenney’s expectations of a firm financial commitment to kickstart new carbon capture utilization and storage, CCUS, projects based on “very encouraging discussions with the federal government.”
In March, Kenney asked Prime Minister Justin Trudeau for C$30 billion in assistance and various incentives for CCUS, noting that Alberta has “the technology, the workforce and producers who are keen to participate … what we don’t have are the right incentives.”
Role of investment tax credits The initial interpretation of the budget is that investment tax credits could play a major role in lowering carbon outputs at refineries, cement and fertilizer production plants and power stations, while helping to shrink emissions at oil sands operations.
While the Kenney government and the petroleum industry wait for specific details of the tax credits - which the Trudeau government has promised after 90 days of consultation - environmental organizations are wasting no time in pummeling any prospect of funding for CCUS technology, arguing that would only delay the transition away from fossil fuels.
Julia Levin, the climate and energy program manager at Environmental Defense, said the proposed funding risks locking Canada into “decades of increased carbon pollution … we need to start winding down the oil and gas sector in order to ensure we have a liveable planet … these supports would do the opposite.”
The early conclusion by Saskatchewan Premier Scott Moe and Alberta Finance Minister Travis Toews is that the Trudeau government is sending out a signal that it opposes using CCUS for enhanced oil recovery, EOR, by using the carbon emissions to rebuild reservoir pressures.
Toews said he is concerned about the absence of budget details, “specifically the exclusion of EOR projects with a net-zero carbon profile,” despite Alberta’s estimate that CCUS technology could reduce emissions by 30 million metric tons a year and aid Canada’s goal of achieving net-zero emissions by 2050.
The Business Council of Alberta said the budget spends in nearly every area of the Canadian economy and society but comes up “woefully short on the approach necessary to enable Canada’s industrial and resource sectors to reach their emissions potential.”
However, Alex Pourbaix, chief executive officer of Cenovus Energy, one of the largest oil sands producers, said the prospect of a CCUS tax credit is “an important step forward (in the) important work of decarbonizing Canadian oil production.”
- GARY PARK
| 