TAX NEWS - JUNE 2010

Canada Tax: Revenue from oilsands keep provincial taxes low

If this province didn't have the oil and gas royalties generated from the oilsands, it would need a provincial sales tax of 16%.

That was one of the key messages this morning as Alberta Energy Minister Ron Liepert addressed the Fort McMurray Chamber of Commerce breakfast meeting. He also discussed what he termed as the "Team Alberta Truth Campaign" spreading out across the country this fall "to have us as Albertans" talking to individual Canadians about what really goes on the oilsands to correct the "propaganda" being spread by well-funded environmental activists.

The message to Ontario and Quebec is "a strong Alberta means a strong Canada." When travelling through the United States, the message will be that a strong Canadian energy sector means security of supply to the lower 48 states, continued jobs in manufacturing and refining.

Those messages are also needed because not only do many Alberta, but Canadians and Americans don't fully realize the significance of the oilsands to their own economies and employment rates.

"Our continued prosperity of the province is going to be largely attributed to what happens in the Fort McMurray-Wood Buffalo region," Liepert told the small gathering.

He did take some heat from members who asked, for example, the province's financial commitment to the twinning of Highway 63 be revisited because it's nowhere near the point of completion it should be. Frank Saraka, Canadian Tire owner, also took exception to the fact there is no chronic care facilities for seniors in town, forcing him to recently move his chronically ill mother back to Ontario where she can receive proper care.

Without the energy industry, he noted that Alberta's GDP would be less than half of what it is today.

Capital investment in Alberta this year is expected to be about $70 billion, with $26 billion going into the oil and gas sector, mostly to the oilsands.

"Without oil and gas royalties, we would need a provincial sales tax of 16% to maintain our current levels. ... And for the first time ever, royalties from the oilsands, will exceed royalties from natural gas and that's important because we need to maintain a balance in our royalty structure. Obviously we have to ensure we have enough royalties to pay for health care, education, infrastructure, but we also have to remain competitive so our goal is to ensure that the engine that drives (our) economy remains strong and vibrant."

However, Liepert pointed out that the province's prosperity is being threatened by an international campaign is misleading people about the oilsands.

"The province and our industry are under attack by well-funded international groups and their efforts are only going to increase."

These groups see the oilsands as an easy target, though Liepert thinks some of the attention will be refocused because of the situation in the Gulf of Mexico.

"Nevertheless, we have to correct the misunderstandings and falsehoods that are being spread ... about us and our industry." He added it's vitally important for people to understand facts about the oilsands such as how 80% are developed through in-situ methods with only 20% being developed through open pit mining which has become the object of so much scorn.

While the oilsands projects do emit a lot of carbon dioxide, Liepert said it's far less than most people realize: less than one-tenth of 1% of the global emissions.

What environmentalists don't talk about is the huge environmental improvements Alberta is making including a 17-million tonne reduction in emissions since 2007. Alberta remains the only North American jurisdiction requiring mandatory greenhouse gas emission reductions from large industries.

He mentioned the Conference Board of Canada recently said Alberta is making the largest total investment in clean energy in Canada.

These facts, he said, need to be conveyed to the public, especially the young people "who are the targets of a lot of propaganda that creates a false impression that we don't care about our environment.

Crippling Alberta's economy with campaigns also significantly impacts other have-not provinces, leading to, for example, job losses in central Canada.

With the gains made in the last 20 years by removing international trade barriers, Liepert said "let's not allow international special interest groups to artificially re-establish these barriers in this the 21st century under the guise of environmental correctness."

Better information needs to be delivered by all Albertans, he added.

"I believe the best days of our industry are still ahead of us. ... We are in a very enviable position compared to the rest of the world. We need to be proud of what we accomplished and we need to look forward to the future."