The Fantasy of Fossil Fuel Subsidies

What subsidies are they talking about? Or is it just more rhetoric?

Parliament is out for the summer, but this Government never takes a break on their misinformation ‘fossil fuel subsidies’ narrative. Like many of you, the first question that came to mind when I heard Canada’s Minister of the Environment proclaim ‘the end of fossil fuel subsidies’ was – “what are you talking about?”

We’ve seen repetitive misinformation from this Government and their parliamentary allies for some time – and I have been punching big holes in these absolute fantasies put forth by the Liberals on this matter in the House of Commons.

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But they persist.  Just as Catherine McKenna proclaimed, “if you actually say it louder, we’ve learned in the House of Commons, if you repeat it, if you say it louder, if that is your talking point, people will totally believe it,.”  It’s a sad, but somewhat accurate condemnation of critical thinking in the digital age.

“If you actually say it louder, we’ve learned in the House of Commons, if you repeat it, if you say it louder, if that is your talking point, people will totally believe it.”

Catherine McKenna, then-Minister of the Environment, May 17, 2019

Recognize that most of you reading this are not the target audience of the government’s narrative.  Many of you have had exposure to the reams of ‘economic rent’ paid by Canada’s resource industries for the social benefit of all Canadians. There is very little doubt that Canada’s social safety net would be much less robust without the direct contribution of our resource industries. Last year, this direct contribution to government (through corporate taxes, royalties, and licensing alone) amounted to approximately $22 Billion.  That’s not including the income taxes workers in the industry paid the government, nor the taxes collected from carbon, excise and sales taxes. Compiled data show that, counting these inputs, the oil and gas industry has contributed $701.2 Billion to Canadian governments between 2000 – 2019 — an average of over $35 Billion per year. For reference, in 2021, the federal government’s share of Canada’s healthcare spending was $42.1 Billion. 

So, with the billions of dollars of taxation paid to governments by the oil and gas industry, and its contribution to government revenues exceeding any other industry – make sure you raise an eyebrow when any charlatan tries to string together a narrative that this industry is ‘subsidized’. 

“It’s long been a perennial claim in Canadian politics that obscene amounts of government money are being diverted every year into the coffers of the oil and gas sector. As has been claimed multiple times in the House of Commons, Canada’s “oil and gas subsidies” are in excess of $22 million each day; the equivalent of taking the entire GDP of Prince Edward Island and simply signing it over to Big Oil.

“But even the most cursory look into what actually constitutes a “fossil fuel subsidy” reveals it to be one of the more abused terms in Canadian politics. A diesel bus being converted to run on natural gas? A research program to stop oil spills? An environmental activist being arrested for blocking a road? All of these have, at one time or another, been tallied up as an “oil and gas subsidy.”

Tristin Hopper, Vancouver Sun, July 24 2023

For those of you that look for more economic depth, it also ignores how much Canadians benefit from a currency that is supported by an export commodity that alone accounts for over $100 Billion of trade surplus with our largest trading partner.  Without this balance, our dollar would trade far below its current rate. That means that everything we import – and we import about half of what we buy – would cost a lot more Canadian dollars, so – everything would cost more, and our inflation rate would be much higher.

Environment Committee Study

Luckily for the government, we just studied this very matter at the House of Commons Standing Committee on the Environment.  But I punched holes in the Committee deliberations on the propagandized witness testimony they did receive.  As much as I try to add value to these parliamentary committee reports – with, you know, things like data that corroborates or ridicules what some witness may boldly state – the other parties would have little of that input.

Muzzling Opinion at the Environment Committee

I am attaching a copy of the report – it’s 100 pages long – for your perusal.  The Coles Notes version would have me direct you to the government members’ 20 recommendations.  I advise that you will find them ‘mealy-mouthed’.  Frankly, the report would have been marginally productive if parliamentarians could have arrived at definitions of ‘fossil fuel subsidy’ and ‘inefficient’.  Such is not the way of parliamentary committees.

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Secondly, take a read of the Conservative Party of Canada’s dissenting opinion, the data for which comes from my office.  We make substantive recommendations – the most pertinent being that the volume of petroleum products consumed in Canada that are not produced in Canada (we import 674,651 barrels/day, of the roughly 1.6 million barrels/day that we use, or about 42%) – provide very little ‘economic rent’, as opposed to Canadian-produced oil and gas.  It seems as though the foreign-supplied resources have the actual subsidy, in that context.

True circular economy

For this study, I asked for disclosure on the government funding received by the ten witness groups that the governing coalition used to create their report – and much of their input is completely specious.  I received a detailed response, and these groups – that testify for parliamentary committees – have been granted over $150 million from this government over the past eight years.  Some groups were created just for this input; others have seen their grants increase markedly.  That’s the subject for another day. But let me point out clearly that this government has their well-paid propagandists working hard for them.  It’s a circular economy!

Let’s discuss actual subsidies – because our oil and gas industry has received some. 

• Flow-through share financing (with which some of you know I am well-versed) began its withdrawal from Canadian tax eligibility under the Conservative government of Stephen Harper. This government indicated its final demise in 2017 – and has been wound down ever since (some of the investments have 5 year tails. But the government keeps re-announcing their pulling out!

• COVID Support – yes, during the pandemic, the oil and gas service industry received special program funding to keep working, and focus on dealing with accumulated environmental liabilities.  It was a federal subsidy for what is a provincial liability.  It also kept an industry current, and kept those workers from receiving funds under other pandemic programs, like CERB and CEWS.  Let’s thank the government for allocating $1.7 Billion of targeted pandemic funding – out of $403 Billion spent on the programs across Canada. And important work was actually done! Some further CERB and CEWS funding went to the oil and gas industry also.

• Trans-Mountain Pipeline – as I said in the House of Commons. “You broke it, you bought it, you broke it again!” There isn’t a financial analyst alive that can justify the cost over-runs associated with the pipeline build.  It is absurd. I will be pressing to find out where and how the funds were spent – because we’re already been thwarted on getting information on this boondoggle. But it’s tough to call the $30 Billion + a subsidy, when it has been engineered by the Minister of the Environment to have costs escalate.  Yes, I have pushed on this and will continue.

• Export Development Canada / Business Development Canada funding – Yes, they  stepped in to fill the void of financing for oil and gas companies in 2015, after the Supreme Court of Canada’s famous ‘Redwater’ decision.  Much to the Justice’s dismay (post-decision), security for oil and gas assets disappeared.  Lenders did not know where they stood on their investments.  In the face of frozen activity, the federal government stepped in with funding from two Crown Corporations to fill the temporary void.  Loans for billions were issued – but the cost of capital was always close to where the financial terms would be with another provider – so the benefit is nebulous.  But it is a good study in unforeseen consequences of well-trained legal minds arriving at a solution. (Note: the Supreme Court of Canada over-ruled the Alberta Court of Appeal in that ruling).

Let me put a silver lining on this cloudy announcement from the Minister of the Environment.  For the first time – he has acknowledged that the government will be applying for international credits under Article 6 of the Paris Accord, a common sense solution that we have pushed and the government has avoided until now.  This should open the door to our LNG developments – if we can get the regulatory roadblocks out of the way. It’s always been obvious that Canada was not going to meet any climate commitments without this measure, and – worse still – the world would continue to produce more CO2 while Canada sat on its hands.

But, Minister – what took you so long to figure this out?