Finance Committee on Oct. 29th, 2014

[Murray Rankin, NDP, Victoria, BC]

It's a disappointment that we all share.

The second thing I wanted to raise with you and Mr. Egan deals with Mr. Allen's comments on rapid writeoff, the rapid ACCA changes. You're suggesting from an 8% rapid writeoff declining balance to a 40%. You indicate that the preliminary estimate says that the net benefit of that change would be approximately $3 billion in GDP from 2015 to 2035.

Just to be clear, this is a tax expenditure. It's moneys that otherwise would have been paid by your industry to government, which now wouldn't be received. When you talk about $3 billion, is that essentially a $3-billion subsidy that you're asking Canadian taxpayers to provide?

[Janet Annesley]

Well, the money would be received. It is just a deferral of tax revenues.

[Murray Rankin, NDP, Victoria, BC]

But it's tax that your industry would have otherwise paid and you're saying we should now change, so as to allow you $3 billion less in tax payments.

[Janet Annesley]

I'd have to look at the specific MPD. I can't comment on the $3 billion, but again, it's a tax treatment in our view that if the government and Canadians wish to realize the tremendous jobs, the resource revenue—

[Murray Rankin, NDP, Victoria, BC]

You're asking us to pay a price for that benefit.

[Janet Annesley]

—that greatly exceeds $3 billion, then certain treatments are required.

[Murray Rankin, NDP, Victoria, BC]

I have such a limited amount of time, do you have a quick comment, Mr. Egan?

[Timothy Egan]

I wanted to respond to that because our numbers are different, but the formula would apply. We were looking at the differential for the investment for small LNG facilities. The tax loss is in the order....You're right, you are forgoing charging a tax to a potential taxpayer.

[Murray Rankin, NDP, Victoria, BC]

So the rest of us have to dig deeper to support you.

[Timothy Egan]

But that's an investment that won't otherwise occur.

[Murray Rankin, NDP, Victoria, BC]

I understand.

[Timothy Egan]

It's the reason you do it.

So a $42-million tax, in our estimate, for our projects would generate a billion dollars in revenue—

[The Chair, Conservative, James Rajotte]

You have about two minutes.

[Timothy Egan]

—which would generate HST revenue amongst other sources of revenue which would more than offset, which is where we come, I'm assuming, in the numbers on the upstream side as well.

[Murray Rankin, NDP, Victoria, BC]

Mr. Pineault, I wanted to thank you for an expression I have not heard before that I'm going to now use, “the government's environment denial”. I love that. I'm going to plagiarize it from now on.

The point you talked about was economic. Your third recommendation that you didn't have a chance to elaborate on talked about economic transition to a world without carbon. Mr. Carney, the Governor of the Bank of England, just a couple of weeks ago at the World Bank meeting, said that the vast majority of oil and gas reserves are unburnable because if we're going to commit to a global temperature rise of less than two degrees, that's inevitable.

You were getting at something to the same effect, with the carbon bubble analysis, that he and so many others have used. Have I got that right?

[Éric Pineault]

Getting back to the gold mine picture, the problem is not the gold in the soil, the problem is we're running out of atmosphere to throw it into. Maybe in Canada we're denying this and that's fine, and it's okay, but elsewhere in the world, that's a fact. It's taken as a scientific and basic fact.

Most economies are trying to find ways to move out of carbon-based energy without thinking that they can live in a world without oil. I mean, everybody is realistic. We're going to need oil and gas, but maybe a lot less.

Then things like transport infrastructure projects are occasions where we could diversity our economy and where we could start to move away from this carbon dependency. I'll give you one small example coming from southern Ontario.

There's a small business that my dad owns, it does hydraulics and robotics. The hydraulic side is putting snowplows on machines to clear the 401. He does this in Canada. He also does robotics for Bombardier for the brake system for high-speed rail and monorails. He fixes these and builds them all over the world except in Canada because Bombardier doesn't sell electrically based high-speed rail or monorails in Canada because Canada is not interested in this technology.

[The Chair, Conservative, James Rajotte]

We'll go to Mr. Van Kesteren, for five minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thanks, Chair. I wish we could have a longer conversation, I really do.

Chair, you and I, and a number of us spoke about maybe getting a few economists together to talk about these things. We need a longer session.

I want to go to the gas people first. Mr. Egan, I want you to talk to me.

You don't have a specific ask, do you? If you did, what would you like to see in this budget?

[Timothy Egan]

I guess the question is, are they budget asks or not? Certainly, on ACCA, we have a specific ask. It's very specific.

In terms of the reallocation of infrastructure money, that's not a new money ask, that's a reallocation ask. We do have a specific ask around transportation that I haven't spoken about today in terms of potential federal support to offset the differential in cost of natural gas for heavy-duty vehicles.

So they're specific, but in some instances they involve the reallocation of existing federal money.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm listening to this, and as I said, it's a wholly different discussion whether or not we should be moving away....

If we took energy out of the equation, we'd be in the Stone Age. Quite frankly, we wouldn't even be in the 1700s, because back then they used other forms of energy. The world needs energy, and the world is going to buy the cheapest form of energy.

Am I right? Can we really expect the world to get off oil in the near future, let alone gas?

[Timothy Egan]

I work for the gas industry. We're interested in selling natural gas. We're interested in maintaining a relationship with our customers that includes using that gas as efficiently and effectively as possible. That means we're looking at all kinds of new technology applications for reduced use on a per capita basis, for renewable natural gas, for partnering with renewable technologies, and other things.

But fundamentally our economy derives extraordinary value from the oil and gas sector. I'll focus on gas.

To speak to the point about whether an ACCA rate is a subsidy, I wouldn't characterize it as a subsidy. I would characterize it as tax forgone in the interest of making sure that investment occurs here instead of in another country, to address your point, because capital moves from—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Can I interject? We do the same thing with green energy, obviously: if you try to direct movement towards green energy, we subsidize.

I guess what I'm trying to get around is the question whether we are going to be competitive. Will our economy grow if we substitute for a more expensive form of energy?

Am I missing something?

I've been to China, and I've watched them. I don't know whether they are still doing it, but they built a new coal plant every two weeks. The place is dark. We know that in Japan they have shut off the nuclear.

If we boil it right down, there's nuclear, there's hydro, there's thermoelectric, and there's wind. And yet we know that wind is inconsistent, so unless we develop new batteries or something, gas and oil is still our major source of energy. Am I right?

Janet, maybe you want to make a comment on that.

[Janet Annesley]

Indeed.

If you look at sources such as the International Energy Agency or other third party sources that look at global energy demand, it is growing dramatically, thanks to changes in the economies in India and China and some of the other populated nations. As those economies become more active and people move more into the middle class, most of the demand over the shorter term is going to continue to be met by oil and natural gas. There are huge opportunities for natural gas in particular. Oil grows as well.

At the same time, it is an “all of the above” approach. We need renewables to essentially double between now and the year 2025 or 2030. The oil and gas industry knows that.

It is having the right fuel in the right place at the right time. We have to be very conscious of the cost both to taxpayers in terms of subsidies as well as to industries, if you end up increasing their input costs for such things as electricity or other forms of power.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

A small community that is hooked on to something such as heating oil could be much more competitive and could grow if it had access to natural gas.