Bill C-214 (Historical)

An Act to amend the Income Tax Act (qualifying environmental trust)

This enactment amends the Income Tax Act to include, in the definition “qualifying environmental trust”, trusts that are maintained for the sole purpose of funding the reclamation of an oil or gas well operated for the purpose of producing petroleum or natural gas.

[The Chair, Liberal, Ginette Petitpas Taylor]

Perfect. Thank you.

To continue, today's meeting is also taking place in the new webinar format. Webinars are for public meetings and are available only to members, their staff and witnesses. All functionalities for active participants remain the same. Staff will be non-active participants only and can therefore only view the meeting in gallery view.

Since all our members are here virtually, I don't need to go over the public health recommendations.

For those participating virtually, members may speak in the official language of their choice. At the bottom of your screen, you have the option of choosing either floor, English or French. With the latest Zoom version, you may now speak in the language of your choice without the need to select the corresponding language channel. Honestly, I have to say that it's very nice not to have to make this change anymore.

We are now ready to proceed with the consideration of Bill C-262 standing in the name of Mr. McLean in the order of precedence. As members may know, the subcommittee had considered Mr. McLean's previous item, Bill C-214. The first reading of the bill has since been declared null and void, and the order for second reading was discharged and the item was dropped from the order paper.

As per the rules, the member was given the opportunity to introduce a new item of private member's business. As such, Bill C-262 was introduced and placed on the order of precedence on December 11, 2020. The subcommittee is now asked to determine its votability.

I will invite the analyst to take the floor to give a succinct summary of the item after which members can ask questions. If there are no questions, the chair will put the question.

Ms. Keenan-Pelletier, you have the floor.

Bill C-214—Ways and Means Motion—Speaker's Ruling

[The Speaker, Liberal, Anthony Rota]

I am ready to rule on a point of order raised on November 3, 2020, by the hon. parliamentary secretary to the government House leader concerning Bill C-214, An Act to amend the Income Tax Act (qualifying environmental trust), standing in the name of the hon. member for Calgary Centre.

In his intervention, the parliamentary secretary alleged that the bill should have been preceded by a ways and means motion. He argued that the bill would expand the definition of “qualifying environmental trust” to include a trust maintained for the sole purpose of funding the reclamation of an oil and gas well. As such trusts are taxed, he argued that the bill would extend the tax to a new class of taxpayer and should therefore be ruled out of order.

The hon. member for Calgary Centre argued that his bill would not create a new class of taxpayer, but would merely allow the oil and gas industry to use an existing tax mechanism already in use by the extractive industries. He also argued that an increase in tax revenue would only be incidental and would therefore not normally require a ways and means motion.

Bill C-214 would amend the Income Tax Act to include, in the definition of “qualifying environmental trust”, trusts that are maintained for the sole purpose of funding the reclamation of an oil or gas well operated for the purpose of producing petroleum or natural gas. As the sponsor of the bill noted, such trusts may already be used to fund reclamation activities by other extractive industries, but the act currently prohibits the use in relation to oil and gas wells. The bill's sponsor has argued that such a prohibition is unfair and that his bill seeks to correct the inequity. The Chair's decision, however, must be based not on the worthiness of the bill's policy objective, on which the Chair has no views, but rather on its compliance with our rules.

House of Commons Procedure and Practice, third edition, states at page 906, and I quote:

The House must first adopt a Ways and means motion before a bill which imposes a tax or other charge on the taxpayer can be introduced. Charges on the people, in this context, refer to new taxes, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of a tax to a new class of taxpayers.

The question before the Chair is whether Bill C-214 extends a tax to a new class of taxpayers. The tax treatment of qualifying environmental trusts, or QETs, is admittedly quite complex, with a series of offsetting credits and deductions between the trust and the corporation that contributes to it. Generally, such a trust is created by a corporation as it would provide a tax advantage.

However, this is not a circumstance where the bill proposes a tax reduction or a tax credit. The means by which this advantage is gained is through the creation of a separate and distinct taxpayer, the trust. The bill's sponsor argues that QETs already exist as a class of taxpayers. Indeed they do. At present, however, the Income Tax Act specifically excludes a trust relating to the reclamation of a well. This exclusion has been part of the act ever since these sorts of trusts were first introduced in Bill C-59, An Act to amend the Income Tax Act and the Income Tax Application Rules, in 1995, when they were originally known as mining reclamation trusts.

Having been renamed “qualifying environmental trusts” in 1998, the number of eligible industries was expanded to include other extractive industries in 2011 via Bill C-13, An Act to implement certain provisions of the 2011 budget as updated on June 6, 2011 and other measures. Each of these bills was preceded by a ways and means motion. While they clearly contained other measures, the Chair believes that such a motion was necessary to expand the various types of industries able to create a QET.

Accordingly, a ways and means motion is necessary. The bill cannot proceed and should be discharged.

Pursuant to Standing Order 92.1, the hon. member for Calgary Centre may substitute a new item in the order of precedence to replace Bill C-214.

I thank hon. members for their attention.

Environmental Restoration Incentive Act

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Madam Speaker, I am happy to rise today to speak to Bill C-221, a private member's bill tabled by my colleague for Lakeland.

Bill C-221 would provide a tax credit to qualifying corporations for expenses incurred for the closure of an oil or gas well. The bill would also require the Minister of Finance to assess whether the implementation of a flow-through share program would increase private sector funds available to close oil or gas wells.

I will cut to the chase and say that I do not think that the bill before us is the way forward. The NDP believes in the polluter pays principle, and that is theoretically the way the well drilling system is set up right now. Companies are obliged to clean up their wells when they become inactive. Providing incentives for companies to not break the law is a waste of taxpayers' money. Despite what the member said, it is a textbook case of an inefficient subsidy. It flies in the face of government promises that date back to the Harper era to end subsidies to the fossil fuel sector. However, I would also admit that the bill does have the good intention of dealing with the significant problem of inactive wells across Canada, especially in western Canada.

Right now, there are 91,000 inactive oil and gas wells in Alberta, 36,000 in Saskatchewan and 12,000 in British Columbia, and these are the wells that Bill C-221 is seeking to address. These wells are not cleaned up. When the companies that own them become insolvent, they become orphan wells and the taxpayer is on the hook to pay for the cleanup. That scenario has played out again and again.

There are more than 2,500 orphan wells in Alberta right now, 356 in B.C. and 159 in Saskatchewan. It can cost $100,000 or more to clean up a well. Members can do the math: It is a big bill for taxpayers to deal with orphan wells, and the bill could get bigger. The Alberta Energy Regulator has predicted that the number of inactive wells in Alberta could easily rise, could easily double, to 180,000 over the next 10 years, and so it is a serious problem. I would agree with the member on that.

We cannot leave these wells and do nothing. There are impacts on the environment, as they will leak methane into the air and contaminants into the ground. There is an impact for landowners and farmers who receive lease payments while these wells are active and even when they are inactive. Until they are cleaned up, those lease payments are made, but, increasingly, oil companies have simply informed landowners that they will not be making lease payments, with no discussions, no negotiations. Many Canadians wish they had that kind of power over their landowners. Landowners have had to take companies to court to make them live up to their obligations.

The Alberta provincial government has told oil companies that they do not have to pay municipal taxes during these tough times, but there is no compensation given to local governments that are already struggling through COVID. Municipalities have not only lost a valuable tax base, but many have been left with contaminated sites that they cannot afford to clean up; and the member for Lakeland mentioned one of these, and so development opportunities are squandered.

What has caused this problem, and how can we fix it?

Clearly, the problem is that companies do not have the ability to pay for cleanup. We all know that times are very difficult in the oil patch. One could argue that companies did not see this downturn coming and were caught unaware by these tough times. The trouble is, the number of inactive wells and orphan wells was steadily rising even when times were good, when oil was $80 a barrel. Companies were not saving for the future then. They were not cleaning up their wells then.

Will this proposed legislation help fix the problem? Would it incentivize companies to live up to their obligations so that taxpayers are not on the hook?

When companies drill a well, they know that they are going to have to clean it up once it has stopped producing. When it is producing, they should be putting aside those funds for that obligation. The problem is, many of those companies are not doing this. They are not planning for that rainy day, and they have not been doing this for years.

The regulators are partly at fault for not properly ensuring that companies do this. Regulators should be putting limits on how long a well can remain inactive before it must be cleaned up. Only the B.C. regulator has rules about that right now.

Regulators could create a steadily rising inactive well fee, such as we see in California, that could go into a fund to help orphan well cleanup. Regulators could demand that companies pay a security up front, and the member for Jonquière mentioned this, so that when a well is drilled, the remediation costs would be automatically covered. That bond would be a small amount compared to the price of buying drilling rights and actually drilling the well. However, these regulatory solutions are largely in provincial hands, as the member for Lakeland mentioned.

I am not a tax accountant, but it seems logical that if a company did not put away enough money to cover legal obligations and now is not making enough profit to cover those costs, a tax break will not fix things. Tax writeoffs only work when enough money is being made to have to pay some tax. If tax credits are being provided to cover these costs, then it is the taxpayer who is funding these activities.

The idea of creating a flow-through share structure to encourage people to invest to clean up oil wells does not seem like a good idea either. Flow-through shares are used extensively in the mining industry to encourage investment in mine exploration and mine development. That is obviously a risky investment, so it makes sense, if we are to develop our resources, that we should provide incentives to investors to help companies at that critical stage.

However, cleaning up oil and gas wells is not a risky business. Companies' investors know years ahead of time that they will have to do it, and they have a pretty good idea of how much it is going to cost. Providing incentives to corporations or investors is completely inappropriate at this stage.

This is a straight subsidy to the fossil fuel industry. We would be paying them to do something that they are legally obliged to do. It is like giving drivers a tax break for staying on the right-hand side of the road or coming to a stop at a stop sign. The Parliamentary Budget Officer estimates that this tax credit would cost $264 million.

Canada's natural resources are shared resources owned by the people of Canada. Former premier of Alberta Peter Lougheed once said that, when it comes to resources, we have to act like owners. That means getting the best price for our resources. It also means making sure that the corporations that pay for access to those resources abide by our laws in how they treat the environment when extracting them.

Governments across this country have not done a very good job of upholding that pact with the people of Canada. Regulators for the oil and gas industry, whether it is the Canada Energy Regulator, the Alberta Energy Regulator, the B.C. Oil and Gas Commission or any other of a number of such bodies, have too often acted like cheerleaders for the industry instead of regulators acting as stewards on behalf of the Canadian public.

Companies are obliged by law to clean up after themselves. When they drill a well, they know how much that cleanup will cost. They should act responsibly and put away sufficient money in a trust fund while a well is productive, so that when the well reaches the end of its productive life, the money is there to clean up their mess.

That is what we find in another Conservative private member's bill from the member for Calgary Centre, Bill C-214. I would be happy to support that bill when it comes up for debate. However, this bill before us today is not an incentive for companies to do the right thing, to put aside money to pay for future obligations. It is an incentive for companies to put off that obligation until the last minute, forcing taxpayers to help them pay for clean up or, if it is too late, to pay all the costs for that clean up.

Unfortunately, I will not be supporting this bill.

Bill C-214—Ways and Means Motion

[Greg McLean, Conservative, Calgary Centre, AB]

Mr. Speaker, I rise today in response to a point of order raised by the hon. Parliamentary Secretary to the Leader of the Government in the House of Commons on November 3, regarding his concerns respecting Bill C-214, a private member's bill that I have sponsored, entitled “An Act to amend the Income Tax Act (qualifying environmental trust)”.

My colleague on the government side of the House believes that this bill would need to be preceded by the adoption of a ways and means motion. As he notes and as is clear in both Bill C-214 and in the Income Tax Act, a qualifying environmental trust is a special kind of trust that is recognized under the Income Tax Act for setting aside reclamation costs for mining sites, waste disposal and quarry sites, as well as pipelines.

The purpose of Bill C-214 is to amend the Income Tax Act to include in the definition “qualifying environmental trust” trusts that are maintained for the sole purpose of funding the reclamation of an oil or gas well operated for the purpose of producing petroleum or natural gas.

Bill C-214 proposes to repeal paragraph (a) of the definition “excluded trust” in subsection 211.6(1) of the Income Tax Act, which currently provides that oil and gas wells are excluded from the definition of a “qualifying environmental trust”, an unjustified inequity that the bill is meant to address, and proposes to add paragraph (e) to the definition of “qualifying site” in the same provision. The proposed paragraph (e) would read as follows: “the operation of an oil or gas well drilled for the purpose of producing petroleum or natural gas.”

The consequence of these proposed amendments would be that the reference to a qualifying site in paragraph (b) of the definition of a “qualifying environmental trust” would include the operation of an oil or gas well drilled for the purpose of producing petroleum or natural gas. Subsection 211.6(2) of the Income Tax Act is the charging provision that imposes tax on qualifying environmental trusts.

My colleague on the government side of the House states that adding a new paragraph (e) to the definition of a “qualifying site” in subsection 211.6(1) of the Income Tax Act would have the effect of expanding the definition of a “qualifying environmental trust” to include trusts that are maintained for the sole purpose of funding the reclamation of an oil or gas well operated for producing petroleum or natural gas. Perhaps that is so, or perhaps not. It depends on the trustee's approach. However, excluding language currently in the act that prejudices one sector of our nation's economy vis-à-vis others is a necessary step in addressing a historical economic inequity.

My colleague goes further to state, “Therefore, the effect of Bill C-214 would be to cause a tax to be payable by a new class of taxpayers, that is, qualifying environmental trusts in respect of the operation of an oil or gas well.” This reach of a conclusion ignores the very nature of how qualifying environmental trusts are taxed, but also by segregating qualifying environmental trusts established for the designed purpose as being a new class of taxpayer somehow distinct from the qualifying environmental trust already extant and effectively providing funding for reclamation and remediation services in Canada's other extractive industries.

In trying to justify the necessity of a ways and means motion, my colleague on the government side of the House erroneously states that Bill C-214 would represent an increase in the incidence of tax for these trusts. Maybe, but only as a result of the increased economic activity associated with the efficiency of using a trust structure to deal with environmental remediation activities. Incidental economic activity and the taxation revenue associated thereby is not subject to the necessity of a ways and means motion.

Finally, my colleague insists that Bill C-214 would represent an extension of a tax to a new class of taxpayer, which seems to indicate a prejudice that oil and gas remediation activities represent a different class in the structure of environmental trust, a mode of thinking that is, thankfully, archaic in most of society. Canadians do not segregate themselves by class according to industry sectors, neither does our tax system and neither should the House acquiesce to this regressive rationale.

In support of his argument, my colleague reached for a precedent Speaker's ruling from 2011. I would ask the Speaker to examine how weakly that precedent represents the characteristics of the amendments sought in Bill C-214. I submit a more appropriate comparative would arise from a Speaker's ruling on February 1, 2008, on then Bill C-219, where it was deemed the amendments presented did not result in an increased tax burden on taxpayers.

I have addressed these matters at length through the private member's bill process. I have previously addressed your clerks, Mr. Speaker, on this matter. I have addressed the concerns raised by the legislation-drafting branch at the Library of Parliament. I have worked on the financial modelling with the Parliamentary Budget Officer to show the financial benefit of constructive legislation. In addition, the resultant environmental benefit is a key outcome.

At a time when the current government has intervened with a one-time expenditure of $1.7 billion to address the historical problem created by excluding oil and gas remediation from being classed as a qualifying environmental trust, why is the government attempting to stretch definitions in order to disallow a measure that would bring some overdue equity to the treatment of Canada's oil and gas industry?

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the President of the Queen’s Privy Council for Canada and to the Leader of the Government in the House of Commons]

Mr. Speaker, on Friday, October 30, you made a statement respecting the items of Private Members' Business on the order of precedence. Specifically, Mr. Speaker, you drew members' attention to concerns respecting Bill C-214, sponsored by the member for Calgary Centre, entitled “An Act to amend the Income Tax Act (qualifying environmental trust)”.

I am rising to make an intervention as to why I believe the bill would need to be preceded by the adoption of a ways and means motion. A qualifying environmental trust is a special kind of trust that is recognized under the Income Tax Act for setting aside reclamation costs for mining sites, waste disposal and quarry sites, as well as pipelines.

The purpose of Bill C-214, as set out in the summary, is to amend “the Income Tax Act to include, in the definition 'qualifying environmental trust', trusts that are maintained for the sole purpose of funding the reclamation of an oil or gas well operated for the purpose of producing petroleum or natural gas.”

Bill C-214 proposes to repeal paragraph (a) of the definition “excluded trust” in subsection 211.?6(1) of the Income Tax Act, which currently provides that an excluded trust includes a trust that “relates at that time to the reclamation of a well;” and proposes to add paragraph (e) to the definition of “qualifying site” in the same provision. The proposed paragraph (e) would read as follows:

(e) the operation of an oil or gas well drilled for the purpose of producing petroleum or natural gas.

The consequence of these proposed amendments would be that the reference to a qualifying site in paragraph (b) of the definition of a “qualifying environmental trust” would include the operation of an oil or gas well drilled for the purpose of producing petroleum or natural gas.

Subsection 211.6(2) of the Income Tax Act is the charging provision that imposes tax on qualifying environmental trusts. Adding a new paragraph (e) to the definition of a “qualifying site” in subsection 211.6(1) of the Income Tax Act would have the effect of expanding the definition of a “qualifying environmental trust” to include trusts that are maintained for the sole purpose of funding the reclamation of an oil or gas well operated for producing petroleum or natural gas. Therefore, the effect of Bill C-214 would be to cause a tax to be payable by a new class of taxpayers, that is, qualifying environmental trusts in respect of the operation of an oil or gas well.

Page 906 of the third edition of the House of Commons Procedure and Practice states:

The House must first adopt a ways and means motion before a bill which imposes a tax or other charge on the taxpayer can be introduced. Charges on the people, in this context, refer to new taxes, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of a tax to a new class of taxpayers.

The proposed amendment in Bill C-214 in respect of qualifying environmental trusts would represent an increase in the incidence of tax for these trusts. The definition of qualifying environmental trusts in Bill C-214 would now include trusts that are maintained for the sole purpose of funding the reclamation of an oil or gas well operated for the purpose of producing petroleum or natural gas.

As a result, the number of qualifying environmental trusts that would be subject to part XII.4 tax will increase. Therefore, I submit that this is a situation where the adoption of a ways and means motion would need to precede the introduction of Bill C-214, since the effect of the bill would represent an extension of a tax to a new class of taxpayers.

In terms of precedents to support the argument that the introduction of the bill should have been preceded by the adoption of a ways and means motion, I would draw the attention of members to the following Speaker's ruling.

On November 4, 2011, the Speaker ruled that Bill C-317, an act to amend the Income Tax Act regarding labour organizations, should have been preceded by the adoption of a ways and means motion, since the provision of the bill would have created a new class of taxpayer. The Speaker ruled:

If enacted, Bill C-317 would thus create a situation whereby labour organizations can be differentiated into two distinct categories, those that comply with the financial reporting mechanism and those that do not.

In the Chair's opinion, this new category of labour organization would constitute a class of taxpayer that does not currently exist. Labour organizations in the newly created class, that is those that do not meet the financial reporting requirements outlined in the bill, would see the removal of their current tax-exempt status....

As a result of this determination, I find that Bill C-317, by distinguishing between certain labour organizations, creates a new class of taxpayer and that this new class of taxpayer would then be subject to a removal of an alleviation of taxation.

For the reasons stated, I must, therefore, rule that Bill C-317 should have been preceded by a ways and means motion.

The principle to be derived from Bill C-317 is that any measure that would have the effect of subjecting a new group of taxpayers to a tax must be preceded by the adoption of a ways and means motion. This principle also applies in the case of Bill C-214.

[The Deputy Speaker, Conservative, Bruce Stanton]

Before we move on to private members' business, the Chair wishes to make some brief remarks.

This week, the House has begun debate on items sponsored by private members. I would therefore like to make a brief statement regarding the management of Private Members' Business.

As members know, certain constitutional procedural realities constrain the Speaker and members insofar as legislation is concerned.

Following the establishment or the replenishment of the order of precedence, the Chair has developed a practice of reviewing items so that the House can be alerted to bills which, at first glance, appear to impinge on the financial prerogative of the Crown. The aim of this practice is to allow members the opportunity to intervene in a timely fashion to present their procedural arguments.

The order of precedence having been established on February 27 and reinstated after prorogation, I therefore wish to inform the House that there is one bill which preoccupies the Chair. That is Bill C-214, an act to amend the Income Tax Act (qualifying environmental trust), standing in the name of the member for Calgary Centre.

The understanding of the Chair is that this bill may need to have been preceded by a ways and means motion.

As members know, there are certain constraints on changes to taxation measures in the absence of a ways and means motion. If a bill requires such a motion and one has not been adopted, according to our rules, the bill cannot remain on the Order Paper.

I therefore encourage hon. members who would like to make arguments regarding the requirement of a ways and means motion for Bill C-214 to do so at the earliest opportunity.

In this case, there is some urgency, as a bill requiring a ways and means motion cannot be debated and would be dropped from the Order Paper. The Chair would like to deliver a ruling on this bill as soon as possible. If a ruling has not been given when this bill reaches the top of the order of precedence, I will ask that it be dropped to the bottom of the list, in order to allow the member for Calgary Centre to substitute a new item in the event Bill C-214 is found to be out of order.

I thank hon. members for their attention.

I will not be taking any time away from the usual hour that is permitted for the taking up of Private Members' Business.

[The Chair, Liberal, Ginette Petitpas Taylor]

No. Thank you so much for that. That's great.

Perhaps now we can proceed through each item. To be efficient with our time, we could maybe just go through them item by item, and if there are no questions or comments, we can dispose of them fairly quickly. We'll be able to address the ones for which there is debate.

Does that sound appropriate to everyone?

We'll start off, then, with Bill C-210. Does anyone have any issues or comments about that one? No.

Next is Bill C-238.

I see there are no comments, so we'll move right along to Bill C-224. Good.

Next is Bill C-215. No comments.

Next is Bill C-204, and now Bill C-229.

I'm not going to jinx it, but we're on a roll.

Now we have Bill C-218 and a motion, M-34.

Next we have Bill C-214, Bill C-220, Bill C-221, Bill C-222 and Bill C-213.

I love working with women.

Next is Bill C-223, followed by M-35.

Now we have Bill C-206, Bill C-216, Bill C-208, Bill C-205, Bill C-237, Bill C-225, Bill C-228, Bill C-236, Bill C-230 and Bill C-232.

Income Tax Act

[Greg McLean, Conservative, Calgary Centre, AB]

moved for leave to introduce Bill C-214, An Act to amend the Income Tax Act (qualifying environmental trust).

Mr. Speaker, the bill is about equity for the Canadian resource industry. It would provide a level playing field in the oil and gas sector and a financial instrument that is already available for every other extractive industry in Canada, including pipelines. It would allow us to move forward in dealing with environmental liabilities associated with end-of-life wells, inactive wells and suspended wells from the oil and gas sector.

Qualified environmental trusts were brought in by a previous Liberal government, in 1994, in recognition of the fact that liabilities occurred at the end of well life and resource life whereas revenues occurred toward the beginning of resource life. This would match income with expenses. It is a good instrument for our oil and gas industry, particularly in these times when there is so much environmental remediation required in the industry.

Why was it was left out of that legislation in 1994? It is only because oil and gas companies at that time had a surfeit of opportunities that were at all stages of their development, and it was not recognized as being necessary. It is completely necessary now, given what is happening in the oil and gas industry and in Alberta.

We need to recognize that this industry provides so much for Canada. There is so much value to be brought by this new legislation, including $20 billion of economic activity over the next 20 years. This would be a boon to employment in Alberta and GDP across Canada.

The bill would level the playing field for an industry that has not been represented well at this level. I hope we can move it forward very quickly.

(Motion deemed adopted, bill read the first time and printed)