Thank you for this opportunity to speak to the committee. My name is Gord Kerr, and I am here on behalf of the Coalition of Canadian Energy Trusts.
On October 31, 2006, Canada's new government broke a key election promise not to tax income trusts. This has cost energy trust investors billions of dollars. Investors relied on the government's good word, and the subsequent devastation was unnecessary. We believe the government broke its promise to Canadians in its rush to stop trust conversions.
We're not here to dispute the government's decision to stop conversions, but we do believe this decision should have been followed by consultation regarding the role trusts should play in specific sectors of the Canadian economy. With a more complete analysis of our sector, we believe the government would have recognized that energy trusts are different and ought to have been exempted from any new policy, just as real estate investment trusts were.
We are not suggesting that the entire oil and gas industry should be structured as trusts, nor do we believe that would happen. As my comments will show, this structure is the right business model for a significant component of the western Canadian sedimentary basin.
Our coalition has produced a detailed document that justifies the continued existence of trusts in the energy sector. Our report concluded that energy trusts do not cause tax leakage; that energy trusts enhance productivity; that contrary to the government's assertion, U.S. energy trusts continue to thrive; and that millions of Canadians, including retirees, have suffered enormous financial losses as a result of the government's broken promise.
With regard to trust-like entities in other jurisdictions, this committee has already heard from others that the Minister of Finance is wrong. Comparable structures do exist in other countries and are in fact expanding, potentially increasing foreign control over Canada's energy sector. I won't revisit that territory. What I want to address is the issue of tax leakage and the important role of energy trusts in Canada's energy future.
On the matter of tax leakage, we heard a lot about tax leakage in the previous session. Our research shows that government revenues are actually enhanced by the energy trust structure. During the past five years, energy trusts have generated greater taxes than they would have as corporations. For 2006, we estimate that our $8 billion in distributions will generate in the order of $2.4 billion in taxes. Moreover, for 2005, our data shows that our sector will have generated an estimated 30% of the tax revenue collected from publicly traded Canadian entities in the oil and gas sector, while representing only 16% of the revenue.
Regarding our contribution to productivity and sustainability, since 1986 the energy trust structure has evolved as an ideal model for Canada's maturing hydrocarbon basin, through our focus on maximizing recoveries from mature oil and gas pools. Our report clearly shows that members of our coalition have substantially increased capital spending on these assets, resulting in significant reserve and production additions. We have also repatriated approximately $10 billion worth of assets from foreign control over the past ten years.
Despite record levels of drilling, Canadian conventional oil production is falling and natural gas production has plateaued. The traditional corporate growth model is not sustainable for all entities operating in a declining producing region.
Finally, Canadians deserve to have the decisions that impact their economic future made with proper care and all of the facts. We want the government to take the time and do the consultations required to get this decision right. We believe such consultations and this committee's work this week will show that energy trusts are unique and should be exempt from the proposed tax changes. We want to get it right for ordinary Canadians who believed the Prime Minister's promise not to tax trusts, and for Canada's producing regions so that we can maximize ultimate recovery of our scarce resources for the benefit of all Canadians.
We have produced a report supporting our position in this regard. We welcome critical review and debate on this issue and we invite the government to do so, rather than continually stating that they will not change their decision. It is never too late to get it right.
Thank you, Mr. Chairman.