Thanks very much.
Thanks for this opportunity to speak with you this afternoon.
l am here on behalf of the Canadian Energy Infrastructure Group, or CEIG. The CEIG represents ten infrastructure companies that manage energy pipelines, storage facilities, and processing plants. We process, transport, and store a very significant portion of Canada's oil, oil sands, and natural gas production, and petrochemical feedstocks. Our assets represent long-term investments that provide steady, fee-for-service income, not unlike real estate investments. We are all income trusts or similar flow-through entities, proudly headquartered and managed in Canada. The proposed tax on income trusts has the potential to very profoundly impact this important sector.
Combined, the CEIG represents a market capitalization exceeding $12.5 billion, and represents about 6% of all Canadian income trusts. Our member firms deliver over a million barrels of oil per day to the market. That's half of Canada's oil production. We also deliver over 300,000 barrels per day of Canada's natural gas liquids production and transport 2.7 billion cubic feet per day of Canada's natural gas production. We play a central role in processing and storing gas and natural gas liquids. Our companies are critical to Canada's energy supply.
The income trust structure is ideal for Canadian energy infrastructure assets and has been a catalyst for the investment and growth in long-life physical assets that are critical to the development of new energy supplies in Canada and to establishing Canada as a world energy superpower. This business model is based on long-life physical assets with steady and reliable cashflows. Similar to the REITs, which have been exempted from this proposed new tax, energy infrastructure trusts represent stable, long-life, hard assets.
Energy infrastructure trusts also make substantial investments in asset development. Consider this: collectively, the CEIG membership has spent $1.1 billion on expansions over the past five past five years, has planned expenditures of $4 billion over the next three years, and has acquired $3.9 billion of assets, and $1.8 billion of those assets were repatriated from foreign owners. The trust model keeps critical energy infrastructure under Canadian ownership.
Further, the long-term nature of our investments requires a stable, long-term, competitive fiscal regime. At the time of the government's surprise October 31 announcement, our members had made long-term decisions and commitments on the basis of the existing taxation regime. Multi-year shipping and processing contracts, some of which extend 25 years and beyond, are in place, and long-term investment and financing decisions have been made in good faith based on a promise made by this government.
Like members of Parliament, the CEIG member companies are accountable to their own constituents. We made business decisions in good faith, believing that this government would keep its word. We are responsible to our unit holders, who are our primary constituents. These investors also made business decisions impacting their retirement savings and financial futures based on the promise that this Conservative government made to them prior to taking office and on the campaign trail, a promise that, with the introduction of the proposed policy change, has been broken.
Now, there is clear precedent for treating energy infrastructure uniquely. In fact, when the United States made the decision to tax income trusts, they specifically exempted energy infrastructure, recognizing how critical these assets are to energy supply and energy security, encouraging the development of master limited partnerships as flow-through entities.
Today, just as we are shutting down this valuable business structure in Canada, in the United States it is flourishing, with the market capitalization of the energy infrastructure sector currently exceeding $80 billion U.S. and growing.
These infrastructure assets connect Canadian energy producers to markets, so impacts on this sector reverberate through the energy industry, the industry often described as the engine of the Canadian economy. These changes will increase the cost of capital, curtail growth and the development of long-life assets, and, perhaps more importantly, create a competitive disadvantage with respect to foreign and tax-exempt parties. Already, in the energy infrastructure sector, U.S. flow-through entities trade at a significant premium to Canadian counterparts. Today the U.S. entities trade at a yield of 5.2%, compared to Canadian entities at 8%.
Now, the potential for takeovers of the critical Canadian energy infrastructure owned by CEIG members by foreign acquirers, such as the U.S. MLPs, private equity firms, and others, has risen dramatically as a result of this erosion of our competitive position. Such takeovers will result in a reduction in the total tax collected in Canada, precisely the inverse of the government's purported reason for implementing the changes on November 31 of last year.
Retaining the trust structure for the energy infrastructure is the right thing to do.
