In our written submission to the committee this year we made three recommendations, and I'll speak to each of those in turn.
The first recommendation was that the federal government help stimulate job creation in the oil and gas sector by implementing immediate tax deductibility for oil and gas development expenditures, and that would be for a time-limited period.
Second: that the scheduled phase-out of the accelerated capital cost allowance for oil sands be deferred.
Third: that the federal government address ongoing issues of eligibility for the scientific research and experimental development, or SR&ED, tax credit.
The first two of those proposals are meant to address the current and near-term economic environment, while the third will have a medium- to longer-term effect on the sustainability of our industry.
I'd like to spend a moment discussing each of those proposals.
First, on the jobs recovery proposal, we all know that our economy has been through some tough times lately, including the oil and gas sector. While the Bank of Canada and others have had some promising news of late with respect to economic recovery, there is, I think, still some uncertainty about the timing and strength of that recovery. The conventional oil and gas sector, particularly the natural gas business, is undergoing significant structural change that is compounding the effects of the economic downturn.
Development of large supplies of shale gas in the United States, in particular at very competitive costs, is a new source of supply that was not part of the picture even a couple of years ago, and is changing the competitive environment in which we operate. We're confident the Canadian producers will adapt, but it will take time to do so. This means that the 25,000 jobs we've seen lost in the sector will not bounce back so quickly and may continue to be part of a much talked about jobless recovery.
CAPP and its sister associations in the oil and gas industy, like the CAODC, are proposing that the federal government encourage development and job creation by allowing immediate tax deduction of oil and gas development expenses. This is similar to a mechanism that has already been put in place for machinery and equipment purchases for manufacturers and processors. This is a deferral, rather than a reduction of taxes, and requires no direct cash outlay by any level of government.
The proposal is for a limited 30-month period, ideally starting this fall or winter, and it is in sync with how long we estimate it will take for industry to respond to both the recession and some fundamental structural changes that are occurring. There is obviously the option to shorten that period, if it were necessary to do so and should the economic outlook improve sooner. There's a significant amount of detail in our submission with respect to that proposal.
Let me talk very quickly about the other two items we included in our proposal. The first is a deferral of the phase-out of ACCA, our accelerated capital cost allowance for the oil sands business. In a manner similar to what we're seeing in the conventional part of the business, we believe that deferral--not elimination, but deferral--of the phase-out of ACCA would have the effect of stimulating near-term investment in oil sands and creating jobs as well.
Finally, with respect to the eligibility for scientific research and experimental development tax credit, we believe very strongly that technology is a critical lever for reducing costs, increasing supply, and improving environmental performance of our industry. We've had a longstanding discussion around eligibility for the tax credit, and we think one of the means by which to fundamentally encourage investment and technology and stimulate that investment in the near term would be to broaden the eligibility for the tax credit, thereby encouraging companies to invest incremental dollars in technology.
I'll leave it at that in terms of my opening remarks. That's a very brief overview of our submission, and we're happy to take any questions later in the program.
Thank you.