Oil Patch Braces for Exploration Chill After Canada's Election
Harper’s government signed on to a Group of 20 pledge in 2009 to phase out fossil fuel subsidies over the “medium term.” However, the CEE deduction has expanded, most recently in the 2015 budget that made other expenses eligible to be claimed.
The deduction is useful for a high-cost, capital-intensive industry like oil and gas, Brunnen said. It’s mostly used in the conventional oil and natural gas sectors, not in the oil sands. Canada currently produces 1.4 million barrels of conventional oil per day, or 37 percent of the country’s production, National Energy Board figures show.
The tax deduction is “a recognition of the industry’s cost profile,” Brunnen said.
“For our industry, companies have to out lay relatively significant expenditures, capital, for exploration and development. And you have to do this work with no certainty of any revenue streams returning,” he said. “All of the risk comes on the front end with the payout on the back end.”
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