Oil Patch Braces for Exploration Chill After Canada's Election



Industry Costs

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.”

To contact the reporter on this story: Josh Wingrove in Ottawa at jwingrove4@bloomberg.net. To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net Stephen Wicary, Chris Fournier.


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WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Joe V  |  October 06, 2015
Its all about job creation. The government gets plenty of money back from income taxes. More jobs in energy sector means more ancillary businesses, and more employment again. Why should oil companies invest in Canada if theres better deals elsewhere? Justins father did a lot of damage to western Canadian economies; the boy seems of the same ilk. The NDP? Can you spell welfare? Whos going to pay for all the subsidies and handouts? Now let me see ... oh yes, taxpayers! You know, the working stiffs.
Scott  |  October 05, 2015
Interesting article, but tax breaks/incentives are not subsidies. I think its important we use the correct language when talking about issues like this. Otherwise people think the government is giving oil and gas companies tax-payer money, when that is not at all the case.