In spite of record oil prices, record oilsands production and record profits for oil companies, the royalty return to Albertans for each barrel of oilsands oil declined by 32% between 1996 and 2005. Further, the federal government has lost as much as $1.65 billion due to tax breaks to the oilsands industry.
"Albertans, as the owners of the oilsands resource, are giving away too much of their wealth to largely foreign-owned oil companies. The industry has matured quickly and the royalties and tax structures designed originally to give a hand-up to industry are simply no longer needed," said Marlo Raynolds, Executive Director of the Pembina Institute and co-author of a new report entitled Thinking Like an Owner being released just prior to a decision on the next provincial leader in Alberta.
"To add insult to injury, what we're seeing now is cost over-runs in the oilsands industry. This means it takes longer for oilsands companies to pay off capital expenses and start making a profit. Until they do, Albertans only earn a 1% royalty from this non-renewable resource rather than the 25% royalty they receive once a profit is being made," said Amy Taylor, an economist with the Pembina Institute and co-author of the report.
Federal government revenue losses are the result of an outdated tax break, the 100% Accelerated Capital Cost Allowance, which lets oil companies write off all of the capital expenses they incur before they start paying income taxes. The higher capital costs get, the longer it takes to write off these expenses and the longer Canadians wait for tax revenue from oilsands developments.
While oilsands companies enjoy record profits, Albertans and Canadians are losing out.
"Albertans and Canadians are paying the bill for outdated royalty and tax treatments," said Taylor. "Their dollars are subsidizing an industry that clearly no longer needs government support."
The Pembina Institute's Thinking Like An Owner report states that, to ensure a fair tax and royalties system,
- Albertans need to think like owners and insist that their resource manager-the minister of energy-get a better deal for the development of their resource.
- Canadians should demand that the federal minister of finance eliminate unnecessary tax breaks to the oilsands sector and put these companies on a level playing field with conventional oil and natural gas.
The Thinking Like An Owner report and the fact sheet summarizing the report are available at www.pembina.org.
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For more information contact
Amy Taylor
Director, Ecological Fiscal Reform
The Pembina Institute
Cell: 403-996-0510
Marlo Raynolds
Executive Director
The Pembina Institute
Cell: 403-607-9427
Still images and B-roll footage of oilsands operations are available for media at www.pembina.org/oil-sands.