Biting the Hand that Feeds You

Contributed by Robert Lyman © 2020. Lyman’s bio can be read here.

On March 25, 2020, a group of 265 academics from across Canada signed a letter to Prime Minister Justin Trudeau expressing concern that, according to a Globe and Mail report, the federal government was considering a $15 billion “bailout package” for oil and gas companies.

Please read the report [below], which includes additional graphs and information, as well as a full list of the relevant academics in Alberta and Saskatchewan. A full list is here.

The group’s objections reveal, among other things, the usual biases held by those who believe the theses that human emissions are causing catastrophic global warming and that actions to harm the Canadian hydrocarbons industries will somehow stop this. To quote from the letter:

“It is not acceptable to give privileged access to big business associations while excluding representatives from trade unions, universities, municipalities, Indigenous communities and non-profit organizations that work on behalf of the public interest.

Public investment in oil and gas at this time is a highly speculative proposition, and particularly unwise given the urgent need for strategic investments in economic recovery.

Premier Kenney argues that Canada ‘cannot afford to lose the single largest subsector of the Canadian economy’. We question whether Canada can afford to continue to support it. To presume that this industry can be protected with subsidies from the broader circumstances threatening the oil and gas sector globally is folly. As the current price war makes clear, Canada has no control over global oil prices, and growing demand for climate-friendly energy sources threatens the viability of high cost, carbon-intensive oilsands production.

Let us consider some statistics concerning the financial contribution of the oil and gas industry:

• According to the Canadian Energy Centre, an Alberta Crown Corporation, between 2000 and 2018, Canada’s oil and gas production industry paid almost $240 billion in direct provincial revenues and $66 billion in direct federal revenues. In addition, through the income taxes paid by industry employees, the industry indirectly paid nearly $54 billion in federal and provincial taxes.
• Of these amounts, $36.7 billion were paid to provincial governments in corporate tax revenues.
• From 2008 to 2018, $166 billion was paid in rents and royalties to provincial governments
• Alberta accounts for about 82% and Saskatchewan for 12% of Canada’s oil and gas production, and the revenues to the provincial government roughly mirror that spilt.
• Oil and gas industry revenues accounted for 11% of total Alberta government revenues in 2017-2018.
• Individual oil companies have made major contributions to capital projects in Alberta and Saskatchewan universities.

So, who are these university professors who think so little of the oil and gas industry? A list of their names and university affiliations is attached as Appendix A in case any of those who read this article and live in Alberta and Saskatchewan might want to contact the professors to express their appreciation and gratitude for the position they take.

A Few Facts

I do not know the status of the federal government’s consideration of assistance to the oil and gas industry or to any of the other Canadian industries affected by the Coronavirus and by the forced closing of workplaces, but I do know a few things about why the oil and gas industry faces such difficult financial circumstances. This goes well beyond the trends in international oil markets and prices.

• Over the last three years, federal government decisions, influenced greatly by the organizations with which many of the letter signers are associated, were responsible for the loss of $32.5 billion of capital investment in oil pipelines that would have assured access to export markets, along with the loss of 3,500 long-term jobs.
• Over that same period, $67 billion in capital investment in three liquified natural gas plants were foregone due to delays and opposition from the same groups.
• This year, the Tech Frontier Oil Sands mine, a $20 billion investment that would have provided 2,500 long term jobs, was cancelled due to federal delays and barriers, again promoted by these same groups.
• Over the 2014-2018 period, Canadian heavy crude producers lost $40 billion due to market discounts directly resulting from inadequate pipeline capacity.
• Canadian oil producers now pay $30 per ton in carbon taxes that are not paid by competing energy producers in other countries, and that tax rate is scheduled to continue increasing.
• According to the C.D. Howe Institute, Canada lost $100 billion in upstream oil and gas investment over two years, due almost entirely to government policies.
• In 2012, Alberta’s employment rate was 70%, the highest of all provinces. The unemployment rate in Alberta was 7.2 % at the end of 2019, much above the national average of 5.9% at that time.
• Despite the claims in the letter, the federal and provincial governments provide several subsidy programs to the renewable energy industry and none to the oil and gas industry. There is a difference between the two industries in this regard. The so-called “subsidies” paid to the oil and gas industry are investment incentives, payments that the industry converts into very large investments and billions of dollars in taxes and royalties to governments. These so-called ‘subsidies’ fall under categories common to virtually all businesses in Canada. By contrast, the subsidies to renewable energy industry run the gamut from research and development assistance to supply subsidies to favourable regulations to tax exemptions. Try to find out how much the renewables industry pays in taxes; you won’t because it doesn’t.
• Global oil demand grew by over one million barrels per day per year from 2012 to 2019 and is at its highest level in history; almost every other major oil producer has been able to benefit from this growth through increased investment and production and will go on doing so after the coronavirus pandemic passes – investment in Canada’s industry has declined because of government climate policies.

Canada is the only one of these top six competitor nations constrained by the International green trade war known as the #TarSandsCampaign and stringent, ever-changing, climate policies.

To be sure, declining international crude prices have reduced the funds available to invest in the Canadian industry. However, investment has increased sharply elsewhere, like the United States, while declining in Canada. In other words, it is not only the market that has done harm to the oil and gas industry. It is Canada’s own citizens. People like those who signed the letter.

I personally object on principle to the idea that governments should provide taxpayer subsidies to private industry, but with the current Coronavirus, we find ourselves in unique times. Having decided to shut down a substantial portion of the Canadian economy in the name of slowing the spread of the virus, governments are now morally obliged to attempt to offset the more adverse consequences for companies and their employees of the restrictions imposed. To suggest that the oil and gas industry should be deprived of assistance available broadly to other industries betrays an ideological bias. In the case of the oil and gas industry, the damage caused by government policies has far exceeded that imposed on any other sector of the economy, so the assistance provided, if any, should reflect that.

Instead of purchasing equity in oil and gas, Canadian governments should pursue the retraining of fossil fuel workers, and public ownership of Canada’s renewable energy sector, where government coordination and large-scale investment are needed in the short term and where investments will be repaid.”

Those few quotations demonstrate a variety of misconceptions, logical inconsistencies and special interest pleadings. I’ll come back to that later. The purpose of this article is to take note of the identities of many of the academics who signed the letter.

Thirty-eight of the signees are working at Alberta universities and eight are working at universities in Saskatchewan. They work in a broad range of disciplines, but only three in economics in Alberta and one in economics in Saskatchewan, a rather small cohort considering that the main thrust of their letter relates to a possible economic policy decision. Given the hundreds of professors working in universities in Alberta and Saskatchewan, we need not take this sampling to be particularly representative. Eighty of the signatories to the open letter are serial letter writers and signatories – that is individuals who have signed similar open letters in the last few years on a variety of issues such as the UNIST’OT’EN activist efforts to block the Coastal GasLink project, opposition to British Columbia’s Site-C hydroelectric dam, the TECK Resources Frontier oil sands mine, and the TransMountain Expansion oil pipeline project.

We should, however, note the incongruence between the role that the oil and gas industry has in the economic fortunes of Alberta and Saskatchewan, and the antipathy demonstrated by those who directly benefit from the revenues so provided to their employers. Provincial governments pay about 70% of the operating costs of the universities, including, of course, these professors’ salaries, so where universities get their funds matters. The universities that are the beneficiaries of oil industry taxpayer support are not responsible for the political activities of the professors they employ, but they might be expected to exercise a certain disdain when the professors include their university affiliations in a letter for which no such affiliations were required.


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1 Comment

  1. Al Leach

    No other industry in Canada has been subjected to the constant attack as has our energy industry. Instead of being proud of this industry and it’s great contribution both financial & technical we allow agitators such as these professors to vilify this backbone of the Canadian economy. These professors do a great disservice to both of their respective universities by including the names of these institutions to form a part of their signatures. I believe the energy industry needs to strike back and show there are consequences for such attacks by these so called academics. To start, cancellation of all financial support and withdrawal of any and all recognition of both universities. To write a letter as a citizen is our right, but to attempt to add credence by association with, in this case, two universities, is unacceptable. Both respective universities need to first disclaim any association with the submission by these ill informed academics and secondly impose disciplinary sanctions against all of the signatories.

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