Environmental groups ask Canadian watchdog to probe oil subsidies

Oct 03, 2005 02:00 AM

Environmental groups asked Canada's auditor general to investigate the billions of dollars in federal subsidies that have gone to oil and gas companies. The groups say the money undermines federal commitments to lower pollution under the Kyoto Protocol by subsidizing one of the biggest polluting sectors. The Sierra Legal Defence Fund and Friends of the Earth, among others, estimate that Ottawa spends C$ 2 ($ 1.72)on oil subsidies for every dollar spent on Kyoto.
"We are asking the obvious question of how this can possibly be part of a consistent government policy," said Sierra Legal lawyer Albert Koehl.

Charles Caccia, a former House of Commons environment committee chairman, said tax breaks for the industry encourage greater greenhouse gas emissions.
"Canada cannot meet its commitment under the Kyoto Protocol unless tax subsidies to the oil and gas industry are eliminated," Caccia said. The groups estimate that federal tax subsidies to oil companies amount to C$ 1.4 bn ($ 1.2 bn) a year, mostly in the form of tax breaks.

The 1997 Kyoto accord, which took effect in February, aims to cut carbon dioxide emissions by the industrialized nations by 5.2 % below their 1990 levels by 2012.
"The federal government has a unique opportunity to show international leadership by shifting tax subsidies for the oil and gas industry towards initiatives such as renewables and conservation that will reduce emissions," said Marlo Raynolds, executive director of the Pembina Institute for Appropriate Development. "This would not only help Canada meet its obligations under Kyoto but prove to the world that Canada is a fitting host for the world climate change conference in Montreal later this year."

The petroleum industry counters that the subsidies don't exist, but in fact are standard tax deductions and write-offs typical for all corporations. Greg Stringham, vice president of the Canadian Association of Petroleum Producers in Calgary, said many of the subsidies in question are outdated or no longer exist and the oil industry pays higher income taxes than the rest of corporate Canada.
"You can add all these things back in the past, but as we go forward, we don't believe that there are subsidies to the oil and gas industries," Stringham said.

Further, he said, it's standard corporate practice to be able to write off the costs of drilling an oil well since exploring for natural resources is a risky business.
"All corporations have costs of doing business, and for us, it's drilling," he said.

On the net:
Sierra Legal Defence Fund: http://www.sierralegal.org
Pembina Institute: http://www.pembina.org
Canadian Association of Petroleum Producers: http://www.capp.ca

Source: AP
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