Desperately needing liquidity, the oil and gas industry appealed to the Feds for some sort of support to help get them through the pandemic and oil crisis. It seemed like a no-brainer that the Feds would be willing to lend a hand to one of Canada’s largest moneymakers. However, it took a long time and a lot of prodding to get any of that assistance.
Despite this new report’s claims that the industry received $18 billion in support, what the industry ended up with for direct support was a $ 1.7 billion pledge to help clean up old and abandoned wells and money for cleantech. However, much of this money still has not been tendered to companies and as a result, much of the expected job creation has not occurred.
It’s no secret that these types of reports hyperinflate the numbers to create a narrative of Big Government working for Big Oil. These types of reports have been called out before, and many think tanks like the Montreal Economic Institute believe are overstretching the meaning of subsidy. While still considered a “subsidy”, they are just a particular tax treatment that is common to the natural resources sector and many other sectors as well.
Developing natural resources is a financially intensive process and these measures level the playing field across the sector to ensure they remain competitive.
Many of the ‘subsidies’ in this report are actually cleantech subsidies being used to reduce emissions and increase energy efficiency. At the end of the day, if they cared about the environment and not an ideological bend against oil and gas, activists would be praising this. In fact, if you do not include the money for cleaning up old wells, cleantech subsidies still make up 1/3rd of direct support.
This report also includes things like the $10 billion in bond purchasing through the Bank of Canada corporate bond purchase program as well as support from the Export Development Bank as a subsidy for the oil and gas industry.
However, these programs are available to all sectors of Canada’s economy, not just the oil and gas industry.
Just for comparison, in 2020 the EDC helped support the oil and gas industry with about $8 billion in export-based credit insurance and financial support. The Finance industry received more than double that at almost $21 billion. All of this is to help develop Canada’s economy and trade.
Consequently, the EDC could be considered more like a bank rather than an arm of the government. According to their website, they are financially self-sufficient and raise money just like a bank, mostly through fees and global markets. This means that they aren’t using public funds to finance these industries.
These types of activists report usually shy away from writing about how much money goes to “green” or environmental spending. A policy brief from the International Institute for Sustainable Development notes that Canada announced almost $15 billion in financial support for “green” initiatives in 2020. This report also confirms the $15 billion number. That is almost 800% more than the $1.7 billion support announced for well-clean up.
All told, there is a lot to criticize in this analysis. The bulk of their $18 billion argument is premised on $13.5 billion in export credit insurance and financing from an organization that does not even get its money from the government. The more accurate number for support could be the $3.6 billion in direct spending, most of which is dedicated to the environment and cleantech.
One thing is for certain, when put into perspective it is a small drop in the bucket compared to the Government’s spending on COVID, which is well over $240 billion.