Sunday, March 04, 2007

Sierra Club bathes in Conservative afterbirth

I observed with glee the Supreme Court of Canada striking down our old "terrorism" law concerning the ability of the government to hold suspects without charges. Stephen Harper was further ticked off when parliament didn't play ball with the security rhetoric. I sigh with relief that my beloved Canada found the wisdom to not fall into the traps of our southern neighbors. Of course we were subjected to Harper's false dichotomy presented to the media scrum that followed the form " the opposition chose to play politics rather than secure Canada."
I find this so distasteful considering that the terror attacks in Canada this century have really been limited to Quebecers that got the wrong idea. It amuses me that considering how much more likely you are in Canada to be murdered rather than be subject of an act of terrorism, the Harper government doesn't offer the same logic regarding murder. Nobody would suggest that in order to prevent and catch murderers we need to do away with habeas corpus. Yet this same logic is applied to the near phantom threat of terrorism.

The Sierra Club, an environmental group that never fails to amuse me with their ignorance, provided me with a hearty laugh this week. They bent the ears of the equally ignorant media long enough to get headlines across the country drawing attention to their last cause: Eliminating the tax break for oilsands development here in Alberta. The tax break was put in place when oil was $25 a barrel and the oilsands were in their infancy. Since oil now hovers around $60, they argue that the development incentive is over and now taxpayers are supporting a booming industry that doesn't need the money and is a major source of pollution. It makes a nice soundbite to gas starved Ontarians to cut the 1.5 billion dollar tax break- but wait, there's more. As it turns out, the tax break actually just lets oil company write off all capital depreciation in one year rather than a piece-meal depreciation year by year. In fact, eliminating this "tax break" wouldn't add one cent to the government coffers.

It would seem that when it comes to snowing over a hapless public with half truths and spurious logic, the Sierra Club has learned well from their governmental nemesis.


rainswept said...

Well might one pick on the Sierra Club, playing we suppose on their reactionary reputation and American roots. However, Alberta's homegrown has reached the same conclusion. Additionally the NDP's proposed amendments to Bill C-30 (which amends the Canadian Environmental Protection Act) include one specific recommendation regarding the ACCA - eliminate it.

The Royalty and Accelerated Capital Costs Allowance was flawed by the failure to include a sunset clause. Considering only the ACCA portion, the federal Department of Finance estimates that the 100% accelerated capital cost allowance provides companies with between $5 million and $40 million in tax breaks for every $1 billion invested. The Commons natural resources committee concludes that the break is worth 1.4 billion dollars annually. Not only would its elimination seem to add at least "one cent to the government coffers", it would end one more example of unwelcome state tampering, levelling the playing field shared by oil sands, natural gas, and traditional oil concerns.

Finally, isn't the oil sands industry one of the most relentlessly destructive to the environment? Forget taxes... what, I wonder, is the real cost of encouraging the development of this resource?

Other sites used in the preparation of this comment:
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and here

and then the_doctor said...

I would caution you to read my blog again. Capital cost depreciation is a tax write off. Each year, a company gets to depreciate a certain percentage of a capital cost. The tax break merely allowed a company to depreciate the total amount in one year rather than over several years. Hence 4-1-1-1-1=0 or 4-4=0.

It goes without saying that oil sands extraction emits greenhouse gases on a massive scale. I just think that the sierra club's presentation of the facts makes it appear that companies are getting a break. The removal of the tax credit, which the rumour mill suggests, will mean that capital depreciation will be spread over several years instead of the year of purchase. Same amount of money - different time scale.

and then the_doctor said...

"Natural Resources Minister Gary Lunn has defended the allowance. He has said it only defers the paying of tax and is not a $1.4-billion tax break as the NDP says"
-from Globe and Mail Report on Business, March 3

rainswept said...

I read it very carefully. But this is a tax concession which does benefit the developers. According to the Department of Finance the cost, as a tax expenditure, arises from the timing of the deductions and for the "...oil sands are projected to total $820 million for the period from 1986 to 2030."

I know know who to blame for this shell game that helps government officials and private businessmen obscure the cost to the taxpayer; and I know why no-one can or will just say what the benefit of the ACCA is, and what the cost of the ACCA is. Regardless, even taking your description over the Department of Finance, the ACCA is, at the very least, functionally equivalent to an interest free loan of 5 to 40 $million annually by the Fed to developers. Thus taxpayers sustain the cost of borrowing despite the overwhelming profitablility of the venture.

Even if my financial analysis is incorrect, it still stands that developers crave this concession and government offers it because it profits the developers somehow. If it were not a case of public subsidy, private profit then developers, rather than various watchdog groups, would be agitating against it.

However, as I said, it is not about the money. What concerns me is that this concession whatever its value may be appears to be unnecessary.

What testimony is being offered to defend this pickpocket partnership between developers and gov't? The natural resources of the country are a public trust. If the government is going to encourage Shell Canada, Western Oil Sands, ConocoPhillips, et al to transform thousands of square kilomenters of Alberta's boreal forests into moonscape - the "real cost" - then the "real benefit" to the public should be placed in the balance.

Confident that this real benefit actually outweighs the financial cost to the taxpayer, the environmental cost to the public, and the ethical cost of state-corporate collusion, we might mock the organ-grinding of environmental pressure groups and political underdogs. Absent total confidence it behooves us to consider the issue further.

CaptainOrange said...

Bravo! Goddamn, but that was a great exchange. I can't wait for everyone to be together this Saturday.