Canadian producers cautious on export tax

A potential new border tax on oil exports to the US is not concerning Canadian producers but it does have industry watching closely to see what comes next, writes Tonya Zelinsky.

Less than a month after his inauguration, US President Donald Trump has signed a number of executive orders and proposed significant changes, including tax reform aimed at reducing corporate taxes and the country’s dependency on foreign oil and a 20% border tax on all imports — including Canadian crude.

However, Canadian producers do not seem concerned what, if any, impact a border tax would have on the industry.

The Canadian Association of Petroleum Producers’ fiscal and economic manager, Jon Stringham, said the industry is watching Trump’s administration carefully but is not rushing to judgement.

“From an energy perspective, we’re an important trade partner and I think they understand that,” he said.

“It’s very important that we separate the rhetoric from the actual legislation. We haven’t seen any real legislation come into effect, we haven’t seen actual lawmakers even begin to move in that direction. There’s some unrest but I think cooler heads will prevail in that there’s a process the US government has to go through and we’re watching it very closely.”

Further strengthening industry’s confidence is Trump’s appointment of Rex Tillerson as US Secretary of State. He has first-hand knowledge of the significance Canada plays in meeting US demand for crude.

As former chief executive for ExxonMobil, Tillerson was involved in some of the company’s biggest investments in the Canadian oil patch, including Imperial Oil’s Kearl oil sands mining operation in Northern Alberta.

Tillerson brings a wealth of experience and a unique perspective to the role of Secretary of State, said Suncor Energy chief executive Steve Williams.

“There’s a lot of expertise in the government with Tillerson. He (Trump) is clearly saying that he believes oil and gas is an important part of the US future,” he said.

“My view is that, overall, Canada is not at the top of the list for the US in terms of trade concerns. I think it’s a very healthy balance and a very healthy symbiotic relationship between Canada and the US, so I think the probability of the border tax we’re currently thinking about is very low.”

In a recent report, BMO Capital Markets agreed the chances of a border-adjusted tax proceeding in its current form to be unlikely because of the lack of strong support by both US Republicans and Democrats alike.