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Canada takes aim at oil tax perks



By Upstream staff 

Photo by AP


Canada's Conservative government, pressured to do more on the environment, is set to phase out some oil sands tax incentives.

The government is also planning to introduce rebates for hybrid vehicles, tax gas guzzlers and subsidise renewable fuels under a deal to maintain its grip on power in Canada's parliament.

The New Democratic Party, which has enough votes to keep the Conservatives in power, had made eliminating accelerated capital cost allowances for oil sands a price for its support, Reuters reported.

"Environmental measures in this budget will improve the air we all breathe," Finance Minister Jim Flaherty said in introducing his annual federal budget today.

Flaherty said the provision allowing accelerated write-off of oil sands investments will be phased out gradually so projects that had counted on them can proceed. Existing developments will get the allowance; for new projects the provision will be phased out between 2011 and 2015.

"I'm not surprised but I am disappointed," said Will Roach, chief executive of UTS Energy, which holds a 30% stake in Petro-Canada's planned Fort Hills oil sands project, one of numerous multibillion-dollar projects on the drawing board.

Alberta's oil sands, which rival Saudi Arabia's conventional oil reserves in size, are the target of an unprecedented development rush as companies look to cash in on North America's thirst for secure energy supplies.

Such projects are also a major source of greenhouse gas emissions, however.

Roach said it was too soon to say if the changes will affect the Fort Hills partners' plans.

The government will extend by eight years, to 2020, an accelerated write-off of investment in equipment that generates energy more efficiently or uses renewable energy sources. It will be expanded to include wave and tidal energy and additional solar and waste-to-energy technologies.

The Conservatives, elected in January 2006, have changed tack and made the environment a top priority in response to a sudden surge in concern on the part of Canadians.

The budget also allocated C$2 billion (US$1.7 billion) for renewable fuels. This includes C$1.5 billion as incentives for ethanol and biodiesel; and C$500 million to help build plants for next-generation renewable fuels, produced from agricultural and wood waste products like straw and wood residue.


Monday, 19 March, 2007, 23:52 GMT  | last updated: Monday, 19 March, 2007, 23:52 GMT

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