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Alberta carbon tax prompts fierce oil and gas competitiveness debate

Last Updated Jun 8, 2016 at 3:45 pm PST

CALGARY – The impact of Alberta’s new carbon levy on the oil and gas industry was hotly debated in Calgary on Wednesday, a day after it was passed by the NDP government.

Alberta Energy Minister Marg McCuaig-Boyd, who spoke at an industry conference, insisted the province can compete with neighbouring Saskatchewan, which doesn’t have a carbon tax.

“We’re still pretty competitive overall in Canada,” said McCuaig-Boyd. “We’re one of the lowest (tax) jurisdictions and, I always have to remind people, we don’t have a provincial sales tax.:

But Gary Leach, president of the Explorers and Producers Association of Canada, said the carbon tax could drive investment away to other provinces or the United States.

“We’re competing in a North American market,” he said. “The price for our energy exports is set outside of Alberta. We don’t set the prices. So to the extent where our industry is shouldering a competitive burden that our competitors are not, that is a serious concern.”

Beverly Gilbert, national commodity tax leader for law firm Borden Ladner Gervais, said there’s no question that Alberta producers will face higher costs and a “huge compliance burden” as a result of the carbon tax.

“They will be paying this non-refundable tax that people in Saskatchewan will not be paying, for instance, on things like venting and flaring,” Gilbert said. “That makes us less competitive.”

Gilbert acknowledged, however, that the fact that Alberta has no provincial sales tax gives it a substantial advantage that producers in other provinces don’t have.

The carbon levy, to take effect Jan. 1, is one element of a climate-change strategy intended to reduce Alberta’s carbon footprint. It is expected to bring in $3 billion in 2017-18.

Cenovus Energy (TSX:CVE) spokesman Brett Harris said his company has supported Alberta’s climate change initiative from the start and would like to see it extended across North America so there’s a “level playing field” for all competitors.

“We think over the long term it actually gives Alberta a potential competitive advantage because it establishes us as a world leader, especially in terms of oil-producing jurisdictions,” he said.

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