Oil in­dus­try needs sta­bil­ity

The Compass - - OPINION -

Here in New­found­land and Labrador, we rely heav­ily on rev­enues from our off­shore oil to pay for govern­ment pro­grams and ser­vices. For this rea­son, re­cent com­ments made on­line by the NDP mem­ber for St. John’s North, Dale Kirby, are very con­cern­ing. Mr. Kirby said sev­eral times on­line that we need to add a new sur­tax on oil pro­duc­tion, in ad­di­tion to our cur­rent roy­alty regime.

Af­ter try­ing many times to get de­tails of his pro­posed new tax with no re­sponse, I have no­ticed that this tax is no longer men­tioned.

Although I don’t agree with his pro­posal, I am not ide­o­log­i­cally op­posed to the con­ver­sa­tion. My is­sue is with the NDP’s ten­dency to hastily pro­pose new taxes on in­dus­try and back off af­ter they re­al­ize it is not ad­vis­able for var­i­ous rea­sons. An­other ex­am­ple of this be­hav­iour hap­pened dur­ing the last elec­tion cam­paign. Dur­ing a tele­vi­sion in­ter­view, Lor­raine Michael sug­gested that no deal was fi­nal, and pro­posed that an NDP govern­ment would leg­is­late opening ex­ist­ing oil con­tracts for more favourable terms. Pre­sum­ably, she was later ad­vised we would be sued and backed off.

I am con­cerned about the mes­sage this sends to the oil in­dus­try. Off­shore oil takes many years to go from ex­plo­ration to pro­duc­tion, and many re­gions have un­ex­plored ter­ri­tory look­ing for in­vest­ment. Shale gas in the U.S., off­shore oil in the Gulf of Mex­ico and the Arc­tic are only a few ex­am­ples of ar­eas com­pet­ing for in­vest­ment in ex­plo­ration.

Our govern­ment has the re­spon­si­bil­ity to make sure New­found­lan­ders and Labrado­ri­ans ben­e­fit from our re­sources, there­fore fair roy­alty and tax regimes are nec­es­sary. How­ever, the NDP comes up with new ideas to tax in­dus­try seem­ingly on a whim, with­out fully con­sid­er­ing the im­pli­ca­tions.

This ap­proach to tax­a­tion and roy­alty could drive away in­vest­ment, be­cause no com­pany wants to deal with an un­pre­dictable govern­ment that might retroac­tively add a tax at any time. I would think that given that St. John’s sees the ma­jor­ity of the em­ploy­ment as­so­ci­ated with oil, the NDP would be more aware of th­ese facts.

Jeff Mar­shall writes from St. John’s

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