Shareholder thanks Saskatchewan taxpayers for corporate incentive

As a shareholder of Gibson Energy I want to thank Premier Scott Moe, his government and Saskatchewan taxpayers for the tax incentive recently announced for the Moose Jaw Refinery expansion.

The royalty tax credit, worth about $3 million over three years on this $20 million expansion will help to boost profits and return on investment in Gibson’s plant. Notably, the expansion to refine 22,000 barrels of oil a day from 17,000 barrels will not emit any more greenhouse gas emissions. In fact, the greenhouse gas emissions per barrel will be cut by 20 per cent to 25 per cent. No new jobs were created by the expansion which was completed June 29.

Government representatives at the Oil and Gas Processing Investment Incentive announcement patted themselves on the back for this first successful applicant to the program and its impact on building a strong investment climate in Saskatchewan.

The program was announced last fall to encourage investment in processing oil and gas in this province. Some voters could be left with the impression this royalty tax credit gave Gibson reason to expand now. Nothing could be further from the truth. While the Moose Jaw Refinery expansion has been on the burner for at least 10 years, having been postponed about eight years ago over excessive costs, the current expansion has been in the planning for almost two years. The expansion is part of a company restructuring to improve profitability. Sale of the trucking division is part of the restructuring.

The point here is that the $3 million loss in royalties was unnecessary to ensure the refinery expanded. The $3 million is like a gift from Saskatchewan taxpayers. Gibson management merely followed the rules to apply for and received the available credit.

In many cases these kinds of corporate subsidies are a gift to the company and shareholders. They really can only be justified on the basis that every province has incentives to retain and attract business investment. When the premiers talk about reducing trade barriers — talk that never seems to accomplish much — they never talk about reducing subsidies to attract investment to their respective provinces.

That discussion won’t happen simply because politicians want a carrot to dangle in front of investors. Some investments like the Moose Jaw refinery don’t need the subsidy, making the incentive subsidy a waste of taxpayers’ money.

Those investments that need the subsidies to start up are often marginal and unsuccessful – another waste of taxpayers’ money.

Saskatchewan’s Oil and Gas Processing Investment Incentive was probably established to land a bigger fish, explaining its $75 million cap on a $500 million investment.

The bigger fish would be the 40,000 barrel per day refinery proposed for Stoughton in 2018 by Quantum Energy of Arizona. Quantum also announced five other proposed refineries – two in Montana and three in North Dakota.

That would be a catch to crow about, but taxpayers will never know if the incentive was necessary.

Ron Walter can be reached at ronjoy@sasktel.net