Canadian Association of Petroleum Producers: oil and natural gas industry offers a pathway to rapid and sustainable recovery

CALGARY, AB – As governments turn their attention to the reopening and rebuilding of Canada’s economy, the Canadian Association of Petroleum Producers (CAPP) has been working closely with the federal government to identify measures to support economic recovery while the country continues to manage the health risks of the COVID-19 pandemic.

CAPP recognizes the Government of Canada has expressed deep concern for the serious impact this unprecedented crisis is having on the oil and natural gas industry and the people whose livelihoods rely on the sector. The federal government’s implementation of the wage subsidy program, funding for orphan and inactive wells and the Emission Reduction Fund, along with liquidity measures for small and large producers have offered vital support to keep workers employed, help companies survive and position the industry to take advantage of a global economic recovery. Provincial governments have also implemented programs and are making significant efforts to complement the federal support.

The federal and provincial government supports have rightly been focused on short-term economic survival. However, to turn from near closure and contraction to recovery and growth, Canada’s economy cannot rely solely on government support. The pathway to rebuilding requires encouraging and attracting private investment back to Canada’s industries.

In the wake of the COVID-19 crisis, Canada will be competing with every other jurisdiction in the world for more limited investment dollars.

The oil and natural gas sector is Canada’s largest industry, generating more than $100 billion in gross domestic product (GDP) annually and supporting half a million jobs across the country. The industry is also the biggest source of international investment and produces the country’s largest export commodity. In addition to contributing to Canada’s economic recovery, a strong oil and natural gas sector can help advance the federal government’s objectives related to both Indigenous reconciliation and climate change.

Oil and natural gas projects are shovel-ready and shovel-worthy. They can immediately put Canadians back to work with a multi-billion-dollar national supply chain, offer economic and self-sustaining opportunities for Indigenous communities and generate desperately-needed revenues for governments in the form of taxes and royalties. These objectives can be achieved while leveraging the sector’s leadership in emissions reduction, water protection, and land and species management.

CAPP has publicly released letters it submitted to the federal government through the organization’s ongoing work with a number of ministries to stabilize Canada’s economy and position the country for recovery. The May 27, 2020 letter focuses on economic recovery and outlines three areas of recommendation to provide certainty to capital markets and attract investment back into Canada’s resource industry. The recommendations to the federal government include:

• A visible government commitment to work with the oil and natural gas industry to demonstrate Canada is a supportive and competitive country in which to invest over the long term.
• Prioritize a 100 percent immediate deductibility, levelling the playing field consistent with other capital intensive industries in Canada, for oil and gas sector capital investments; including clean technology and emission reducing investments.
• Work together to develop and implement an integrated recovery strategy that considers goals around economic growth, job creation, Canada’s climate targets, its clean technology export ambitions and economic reconciliation with Indigenous communities.

CAPP quotes Tim McMillan, president and CEO:

• “Canada’s oil and natural gas industry is committed to creating good jobs, generating benefits for Indigenous communities and advancing Canada’s environmental leadership. Working collaboratively with the federal government we have an opportunity to reset the national conversation about energy and bring Canadians together to build value across the country.”
• “A strong industry creates jobs for Canadians and generates desperately-needed revenues for government. The oil and natural gas industry is crucial to our country’s economic well-being and can help lead our recovery, as well as be the foundation for long-term resilience.”
• “Provincial and federal governments have stepped up to provide critical support to industry during this crisis but we cannot rely on government spending alone for recovery. It is crucially important we make the right policy decisions so Canada can compete for investment dollars in what is going to be a hyper-competitive international market.”

Supporting information:

• The oil and natural gas industry supports nearly 500,000 jobs across Canada, generates approximately $8 billion annually in revenues to governments, and contributes $109 billion to the country’s gross domestic product.
• The supply chain of oil sands producers alone is associated with close to 10,000 businesses across the country.
• The offshore oil and natural gas industry makes up one-quarter of Newfoundland and Labrador’s GDP and 41 percent of exports. Approximately 600 supply and service companies in Atlantic Canada rely on work associated with offshore development.
• Ontario’s participation in the oil sands supply chain was valued at $1.89 billion in the two-year period from 2016-2017, supporting more than 63,000 jobs and 1,162 businesses.
• The oil and natural gas industry is Canada’s largest investor in clean technology and environmental protection, spending about $3.5 billion annually.

The Canadian Association of Petroleum Producers (CAPP) represents companies, large and small, that explore for, develop and produce natural gas and oil throughout Canada. CAPP’s member companies produce about 80 per cent of Canada’s natural gas and oil. CAPP’s associate members provide a wide range of services that support the upstream oil and natural gas industry. Together CAPP’s members and associate members are an important part of a national industry with revenues from oil and natural gas production of about $109 billion a year. CAPP’s mission, on behalf of the Canadian upstream oil and natural gas industry, is to advocate for and enable economic competitiveness and safe, environmentally and socially responsible performance.