Canadian Economic Contribution
As the fifth-largest producer of natural gas and the sixth-largest producer of oil in the world, Canada has the opportunity to provide responsibly produced oil and natural gas to meet demand while driving job creation and economic growth here at home.
Canadian oil and natural gas provided $110 billion to Canada’s gross domestic product (GDP) in 2019, supported almost 550,000 jobs across the country in 2018 and provided $10 billion in average annual revenue to governments for the period 2017 to 2019. This revenue helps pay for roads, school and hospitals.
How Oil and Natural Gas Contribute to Canada’s Economy
Oil Sands and Canada’s Economy
Over the next 10 years, the oil sands industry is expected to pay an estimated $17 billion in provincial and federal taxes – including royalties* (Canadian Oil Sands Supply Costs and Development Projects, 2019 – 2029, CERI)
In addition to paying significant royalties and taxes, the oil sands industry is a major employer. In 2018, the oil sands supported and created almost 217,000 direct and indirect jobs across Canada.
Almost every region in Canada has benefitted from oil sands development through job creation and economic activity.
Oil Sands Supply Chain
A strong oil sands sector drives a strong national economy by attracting capital, creating jobs and supporting public services. Canada’s oil sands create prosperity across the entire country – not just in Alberta. Local companies in every province supply goods and services to the oil sands—creating jobs, growth and economic opportunity in local communities.
The oil sands supply chain data highlights examples of the commerce and trade relationships between oil sands producers and business suppliers across Canada. Supplier counts are down in every province as compared to the previous data from the period 2014 / 2015. In addition, the supply chain spend is down dramatically across the country. This is consistent with the investment and spending declines experienced in the oil sands and energy sector since 2014.
CAPP has been conducting a bi-annual survey of oil sands and service companies across Canada since 2012 to determine the value of the oil sands supply chain. The data is not a complete and exhaustive list of suppliers in a particular region, but serves to highlight existing examples of the commerce and trade relationships between oil sands producers and companies across Canada.
Natural Gas and Canada’s Economy
The upstream natural gas industry contributes to Canada’s overall economic health through jobs, and taxes and royalties paid to provincial and federal governments. For the period 2019 to 2029, total Canadian GDP impact from the natural gas industry is estimated to be $250 billion.
The industry contributes to Canada’s overall economic health through jobs and taxes and royalties paid to the provincial and federal governments. This revenue can be used to help pay for health care, education, infrastructure and other social programs. The following benefits will be realized if we are able to build a liquefied natural gas (LNG) industry to ship Canadian natural gas to Asian markets:
- It is forecast that the natural gas industry will generate $250 billion in economic impact over the next 10 years.
- Taxes paid to the federal and provincial governments from the upstream natural gas industry will total almost $11 billion over the next 10 years. (Source: CERI)
The Future of Natural Gas
While the natural gas market has been challenged by a number of factors including growing US production and a lack of pipeline infrastructure in the Western Canadian Sedimentary Basin (WCSB), Canada’s natural gas industry does have a bright future if we are able to build a liquefied natural gas (LNG) industry to ship Canadian natural gas to Asian markets. Based on a 2018 CAPP data the economic impacts of supporting a Canadian LNG industry are significant and estimates include:
- Generation of $2.4 billion towards Canada’s GDP in direct or indirect activity
- Employment growth on a national level increases by 10,000 direct or indirect jobs
- Annual government revenues (corporate, personal, indirect taxes and royalties) for the provincial and federal governments
LNG Exports from Canada Could Provide Annual Benefits
Atlantic Canada’s Offshore and the Economy
Atlantic Canada’s offshore oil and gas industry also provides many benefits to the country’s economy:
- It employs approximately 6,000 people directly, and and thousands more indirectly.
- It supports more than 600 supply/service companies.
- The cumulative expenditures by the producing sector in Atlantic Canada from 1999 to 2019 total almost $98 billion.
- The cumulative royalties paid to the Governments of Nova Scotia and Newfoundland and Labrador from 1999 to 2019 total more than $25 billion.
- More than $506 million has been spent on research and development, and education and training.
Most of the natural resources in Alberta, B.C. and Saskatchewan belong to the provinces (Crown). In exchange for the right to develop these resources, companies pay the government a royalty. This is a percentage of revenues generated from the sale of oil and natural gas products, or in some cases takes the product in-kind for the government to sell.
Royalties are just one way oil and natural gas producers contribute to government revenues. Many different government taxation policies affect exploration and development of Canada’s natural resources.
In CAPP’s view, government support of a particular industry or company via direct spending or credit should be deemed a subsidy. However, measures of the federal tax framework that enable economic activity and maintain effective neutrality of the tax system are not subsidies.
In Canada, all businesses can deduct certain expenses, and the oil and natural gas sector is no different. Tax measures used by the oil and natural gas sector are not subsidies. The government establishes tax measures to ensure the neutrality of the tax system between industries that differ in their capital intensity, revenue generation and production life cycles, to remove tax bias.
Canada is Falling Behind
Competition for capital investment in the global market is fierce and if Canada wants its industry to be a major player internationally, a number of factors need to be considered. Rising government costs, the burden of inefficient regulations, and the lack of infrastructure to move Canadian energy to growing markets are all undermining investor confidence in Canada and negatively affecting the country’s ability to attract the capital needed to create jobs and national prosperity.
Total capital spending was $35 billion in 2019 – a 56% decrease compared to $81 billion in 2014. Meanwhile, capital spending in the United States increased by about 55 per cent from 2016 to $137 billion thanks to a more streamlined regulatory system.
Capital Investment in Canada’s Oil and Natural Gas Industry
Source: Statistics Canada and CAPP, 2020