Jul 4, 2019
As part of its ongoing coverage of the innovation economy, the Financial Post is reporting on the intersection of technology and energy, which includes an article on the oilpatch’s investment on clean tech in Canada. According to the article’s author Geoffrey Morgan, the incredible pressure on oilsands companies to reduce their emissions and overall environmental impact has led to massive spending on new technologies to drive down carbon emissions, water use and land disturbances, making the domestic oilpatch the largest spender on clean technology in Canada.
Despite oilsands companies’ investment in implementing new technologies, including putting $1.4 billion into Canada’s Oil Sands Innovation Alliance, an organization that pools funding and research on environmental technologies, the article reports that the “general public, environmentalists and even governments continue to believe that the industry needs to do so much more, even while throwing up roadblocks to thwart any progress. The latest impediment is the Canada Revenue Agency, which industry executives and tax lawyers say has been increasingly hesitant to allow oilsands companies to claim Scientific Research and Experimental Development (SR&ED) tax credits.” These credits, commonly referred to as “shred credits,” have been inconsistently administered, according to the article.
“The idea behind clean-tech and innovation credits is a great idea, but it has to be administered properly by people who understand what is happening in the industry,” says Joanne Vandale, a Calgary-based partner in Osler’s Taxation Group.
The article also reports that Canadian oilsands companies are piloting increasingly ambitious technologies on a larger and larger scale since they continue to face increasing pressure to reduce emissions, but are having a more difficult time accessing the credits than those outside the energy sector.
“Often the CRA will confuse experimentation at a scaled-up level with commercial production,” Joanne tells the Financial Post, explaining that this creates a disincentive for energy companies, already struggling with low prices for their products, to allocate additional funds to ambitious clean-tech projects.
“I’m not sure that it necessarily reduces the amount of work that resource companies try to do in the clean-tech area or in technological advances to reduce carbon footprint, but when you’re pricing out the cost of those pilot projects, the availability of the SR&ED credit often has a big question mark next to it,” she says, adding, “[i]t’s less reliable than it should be.”
For more information, read Geoffrey Morgan’s full article, “Innovation Energy: Oilsands step up to take on clean tech challenge” in the Financial Post.