The New Government of Prime Minister Stephen Harper brought down its second budget on Monday, March 19. Finance Minister Jim Flaherty outlined how the Conservatives plan to spend over $220 billion to create a stronger, safer, better Canada. The budget promises to restore the fiscal balance between federal and provincial/territorial governments; give tax relief for working families; further reduce the national debt; improve health care; support our troops and our farmers; andthe biggest promise of allto preserve the environment.
With so many promises spread out buffet-style, those in the mineral industry have been picking over the offerings to decide if this budget is good news or not for our sector.
The MINING ASSOCIATION OF CANADA calls the budget buffet a mixed bag. It praises promises of regulatory reform; any reduction in red tape is welcome. Also appealing are the tax incentives for investment in machinery and equipment, the commitment to Aboriginal training, and the extension of the Mineral Exploration Tax Credit until the end of 2009.
Harder to digest is the failure of the federal government to expand its investment in geoscience, particularly in northern Canada.
And truly distasteful, says the MAC, are plans to phase out the Accelerated Capital Cost Allowance for oil sands mining. The credit will be grandfathered for existing operations, but without it new investments in oil sands will be less appealing.
While the loss of the tax credit alone will not markedly affect the rate of return for oil sands projects, the governments promised $4,000/vehicle surtax on gas-guzzling cars and trucks plus its $2,000 incentive for buyers of green vehicles will have a larger long-term effect. Uncertainty over how committed the federal government is to supporting the oil sands and petroleum industries is beginning to take shape.
Here is a question for CMJ readers to ponder: If the Canadian government wont nurture our oil sands industry, will it wither? Or will it be snapped up completely by foreign owners with deep pockets?
The budget is not yet law. Harpers minority government needs support to push it through Parliament. Without the backing of the New Democrat MPs, we may be in for another spring election.