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Toronto Sun: How much is enough? Exxon – which is enjoying record profits – demands Canadian taxpayers give it more money

Rex Tillerson, Exxon Mobil Chairman & CEO

(Rex W. Tillerson, chairman and CEO of ExxonMobil)

By LINDA LEATHERDALE, TORONTO SUN
June 3, 2007
 
Read this and try not to blow a gasket.

The world’s largest oil giant, which is raking in the biggest corporate profits in history, wants a corporate welfare cheque from Canadian taxpayers, who’ve already forked out billions to the oil patch.

Exxon Mobil Corp., which owns 69.9% of Imperial Oil, is the Texas-based giant which netted a record profit of $39.5 billion US in 2006, which equates to $4.35 million US every hour, while the average worker gets only $12.

The gusher profits continue to pour in.

Yet, Exxon is going to Ottawa with its hands out.  

The shocking revelation was made at Exxon’s annual meeting, where chairman and CEO Rex Tillerson warned that the long-delayed Mackenzie Valley pipeline project would be shelved if Canadian taxpayers don’t foot some of the bill.

The pricetag for this project, led by Imperial Oil, has doubled to $16.2 billion.

“We are now in a situation where it’s not economic at the current costs,” Tillerson said at a news conference after the meeting, where angry shareholders voiced concern about excessive executive pay and climate change.

This year, Tillerson’s base pay jumped by 17% to $1.75 million US and his bonus more than doubled to $2.8 million US. He replaced retiring chairman Lee Raymond, who walked out the door with $400 million US in his jeans.

At the meeting, 47.2% of Exxon’s shareholders voted in favour of a proposal to allow the company to recoup bonuses if found unjustified; 41.2% were in favour to give shareholders a vote on executive pay; and 40% agreed the chairman and CEO responsibilities should be split.

Exxon isn’t the only player involved in the Mackenzie Pipeline project, which if built would ship 1.9 billion cubic feet of natural gas a day from three big fields in Canada’s Northwest Territories to Alberta and U.S. markets.

Other project partners include Conoco-Phillips and Shell, who are also enjoying record profits.

Outgoing Shell Canada CEO Clive Mather, who’s leaving after parent Royal Dutch Shell bought up all outstanding shares, says Shell is still committed to the Arctic gas pipeline.

“The fundamentals are strong — I mean the fundamentals associated with bringing that stranded gas to market, the fundamentals associated with opening up a potential new (supply) basin in the North,” said Mather, whose total pay last year was a whopping $4.9 million.

Shell’s 2006 profit was a record $1.7 billion, and Royal Dutch Shell raked in $25.4 billion US — a U.K. corporate record.

What these players want is Ottawa to pay for infrastructure like roads and to guarantee that third parties sign up to ship gas. They also want government to allow accelerated depreciation.

“It’s outrageous for the Government of Canada to put any more money into this project,” said Stephen Hazell, executive director of the Sierra Club of Canada.

He said Ottawa has already committed $500 million to help MacKenzie Valley residents adjust to change the pipeline will bring. Plus, up to $300 million has been spent on the regulatory process and environmental studies.

Amy Taylor, an economist with the Pembina Institute, said making taxpayers cough up more money for the oil patch is “totally unacceptable.”

In its report on Ottawa’s spending on the oil and gas industry and how it’s undermining Kyoto commitments, the institute says: “It turns out the industry’s real fear may well be that Canadian taxpayers will object to the huge corporate welfare that is being provided to the country’s richest and biggest polluters.”

OVERHAUL DEAL

Another institute report demands an overhaul of the royalty and tax treatment of Alberta’s oil sands and points out that amid record oil prices, record oil sands production, and record industry profits — Alberta’s oil sands royalty return a barrel is down 32%, while Ottawa loses up to $1.65 billion in revenue.

“What the government is doing is leaving high profits with the industry, and not giving value back to the owners of the resource,” said Taylor.

Who owns the resource are Canadian taxpayers, but it depends on where you live. Under Canada’s Constitution, as set out by Pierre Trudeau, provincial taxpayers own provincial resources, except in the Northwest Terrorities where all Canadian taxpayers own the resources.

So, when it comes to the Mackenzie Valley pipeline, all Canadians own the resource.

Bottomline is this energy boom is growing a wealth gap in Canada.

Alberta’s rolling in the dough, where record-profit energy giants can write off 100% of capital costs in the first year of building a new upgrader in the oilsands.

But elsewhere, like Ontario, a manufacturer who builds a new plant only gets to write off 12% of capital costs each year.

Meanwhile, our economy has lost 250,000 good-paying manufacturing jobs since 2002, for a wage loss of $2.5 billion.

And to blame are skyrocketing energy costs, a zooming Canadian dollar now over 94 cents US, and cheap offshore labour in countries like China, whose growing energy demand is pushing oil prices through the roof.

If anything, Ottawa should be giving Canadians a break on high gas taxes, which are raking in $5.2 billion a year — not handing out corporate welfare cheques to a greedy oil oligopoly.

OUR TAX DOLLARS AT WORK IN THE OIL PATCH

Canadian taxpayers forked out $1.4 billion in subsidies to the oil and gas industry in 2002.

Subsidies increased 33% from 1996 to 2000, for a total of $8.3 billion.

Ottawa spent $1.2 billion on oil sands alone from 1996 to 2002.

The majority of money was spent on tax initiatives involving the Canadian Development Expense, the Canadian Exploration Expense, the Resource Allowance and the Accelerated Captial Cost Allowance.

Ottawa’s finance department estimates that the 100% Accelerated Capital Cost Allowance provides between $5 million and $40 million in tax breaks for every $1 billion invested. This means foregone tax revenue of up to $1.65 billion between 1997 and 2005.

A study commissioned by the Canadian Association of Petroleum Producers predicts federal income tax revenue from the oil and gas industry will be halved from $5.1 billion in 2005 to $2.4 billion in 2008, due to Ottawa’s tax break for oil sands capital investments.

Source: the Pembina Institute

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