Oil and gas production has expanded rapidly in recent years in southwestern Manitoba. In 2011, there were 578 wells under development in Manitoba, and production reached 15 million barrels, four times the level of production in 2000. To some, this boom is a welcome boost to the Manitoba economy, which will allow the province to compete, albeit on a smaller scale, with the fast growing petro-economies to the west. However, evidence shows that Manitoba as a whole benefits little from the exploitation of these resources. Meanwhile the environmental costs of the industry are already significant.
Over the past decade, oil production in Manitoba has increased from less than 4 million barrels to 15 million barrels. Over that time the price of oil has also increased significantly, so that the value of production has increase almost 10 fold to $1.38 billion in 2011. However, government revenues from the industry have not kept pace. A series of tax exemptions were introduced over this period. In 2007, a tax holiday on new production was announced providing a royalty free period for new mines. The normal volume of “holiday oil” for a new mine is 10,000 m3 or about 63,000 barrels. Most wells in Manitoba are small, with relatively low levels of production. Average production in 2011 was only a little over 2,000 barrels per month. This gives each producer more than two years of tax-free production. Last year, the Province announced it was extending the tax holiday until 2015. Manitoba received $28 million in taxes and royalties from oil and gas in 2011, only a 2% tax rate on the $1.4 billion industry.
Meanwhile, several other tax credits provide further subsides to the oil and gas industry. A retail tax credit for drilling equipment costs the province $3 million per year, while reduced electricity taxes cost over $11 million. Furthermore the cost of government services to the industry dwarf any revenues government receives. Each year the Province allocates over $80 million to Energy and Mines, much of which is spent for the direct benefit of industry. For example, 19 geophysical programs run by the province had a bill of $8.6 million in 2011.
The costs to our environment are considerable. Last year, 96 oil spills were recorded in Manitoba for a total of 703 m3. There is currently a backlog of 531 spill sites in Manitoba that need remediation.
New fracking technology presents increased and uncertain dangers from the industry. Manitoba does not currently track which chemicals are being used. The potential for disaster is great. Meanwhile, the greenhouse gas emissions are significant. Despite a recent slow down in the mining industry (including minerals, metals and oil and gas), Manitoba’s emissions from the sector are still more than double our Kyoto commitment.
The Fraser Institute has recently ranked Manitoba as one of the friendliest jurisdiction in world for oil mining (5th out of 147). Little wonder. These oil friendly policies have sparked a minor boom in southwestern Manitoba. However, it is not Manitobans who are benefiting. Most of the secondary industries are located in neighbouring jurisdictions and do not contribute to Manitoba’s economy. Housing prices in towns like Virden are showing many of the ills of a boom economy, crowding out local initiatives.
All Manitobans enjoy their holidays, but it is time for the oil and gas industry to go back to paying its share.
Manitoba oil and gas data is available through the Oil Activity Review
Manitoba Budgets are available from Manitoba Finance.
Information on the risk of Fracking technology is available from the Council of Canadians
IISD reports that oil subsidies by Federal Government, Alberta, Saskatchewan and Newfoundland totaled $2.84 billion in 2008.
David Suzuki Foundation campaign to end oil subsidies