Opinion: On the oil and gas industry, taxpayers need a bailout

Jeremy McCrea, CFA, is director of energy research at Raymond James

Export Development Canada and Canada Development Investment Corp. will both now provide lending support to most names in the sector. Although these loan protections will help prevent bankruptcies, they do little to inject new capital into businesses and merely replace one lender with another.As such, perhaps a different kind of bailout should be available for industry, but also taxpayers this time.

What if there was a way to eliminate these? As government-owned pipelines are constructed, Canadians should want to be sure energy companies will not only survive but also pay corporate taxes. Today, these tax pools are an asset for a company, with the government taking the offsetting liability. If there was an opportunity to buy these pools from companies for pennies on the dollar, the government’s tax collection of oil and gas revenue will increase meaningfully in future years.

For the mid-sized oil and gas sector, accumulated tax pools for public companies add up to $63-billion today. Given current commodity prices and the high cost of borrowing, however, most companies could likely be persuaded to sell their tax pools at about seven cents on the dollar. If the government has the ability to buy out these tax pools at distressed pricing, being $4.4-billion, given their low cost to borrow as well, there should be a strong incentive to do so.

globebusiness Probably good I can't read what others say on here. We worked or work like dogs out in that hell for those of you who benefit most to cut our troaths. May the masks bring ye treasonous ba3tards some Karma to quote NDPs Moffat. I'll break you Moffat

globebusiness Almost every industry needs a bailout.

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