March 19, 2007
2007 Federal Budget: What's interesting?
COMMENT:The three big energy and environment announcements in the federal budget are:
1. Green Levy on Fuel-Inefficient Vehicles of up to $4000 levy, but excluding pick-up trucks (!) These are about 5% of vehicle sales. Up to $2000 rebate on purchase of hybrids and other fuel-efficient vehicles. About 3% of vehicle purchases.
2. Phase out of the Accelerated Capital Cost Allowance Program that allowed companies in the oil sands to write off the depreciation of their capital assets in the year they were purchased. Companies that are already using the program will be allowed to enjoy the tax benefits until 2015, at which point it will be entirely phased out.
3. $1.5-billion Eco Trust, which funds projects jointly with the provinces to reduce greenhouse gas emissions.
Environment: Fee slapped on SUVs
Bill Curry
Globe and Mail
19-Mar-2007
OTTAWA — Canadians are being enticed out of their H3 Hummers and into a Toyota Prius as part of surprise new “green levy” introduced in the federal budget.
A fee of as much as $4,000 will be slapped on gas guzzling SUVs and supercharged sports cars to pay for new incentives aimed at getting Canadians behind the wheel of a new hybrid car or other fuel efficient vehicles.
The incentives would be worth up to $2,000 and can be combined with similar offers by several provinces, reducing the purchase costs of hybrids by as much as $4,000.
The measure steals a page from the Green Party's platform and – combined with incentives for renewable fuel production – places vehicle pollution as the top target of its environmental spending plan.
Though environmentalists welcomed the rebates for hybrids, they criticized the budget Monday for falling well short of the “massive scale-up” of efforts that former environment commissioner Johanne Gelinas called for last September in calling for urgent action on climate change.
The Conservative budget contains more than $4-billion over seven years for environmental issues, including incentives for domestic ethanol production and protection for Canadian lakes and forests.
Half of that money follows from the government's announcement last year that five per cent of all gasoline sold in Canada must be from renewable sources such as ethanol by 2010. Two per cent of all diesel must also be from renewable sources.
With the United States and Brazil heavily subsidizing ethanol production, the Canadian industry warned similar incentives were needed for Canada to compete in the rapidly expanding renewable fuels industry.
But environmentalists note that the new money to support renewable fuel refineries is not new money, because it is being paid for by ending an existing tax break for ethanol.
Environmentalists have also expressed concern that the amount of energy required to grow and produce ethanol negates a large amount of the potential reduction in greenhouse gas emissions.
“If you want to subsidize corn producers, that's fine, but it's barely an environmental program,” said Aaron Freeman of Environmental Defence.
They note that the budget makes no mention of how many megatonnes of greenhouse gases would be reduced as a result of the new spending, raising questions as to whether it amounts to an effective way of spending federal climate change dollars.
The new Green Levy on Fuel-Inefficient Vehicles will not apply to pick up trucks. Finance officials said it would be unfair to penalize such trucks because many Canadians require them for work.
Finance officials estimate about 5 per cent of vehicles on the market would be subject to the fee and about three per cent would qualify for the fuel efficiency rebate.
The $110-million expected to be raised by the levee will be used to pay for incentives for the purchase of hybrid and fuel efficient cars, as well as incentives for Canadians to retire older, high-polluting vehicles.
In addition to the vehicle-related measures, the budget phases out the Accelerated Capital Cost Allowance Program that allowed companies in the oil sands to write off the depreciation of their capital assets in the year they were purchased.
Companies that are already using the program will be allowed to enjoy the tax benefits until 2015, at which point it will be entirely phased out. The money saved will go toward a similar tax break for oil sands to encourage the purchase of technology to capture greenhouse gas emissions before they are released into the atmosphere.
In addition, the budget's environmental spending includes:
-- The already announced $1.5-billion Eco Trust, which funds projects jointly with the provinces to reduce greenhouse gas emissions
-- The previously announced $250-million Natural Areas Conservation Program, which encourages the private sector to protect ecologically sensitive lands
-- $10-million for conservation projects in the North West Territories
-- $22-million to hire 100 more officers at Environment Canada to enforce Canada's environmental regulations
-- $110-million to protect the habitat of species at risk
-- $93-million for a national water strategy, which includes clean up projects for the Great Lakes, Lake Simcoe and Lake Winnipeg as well as fisheries research.
“It's pretty clear the Conservatives don't take environmental protection very seriously and they continue to ignore their international commitment on tackling climate change,” said Dale Marshall of the David Suzuki Foundation.
“My question to them would be: ‘If you thought that the previous government's climate change programs were inadequate, then what makes you think that recycling those programs with less money would do anything?'”
March 03, 2007
Scrap oil sands tax breaks, MPs' report urges
BILL CURRY
Globe and Mail
March 3, 2007
OTTAWA — The Conservative government should scrap the generous tax breaks for the oil sands that some say are worth hundreds of millions annually, recommends a draft report by the Commons natural resources committee.
The report has been debated for weeks behind closed doors as MPs from the four parties in the House wrestled with the politically thorny issue of federal policy on Alberta's oil sands.
The document calls for an end to the accelerated capital-cost allowance program, brought in by the Liberals in the 1990s to encourage development in the oil sands, which, at the time, was seen by some as a high-risk and expensive way to produce oil.
The incentive allows companies to depreciate the full cost of equipment, such as the giant dump trucks and other machines needed to mine the oil sands, in the year it is purchased.
The Pembina Institute, an Alberta-based environmental group, has estimated that federal tax breaks for Canada's oil and gas industry are worth $1.4-billion a year. The institute has said the oil sands receive a significant share of those tax breaks but exact figures are impossible to find.
Environmentalists have long argued that the spike in oil prices since the allowance was introduced means there is no longer a need for such an incentive, particularly for an industry that is a large source of greenhouse-gas emissions and is a drain on Alberta's fresh water supplies. They have called for federal incentives to be redirected toward production of cleaner energy sources.
The report is complete and was scheduled for release yesterday, but that was pushed back by last-minute calls from the Conservatives and NDP MPs on the committee for a delay so that each party could write supplementary reports.
The Conservatives are expected to disagree with some of the recommendations; the NDP is expected to say some do not go far enough.
The desire of Conservatives and New Democrats for a delay could be linked to the timing of the federal budget. With Parliament now on a two-week recess, the postponement means the report will be released after the March 19 budget.
In outlining its demands to the Conservatives for the budget and climate-change action, the NDP has said the $1.4-billion in oil and gas subsidies should be scrapped and redirected to new climate-change programs.
Environment Minister John Baird has questioned the value of the oil sands subsidies. However, Natural Resources Minister Gary Lunn has defended the allowance. He has said it only defers the paying of tax and is not a $1.4-billion tax break as the NDP says.
Marlo Raynolds, executive director of the Pembina Institute, said he was pleased to hear of the coming recommendations. Canadians who have been observing the large profits of oil and gas companies in recent years would want any tax breaks to be dropped from the budget, he said.
“I think they would be very disappointed if it was not removed.”
Tireless energy has Fortis cooking with gas
COMMENT: We reported on the Fortis acquisition of Terasen Gas last week when the deal was first announced, but it has barely caused a riff on the keyboards of BC reporters.
Fortis to acquire Terasen Gas for $3.7 billion
Tireless energy has Fortis cooking with gas
GORDON PITTS
Globe and Mail
March 3, 2007
There was no victory cigar, no celebratory dinner. Stanley Marshall doesn't believe in that sort of thing — not even after the biggest deal in the history of his Newfoundland utility company, Fortis Inc.
Last Saturday morning, the Fortis board met in Toronto to approve its $1.4-billion takeover of a B.C. energy distributor, Terasen Gas. Then its no-nonsense CEO did what he usually does – he hit the road.
By late afternoon, Mr. Marshall was home in St. John's, around 2,100 kilometres away, for hard-won downtime with the family.
The following afternoon, he was back in Toronto, in time for the next day's conference call and $1-billion equity financing deal that established Fortis as a North American natural gas player.
Stan Marshall, president and chief executive of Fortis,
has brought a British Columbia natural gas utility
back under Canadian ownership as Fortis Inc. struck
a $1.4-billion deal with US energy giant Kinder Morgan
Inc. (Kevin Van Paassen/Globe and Mail)
It was a typically obsessive travel regimen for Stanley Marshall, 56, who is perhaps the country's most relentless road warrior. The decision-making process in the Terasen deal is typical of Mr. Marshall's approach honed over a dozen smaller deals – direct, patient and nomadic.
Fortis has kept its official headquarters in St. John's but its vision is continental, and for Mr. Marshall, that means his office is the road. Asked what he does for fun, he says simply: “I work.”
He has no CEO-type hobbies, although he is an enthusiastic gardener. He has little life outside his family and the company he has built over the past 15 years from a provincial electrical utility into a multinational energy powerhouse.
Indeed, Mr. Marshall has little time or patience for the back-slapping bonhomie that goes on after many financial deals. “You're too tired after you do these things,” he says, explaining his quick departure from Toronto last Saturday.
St. John's, perched on the northeast edge of North America, is not an easy place from which to run a burgeoning multinational. The negotiations to buy Terasen Gas took place in Houston, the home town of the seller, Kinder Morgan Inc., and in Toronto, but not in St. John's.
“It's a hard place to get to, especially this time of year,” says Mr. Marshall, who spent four weeks on the road clinching the deal. That's not unusual: In the seven weeks before Christmas, he spent only seven days in his Newfoundland office.
Mr. Marshall's schedule isn't going to get any easier, as he builds on the takeover of the Terasen system. The purchase, which awaits regulatory approval, gives Fortis muscle and expertise in natural gas distribution, allowing him to target other North American local gas suppliers in the consolidation sweeping that industry.
He wants to use Terasen as a platform for growth in gas, particularly in the United States, in the same way Fortis's predecessor company, Newfoundland Power, laid the foundation for expansion in electricity. He notes that many gas distribution concerns are also electric distributors and there are strong synergies between the two.
“Not much happens now in the North American utility industry that we don't know about,” says Mr. Marshall, an engineer and lawyer who has worked for the company since 1979, when it was only Newfoundland Power, including the past 11 years as Fortis CEO.
The strategy has not been without personal cost, and even Mr. Marshall admits he gets bone-tired. After his crazy deal-clinching weekend, he flew out to Vancouver to meet employees of his new acquisition. Last night he was scheduled to be back on the Rock again for his Friday-Saturday tonic of family time.
Such is the lot of the CEO of a Newfoundland company. When regulators approve the new deal, it will have less than 10 per cent of its business in its home province. Half its assets will be on the opposite coast, in B.C.
Mr. Marshall runs a very lean shop – only 13 of Fortis's 4,400 employees are at head office. Operations are highly decentralized with considerable authority at the operational level. The network of 10 subsidiaries is held together by the peripatetic CEO, who travels the world looking at acquisitions and fixing problems.
That has been the pattern almost since the mid-1980s when Mr. Marshall, as a rising senior executive, helped convert Fortis from a power utility into a holding company. He acquired non-regulated businesses, such as hotels and commercial real estate, as well as smaller non-regulated electrical companies.
In the late 1980s, “there was only one person who ever thought we could be of this scale and that was me,” he says. He felt the company could build on its regulatory expertise and core of good people, raising its profile and credibility slowly through small deals.
Fortis has made about a dozen acquisitions of power companies in Canada, New York State, Belize , and the Turks and Caicos in the Caribbean.
He had been courting Terasen since back in the days it was known as BC Gas. When Kinder Morgan bought the parent company Terasen Inc. in 2005, it was common knowledge that the U.S. operation wanted Terasen for its oil pipeline, not the gas business.
Fortis saw itself as the natural buyer, having already established itself on the West Coast through the purchase of the Alberta and B.C. electricity assets of Aquila Networks, another U.S. seller.
It put out feelers to Kinder Morgan more than a year ago, indicating that when it ever wanted to sell the gas side, the Newfoundland company was very interested.
But Kinder Morgan had other things on its mind – namely, founder Richard Kinder's $22-billion (U.S.) bid to take the company private. Mr. Marshall patiently waited and, in January, Kinder Morgan said it was ready to talk. Mr. Marshall quickly started negotiating, he says, before other potential bidders even knew it was for sale.
Mr. Marshall loved negotiating with the Texas company. Both parties were experienced in doing deals; there was not a lot of sentiment involved with the assets. They had done business before, and things moved quickly.
But Mr. Marshall admits he couldn't pull off these marathon negotiations if his family were not old enough to get along without their father for extended periods. The three children – twin daughters and a son – are all in university.
Also, his wife, Elizabeth Marshall, has her own career as a member of the Newfoundland and Labrador House of Assembly, following high-profile stints as a cabinet minister and senior public servant. As for her husband, he sees no end in sight for the hyperactive lifestyle. It's hard to give up something he loves so much, he admits.
STANLEY MARSHALL
Title: President and CEO.
Age: 56.
Born: Freshwater, near Carbonear, Nfld.
Educated: Engineering degree from University of Waterloo; law degree from Dalhousie University.
Roots: Father was a carpenter, one in a family of tradespeople who often emigrated to New England for work.
Downtime: Not much, but he loves gardening at his Newfoundland house and in his two-year-old second home in Belize, where Fortis owns a power company.
Power couple: Wife Elizabeth Marshall is a prominent political figure in St. John's, as a Conservative member of the House of Assembly and former auditor-general. She is identified as one of only two MHAs – Premier Danny Williams is the other – to refuse undisclosed provincial bonuses, thus sailing clear of a political scandal.
Road trips: When he gets into a city for a meeting, what does he do? “I go home. Most of the team might go to a hockey game but I'm too tired for that.”