Welcome back to Calgary, Mr. Chairman. It is nice not to have to appear before you six times this year. I look forward to one budget or two. Six certainly stretched our limits the last time we saw you.
Mr. Chairman, we live in interesting times. Some may dispute whether this is a blessing or a curse, but there is no denying that the business environment for the oil and gas activity in this country has captured public attention as one of the most reported news stories of the year: high oil prices, low natural gas prices, a high dollar, low netbacks, high profits, low drilling, high costs, low labour availability, higher royalties, and lower corporate taxes.
Canada's oil and gas producers have seen it all in the past 12 months. While each of these on its own is nothing new, it is the combination of them that has led to a very turbulent year.
Volatility is part and parcel of exploration and development. It is inherent in the nature of the commodities business. The industry has gone through cycles in the past, it is going through ups and downs now, and it will continue to cycle into the future. What is new is the volatile policy environment.
Capital is mobile, maybe more so now than ever before in the oil and gas industry. It moves where it can find the best return on investment. This is no surprise to anyone, especially as we see live examples of what's happening today interprovincially and internationally.
These movements have been and will be affected by surprises. In the last 12 months, the oil and gas sector has gone through several policy surprises, including the tax changes for income trusts, the cancellation of the accelerated capital cost allowance for oil sands while it is being extended to other parts of the economy, the proposed limitation on foreign interest deductibility, and of course, most recently, the results of the Alberta royalty review.
With this as a backdrop, in our written submission this summer we recommended that the federal government continue its broad-based tax reductions, refrain from punitive sector target measures, and consult with industry to avoid surprises before announcing new initiatives.
There are a few other recommendations in our written submission, but I won't go into them today.
However, the panel asked recently what the impact of the high dollar is on the different industries. We get asked this a lot. The effect on the oil and gas industry is not unique among Canada's exporting industries. With oil and gas prices based in U.S. dollars, a higher exchange rate means fewer Canadian dollars back to Canadian producers. As with all other exporting industries, the higher our dollar goes, the lower the price we see in Canadian dollars.
What this means is that when oil is trading at $88 U.S. a barrel with our dollar at parity, it's the same to Canadian producers as when oil was at $57 U.S. with a 65-cent dollar. Almost all of the uptick in oil prices has been eaten up by the rising exchange rate. The case with natural gas is even worse, with the double hit from the lower natural gas prices in North America and the higher exchange rate.
The cumulative impact of all these factors has put Canada at the bottom of competitiveness rankings for oil and gas investments internationally. While in the past this was somewhat mitigated by Canada's high ranking for government stability and its environmental policy certainty, the past year has caused many to question that stability.
I don't want to give you an overly negative impression. I am here to tell you that Canada can have a strong, vibrant upstream oil and gas industry, one that invests more money into the Canadian economy than any other from coast to coast and that now accounts for 14% of Canada's exports and is responsible for 80% of our trade surplus with the United States. We employ half a million Canadians across the country. We contribute to the value of pensions and RRSPs as one quarter of the share value traded on the Toronto Stock Exchange, and over $27 billion of industry revenue will find its way into government coffers in the form of royalties and taxes.
CAPP also clearly recognizes the efforts and expenditures taken by the government to address two key constraints facing most Canadian industries, including our own: those of infrastructure and human resources. Public infrastructure and people are two of the vital foundations needed for economic growth that are often overlooked until they are lacking. CAPP wants to express our appreciation for the growth in federal expenditures in infrastructure, such as Highway 63 to Fort McMurray, and in human resources in areas such as apprenticeship training and immigration. It is recognized and appreciated, and most importantly, it needs to continue and even accelerate.
Above all, what I am here to ask this panel is to continue its focus on broad-based tax reduction measures and to treat the oil and gas industry just like any other Canadian industry, fairly and equitably, whether in terms of a policy response to the high dollar or to trade concerns, or of a climate change policy, to name just a few.
Mr. Chairman, thank you for our opportunity to appear. I look forward to any questions you may have.