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Opinion

Budget 2019 – Don’t spend your new Canada Training Credit just yet

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On March 19, 2019, the federal government tabled its election-year budget. One of the new provisions is a refundable credit called the Canada Training Credit. However, the $250 credit won’t even be available until you file your 2020 income tax return in April of 2021.

Further, if you are born in 1995 or later, you won’t qualify yet. If you were born in 1954 or earlier, you would never be eligible.

In addition, the maximum benefit you can receive is $5,000 in a lifetime (which will take 20 years to get at $250 a year) and the benefit can only be used to a maximum of 50% of eligible tuition costs.

So let’s consider the following scenario:

It is 2019 – you are 25 years of age making $27,000 a year and file your taxes every year.

You decide to take advantage of this credit and enroll in your first semester of schooling in the fall of 2023.
According to Statistics Canada, the average Canadian undergraduate pays $3,419 per semester.

So, you take time off work to go to school full-time in the fall, thus reducing your income by 1/3 in the year to $18,000.

Under the current 2019 rules, you would only have $39 in federal income tax. This amount is low because the tuition credits reduce your taxes.

By 2023, you have built up a “pool” of $250 per year after you turned 26, and believe you have a $1,000 pool available for that year.

When you file your 2023 return the $1,000 is triggered as a refundable tax credit. But you won’t be getting $961 back ($1,000 – 39).

Here’s the catch:

The $1,000 pool reduces the amount you can claim for tuition credits as well, which changes the tax owing to $189 Federal income tax. Meaning the $1,000 pool that you waited for is reduced by 15% by the time you pay it out.

Cash in jeans: $811.

But what if the course you decided to go into begins in January of 2023? You go for the January-April semester, work from May-August, and attend school September-December.

Using the same $27,000 – your income is now reduced by 2/3 while attending full time. Your income is only $9,000 as a result of the May-August period.

Your tuition (possibly paid through student loans) is $6,838 for the year.

Your tax is now zero because even before tuition credits you are below the Basic Personal Amount in your earnings.

Does this mean you get the full $1,000?

No.

Because your income is less than $10,000 in 2023, you don’t get the $250 for that year. As such, you only get $750, and your tuition credits available for carryforward are reduced by $750 as well, thus having a future negative impact on tax of $112.50.

Net result: $637.50 cash in jeans

What if you are a parent that decides to stay home with the kids until they are in school full time and go back to school in 2023?
Unfortunately, because you did not make more than $10,000 a year in any of the years, you get zero.

What if you were laid off, collecting regular EI benefits, and decide to go back to school?
Regular EI Benefits don’t qualify for the $10,000 income calculation. As a result, unless you had special EI benefits like parental leave or earned income from another source greater than $10,000, you don’t qualify.

What if you were self-employed through a small business corporation and paid yourself dividends instead of wages and then decided to upgrade your training?
Your dividend income does not qualify, and so you are not eligible for amounts to be added to the pool.

So assuming you qualify, and you wait the four years to build up a pool of $1,000 (remember that the $1,000 is only a net $850 because of the reduction in tuition credits). That same Statistics Canada report says that tuition is increasing at 3.3% per year. That means by you waiting four years so you can get the Net $850 means your annual tuition has likely increased from $6,838 to $7,786 ($948).

You waited four years, and the tax amount you receive won’t even cover the inflationary price increase on tuition.

In Conclusion

  • Those that do qualify won’t see anything until April 2021; the actual net amount of what they will see is only $212.50; and their annual tuition will likely have increased by $225.65.
  • Students under the age of 25 will see nothing;
  • People over the age of 25 that don’t have more than $10,000 of income will see nothing;
  • Seniors will see nothing;
  • Parents looking to re-enter the workforce will see nothing; and
  • People who have been laid off and have less than $10,000 of non-EI income will see nothing.

Seems like a lot of complex legislation for nothing.


Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html

#visionCanada2119

Will you give just a little bit of your energy to support Canadian Energy?

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I love Canadian oil and gas

How do how average Albertans feel about this effort by Canada Action to rally support for Canada’s energy industry?  They’re trying to reach at least 750,000 people with their Stand Strong With Canada message.

As part of Todayville’s #visionCanada2119 project we’d like to share in this conversation.

For those of you who are working or want to be working in the energy industry… Does this make you feel proud?

For those of you who realize that Alberta’s economy relies on energy production… Is this a campaign you can get behind by forwarding to your various social media accounts?

For those of you who would prefer that we stop producing oil and gas and immediately transition to a new entirely renewable energy based economy…  Is this a step backwards?

We’ve opened comments on this post and we invite your strong and well intentioned opinions.  Just remember this is a community platform and comments should always be G rated!

Please feel free to forward this post to your social media accounts.. and let us know how it goes.

Message From CanadaAction.ca

SHARE THIS VIDEO AND STAND STRONG WITH CANADA

Canada is a leader in protecting people and the planet – a fact that should be known by every single Canadian.

So, we need your help to get our video to 750,000 views across all platforms by sharing this link with staff, friends, family, and on social media!

We are no longer apologizing – a future in energy and a future in the environment are not mutually exclusive.

The world needs us. We are Canadian energy — and we are proud!

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#visionCanada2119

Garfield Marks; “Oil-by-Seaway” proposal still draws interest.

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The proposal to by-pass Quebec in shipping oil to refineries in New Brunswick via Thunder Bay then shipping through the St. Lawrence Seaway still has legs.

Nov 9 2019, Comments by D.B. Chalcroft on the

PROPOSAL TO SHIP OIL TO EASTERN CANADA VIA ST. LAWRENCE SEAWAY by Garfield Marks

Garfield Marks published his “Oil-by-Seaway” and it has subsequently been covered in the CBC media and more recently on CHQR 770 radio.

The Garfield Marks “Oil-by-Seaway” Proposal

Concept – To replace the eastern half (about 2600 km) of the proposed Energy East Pipeline with tanker shipping from Thunder Bay via the Great Lakes and the St. Lawrence Seaway to St. John, New Brunswick.

The Energy East pipeline proposed by TC Energy in 2014, would have converted about 3000 km of the existing natural gas pipeline from Hardisty, Alberta to the Ontario-Quebec border, to diluted bitumen transportation; and would have built 1600 kms of new pipeline from the Ontario-Quebec border to St. John, New Brunswick. The capacity of the pipeline was to have been 1.1 million barrels (200,000 tonnes) of crude oil per day, was estimated to cost $12 billion, and at 4600 km would have been the longest pipeline in North America. TC Energy subsequently cancelled the project in October 2017, citing regulatory rule changes. In addition the Government of Quebec has stated that there is no social license for the Energy East pipeline through Quebec.

“Oil-by-Seaway” Tanker Shipping Option

The “Oil-by-Seaway” proposal would include converting 2000 km of the existing TC Energy Natural Gas pipeline from Hardisty, Ab, to Thunder Bay to carry diluted bitumen, and creating a new oil tanker shipping system from Thunder Bay through the existing St Lawrence Seaway and by ocean to the major Irving oil refinery at St. John , NB.

The existing St. Lawrence Seaway has more available shipping capacity than is presently being utilized. During the 1970s and 1980s, cargo shipments from Thunder Bay, for example, averaged about 20,000,000 metric tonnes per year with between 850 and 1470 vessels per year leaving the port. Since 2009 cargo shipments from Thunder Bay have averaged only about 8,000,000 tonnes/year on some 400 vessels per year.

The existing locks in the St. Lawrence Seaway at the Welland Canal and near Montreal, impose length, width, and draft, size restrictions (maximums of 225.5 m long by 23.8 m wide and draft of 8 m) on the vessels that can use the Great Lakes shipping system. The maximum size of bulk cargo that can be shipped through the system is about 29,000 tonnes per Seaway-capable ship – these ships are known as “lakers”.

The St Lawrence Seaway averages about 275 days of navigation per year – the other 90 days being closed to shipping due to winter conditions.

In order for “Oil-by-Seaway” shipping to deliver the 1,100,000 BPD (200,000 tonnes per day) of oil to the St John, NB terminal as envisaged by Energy East, in a shipping season of 275 days, would require the daily shipping deliveries to be 265,000 tonnes/day during the navigation season. This would require close to 10 “laker-tankers” per day to unload at St. John, NB. Assuming the turn-around time for a “laker-tanker” from Thunder Bay to St. John to Thunder Bay is about 16 days including 2 days for loading and unloading – means that a fleet of about 160 “laker-tankers” would be required to achieve this delivery commitment, plus storage facilities at St John of about 100,000,000 barrels.

The Welland Canal currently has about 1500-1800 vessel transits each way per year, or on average 5-7 transits per day each way. However in 1960 the total number of vessel transits was as high as 4500 each way (an average of 16 /day) although vessels were smaller carrying an average of only 3,400 tonnes of cargo. The Oil-by-Seaway proposal would add 2700 passages per year bringing the total to around 4500 per year or 16 per day each way, very similar to the 1960 record rate albeit with larger average vessel sizes.

Ballpark Cost Estimate for 160 Laker-Tankers

What would it cost to create a fleet of say 160 “Laker-tankers”? As a very rough comparison, the three Newfoundland Off-shore Shuttle Tankers that pickup roughly 230,000 BPD (47,000 tonne/day) of oil production from the five producing platforms on the Grand Banks, cost a reported $375,000,000 (ie $125M/ship)in 2016, and have a deadweight of 148,000 tonnes and gross tonnage of 85,000 tonnes each, meaning each ship can carry up to about 60,000 tonnes of cargo (oil) . These three Shuttle Tankers deliver the 47,000 tonne/day of Grand Bank oil production to the trans-shipment terminal at Whiffen Head, NL with an average turn-around time of 3-5 days . A rough cost estimate for the Laker-Tankers can be obtained by taking $125M X 29,000 t/ 60,000 t = $60 million. Therefore the cost of one “Laker-tanker” with 29,000 tonne capacity is estimated to be in the order of $60 million, and a fleet of 160 Laker-tankers would be in the ballpark of $10 billion.

Discussion

The St. Lawrence Seaway is currently handling 20-25 million tonnes of cargo per year through the Welland Canal in the Downbound direction, ie towards the east, with total transits of 1400 – 1900 per year. Oil-by-Seaway to equal the Energy East proposal of 200,000 tonnes per day would add 73,000,000 tonnes/yr. to the Downbound traffic. This is a significant increase to nearly 100,000,000 tonnes/year and 16 vessel transits per day each way, through the Seaway System. It would appear that the present Seaway infrastructure may be able to accommodate this magnitude of increase without major upgrades, because it doesn’t exceed the historical highs in vessel transits which occurred in the 1960s. This would need to be confirmed with the St. Lawrence Seaway Management Corporation.

The Oil-by-Seaway proposal would require a fleet of 160 or so “Laker-Tankers” which most likely don’t currently exist, and which would cost in the order of $10 billion . This concept would also require the creation of about 100,000,000 bbl. of incremental oil storage capacity at St. John, NB, that probably wasn’t part of the Energy East proposal, to cover the 90 days each year when the Seaway is closed.

Utilizing the existing Seaway Infrastructure to transport oil by tanker would reverse a long trend of declining commodity traffic through the Seaway system. This scheme could create the impetus to update and modernize Seaway facilities, and could also reinvigorate the communities along the Seaway, with substantially more economic activity in their midst.

Fabricating 160 Laker-Tankers could provide a significant workload for Canada’s ship-building industry, perhaps including the Davie Shipyard in Quebec, and the Irving shipyard in Halifax.

There are undoubtedly many other technical, social, environmental, and regulatory issues to be identified and considered, as well as whether this concept is commercially viable.

Preliminary Conclusion

On the surface, the Garfield Marks “Oil-by-Seaway” proposal seems to have sufficient merit to warrant a more thorough analysis than presented herein.

 

Comments by: David B. Chalcroft, P. Eng.

Previously published;

 

We have not been able to run our bitumen through a pipeline to a refinery in New Brunswick. There has been resistance in parts of Ontario and in Quebec. What if we came up with another plan. Would we consider it? There will be road blocks, but not insurmountable, would we consider it?

Yes how about Thunder Bay?

Thunder Bay, Ontario, the largest Canadian port of the St. Lawrence Seaway located on the west end of Lake Superior, 1850 kms. from Hardisty, Alberta. A forgotten jewel.

So what, you may ask.

They used to ship grain from Thunder Bay in huge tankers to ports all over the world. Why not oil?

The Saint Lawrence Seaway ships fuel, gasoline and diesel tankers, to this day.

We could run oil tankers to the Irving refinery in New Brunswick, bypassing the controversial pipeline running through eastern Ontario and Quebec.

The pipeline, if that was the transport model chosen, would only need to run through parts of Alberta, Saskatchewan, Manitoba and Ontario. Like, previously stated the pipeline would only be 1850 kms. long.

The other great thing about Thunder Bay is the abundance of rail lines. Transportation for such things as grain and forestry products from western Canada. If you can’t run pipeline from Hardisty, through to Thunder Bay, use the railroad.

Why Hardisty, you may ask.

Hardisty, according to Wikipedia, is mainly known as a pivotal petroleum industry hub where petroleum products such as Western Canada Select blended crude oil and Hardisty heavy oil are produced, stored and traded.

The Town of Hardisty owes its very existence to the Canadian Pacific Railway. About 1904 the surveyors began to survey the railroad from the east and decided to locate a divisional point at Hardisty because of the good water supply from the river.

Hardisty, Alberta has the railroad and has the product, the storage capacity, and the former Alberta government planned on investing $3.7 billion in rail cars for hauling oil while Thunder Bay has the railroad and an under utilised port at the head of the St. Lawrence Seaway.

Economics are there along with opportunity, employment would be created and the east coast could end its’ dependency on imported oil.

Do we have the vision or willingness to consider another option. I am just asking for all avenues to be considered.

In my interviews in Ontario there is a willingness to discuss this idea.

The St. Lawrence Seaway Management Corporation is still reviewing the idea of shipping crude oil from western Canada through its system, and it’s a long way from happening, according to Bruce Hodgson, the Seaway’s director of market development.

“Obviously, there needs to be an ongoing commitment on the part of a producer, and so that’s going to be required for any project of this nature,” he said.

We could consider it, could we not?

CBC NEWS did a story about this idea on March 7 2019;

A retired oil field worker in Alberta has “floated” a novel solution to Alberta’s oil transportation woes: pipe the bitumen to Thunder Bay, Ont., then ship it up the St. Lawrence Seaway to the Irving oil refinery in New Brunswick.

Marks’ proposal might be more than a pipe dream, according to the director of the Queen’s Institute for Energy and Environmental Policy.

‘I don’t think that it’s a totally nuts idea’

“I don’t think that it’s a totally nuts idea,” Warren Mabee said. “I think that there’s some flaws to it … but this is an idea that could work in certain circumstances and at certain times of year. … It’s not the craziest thing I’ve ever heard.”

The chief executive officer of the Port of Thunder Bay said shipping oil from the port “could easily be done.”

“We ship refined gasoline and diesel up from Sarnia. We’ve done that for many many years,” Tim Heney told CBC. “So it’s not something that’s that far-fetched.”

There are, however, plenty of potential drawbacks to shipping crude through the Seaway, Mabee explained, not least of which is the fact that it isn’t open year-round.

The need to store oil or redirect it during the winter months could be costly, he said.

Potential roadblocks

Another potential pitfall is capacity, he added; there may not be enough of the right-sized tankers available to carry the oil through the Seaway.

Finally, he said, the journey by sea from Lake Superior to the Irving refinery in New Brunswick is a long one, so it might make more sense to transport the product to a closer facility such as the one in Sarnia, Ont.

The St. Lawrence Seaway Management Corporation is still reviewing the idea of shipping crude oil from western Canada through its system, and it’s a long way from happening, according to Bruce Hodgson, the Seaway’s director of market development.

“Obviously, there needs to be an ongoing commitment on the part of a producer, and so that’s going to be required for any project of this nature,” he said.

So far, no producer has come forward seeking to ship crude through Thunder Bay, he said.

Asked about the possible environmental risks of shipping oil on Lake Superior, both Hodgson and Heney said shipping by tanker is relatively safe; Hodgson noted that any tankers carrying the product would have to be double-hulled, and crews are heavily vetted.

Time to rethink pipelines?

There hasn’t been a spill in the Seaway system for more than 20 years he said.

Nonetheless, Mabee said, the potential for an oil spill on the Great Lakes could be a huge issue.

“The St. Lawrence and the Great Lakes have a lot of people living in close proximity, a lot of people who rely on it for drinking water,” he said. “There’s a delicate ecosystem there. I think a lot of people would push back against this proposal simply from that perspective.”

 

In fact, one of the reasons Mabee appreciates Marks’ proposal, he said, is because it invites people to weigh the pros and cons of different methods of transporting oil.

“If we’re not going to build pipelines, but we’re going to continue to use oil, it means that people are going to be looking at some of these alternative transport options,” he said.

“And if we don’t want oil on those alternative transport options, we need to give the pipelines another thought.

Time to consider all options, I dare say.

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