Cost Estimate of Bill C-221, An Act to amend the Income Tax Act (oil and gas wells)

The bill establishes an income tax credit for qualifying corporations equal to the corporation’s general rate reduction percentage for the taxation year multiplied by the total of all expenses incurred by the corporation in that taxation year for the closure of an oil or gas well. This tax credit applies to expenses incurred after 2019 and before 2026. A qualifying corporation is defined as a corporation that owns one or more oil or gas wells in Canada which, for a taxation year, produced on average a total quantity of oil or gas that is less than 100,000 barrels of oil equivalent per day. To be considered for this tax credit the oil or gas well must be plugged and capped, surface structures and associated infrastructure dismantled, and the surface restored to its previous condition. PBO estimates the cost of this tax credit to be $264 million over its lifespan. The cost per year will depend on the total number of wells fully reclaimed in a given year.