Imperial Oil boss says gas pump taxes, not energy firms, deserve scrutiny

cnews.canoe.ca By JAMES STEVENSON

CALGARY (CP) - Canadians enjoy some of the lowest gasoline prices in the world and if blame is to be assessed for rising prices they should look at government taxes at the pumps, Imperial Oil president Tim Hearn said Tuesday.

Hearn said Canadian pump prices - which averaged 82 cents a litre last week - can be directly connected to international events such as the continuing troubles in major oil producer Venezuela and prolonged war clouds over Iraq. A particularly cold winter on North America's East Coast has also boosted demand and kept crude prices sky high.

"Just take the tax out and take a look at how Canada compares to the U.S. today," Hearn said in an interview. "And everybody says the U.S. has the lowest prices in the world."

Taxes account for almost 40 per cent of the cost of gasoline at Canadian retail stations. Imperial is Canada's largest oil producer, operates the national Esso brand of 2,500 service stations and is 70 per cent owned by global energy giant ExxonMobil.

Hearn said the real price increase of gasoline has gone down in the past two or three decades, while provincial and federal taxes have risen by more than twice the rate of inflation.

"I guess you can never avoid the politics of mischief."

Last week the federal industry committee demanded to hear from Canada's top oil executives on the recent surge in oil prices, which hit Canadians both at the pumps and through home heating oil.

The high price of fuel prompted MPs from all political parties to accuse Canada's big energy companies of collusion and price-gouging. But Hearn said the energy market in Canada is "as efficient" as any country in the world.

"Maybe the committee should have an investigation as to why taxes have been going up for the last 30 years."

Imperial (TSX:IMO) said it has not received any request to appear in front of the federal committee but would be more than willing to defend itself if asked.

"I don't think the Canadian oil industry has anything to be apologetic for," said Hearn.

In a rare meeting with reporters, the head of Imperial said his first year on the job in 2002 was a good one, with earnings of $1.2 billion - the third-largest haul in company history.

Along with a large involvement in the northern Alberta oilsands, including a major ownership stake in giant Syncrude, Imperial is playing a lead role in trying to get a new natural gas pipeline built south from the Mackenzie Valley in the Northwest Territories to the energy-thirsty U.S. market.

Hearn said he was disappointed in the delays in getting preliminary information on the mega-project to regulators. Imperial is six months behind where it wanted to be as partners wait for the Aboriginal Pipeline Group to come up with its $70-million, one-third cost of the preliminary design phase.

He hopes the process can get underway in a few weeks.

Hearn wouldn't confirm recent reports that the Aboriginal Pipeline Group has struck a deal with Calgary-based TransCanada PipeLines after Ottawa refused to guarantee a loan.

"For them to develop a potential funder, and if it's someone that can add value to the project, I think we'd welcome them. I wanted us to be further along than we are today, but it's more important that we get this right at this point in time.

Hearn told analysts months ago the pipeline could be up and running by 2007, but on Tuesday he said funding delays would push that earliest-case scenario back to 2008.

"I think it's a project that is extraordinarily important to the country - the federal government is a big net beneficiary of this project, the aboriginal peoples of the North should be major beneficiaries of this, and of course Imperial and the other producers will also benefit."