Canadian Government Will End Some Tar Sand Subsidies, Add Hybrid Incentives

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OTTAWA, March 19 (Reuters) - Canada's minority Conservative government, pressured to do more on the environment, will phase out some oil sands tax incentives, introduce rebates for hybrid vehicles, tax gas guzzlers and subsidize renewable fuels.

The opposition New Democratic Party, which has enough votes to keep the Conservatives in power, had made eliminating accelerated capital cost allowances for oil sands a price for its support. "Environmental measures in this budget will improve the air we all breathe," Finance Minister Jim Flaherty said in introducing his annual federal budget on Monday.

The provision allowing accelerated write-off of oil sands investments will be phased out gradually so projects that had counted on them can proceed. Existing developments will get the allowance; for new projects the provision will be phased out between 2011 and 2015.

"I'm not surprised but I am disappointed," said Will Roach, chief executive of UTS Energy Corp. (UTS.TO: Quote, Profile , Research), which holds a 30 percent stake in Petro-Canada's (PCA.TO: Quote, Profile , Research) planned Fort Hills oil sands project, one of numerous multibillion-dollar projects on the drawing board.

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