Showing posts with label Alberta Oil Royalties. Show all posts
Showing posts with label Alberta Oil Royalties. Show all posts
Wednesday, March 28, 2012
Alberta to receive 1.2 trillion in oil royalties over next 35 years
At least that is the amount calculated by the Canadian Energy Research Institute. At the same time royalties increase so do emissions from oil and gas extraction. Emission amounts are expected to triple over the same time period. See this article.
No doubt Albertans will welcome these projections. The province should be able to have budget surpluses and low taxes. The Institute predicts that oil production will rise from the present 1.6 million barrels a day to 5.4 million barrels a day by 2045.
The report of the Institute notes:“While technological innovation within the oil sands industry (in addition to carbon capture and storage) is expected to help reduce these emissions, the emissions are still expected to rise,” Carbon emissions are projected to increase from 45 million tonnes annually to 159 million tonnes by 2045.
Alberta has roughly 170 million barrels of proven oil reserves. This is the world's third largest supply. Only Saudi Arabia and Venezuela have greater reserves. For much more see the full article.
These projections are far into the future. One would hope that by then there would be a much greater proportion of our energy needs supplied by alternative sources. Perhaps by 2045 extraction of oil from the Tar Sands will be uneconomic. Otherwise with the increased emissions our planet will be damaged more than 1.2 trillion could ever fix.
Thursday, October 25, 2007
Alberta increases royalties charged to energy companies
As I expected Stelmach has increased royalties but quite a bit less than his own panel recommended. For some reason he also gives the companies a year's grace by starting the new regime in 2009. As expected there is nothing about Alberta having its own provincially owned company and gain even more advantages as the Saudis, Kuwaitis and many others do. Even so, he has probably done enough to call an election and win handily. He won't like the Federal Liberals be yapping about Albertans not wanting an election now!
Alberta increases royalties charged to energy companies
Last Updated: Thursday, October 25, 2007 | 4:01 PM MT
CBC News
Energy companies will be charged 20 per cent more for the right to develop Alberta's oil and gas resources, Premier Ed Stelmach revealed in a long-awaited announcement Thursday.
Introducing what he called "a framework for a new century," Stelmach said oil and gas companies will be paying $1.4 billion more a year in royalties starting in 2009.
Alberta Premier Ed Stelmach announced Thursday that starting in 2009, oil and gas companies will pay $1.4 billion more a year in royalties.
(CBC) That figure is 25 per cent less than the $2 billion recommended by a government-appointed panel that reviewed the royalty formula, which had not changed since 1992.
Stelmach rejected about half of the panel's recommendations, including a new tax on oilsands production.
However, royalties will increase for conventional oil, natural gas and oilsands projects, with Stelmach promising a simpler framework that reflects fluctuations in market prices.
"We recognize energy is a volatile industry. There is risk and there is reward. So when oil prices go up, the royalty goes up," Stelmach said in a news conference in Calgary.
The panel's report, released five weeks ago, concluded Albertans were not receiving their fair share of the province's non-renewable resources and called for an increase of $2 billion in royalties.
The report rocked the energy industry, which launched an aggressive campaign against any royalty changes. Oil and gas companies warned an increase will force them to slash jobs and billions in investment in booming Alberta.
Stelmach also said existing oilsands projects will not be grandfathered. The province will negotiate a transition to the new rates with companies, including Syncrude and Suncor, who have agreements that expire in 2016.
"We need a bigger pie. We can't just carve up the existing one," Stelmach told reporters. "We are confident we made the right decision for today and for Albertans' future."
Political observers believe the royalty decision is a defining issue for the premier, who has had the top job for just 10 months and is rumoured to be gearing up for a fall election.
Alberta increases royalties charged to energy companies
Last Updated: Thursday, October 25, 2007 | 4:01 PM MT
CBC News
Energy companies will be charged 20 per cent more for the right to develop Alberta's oil and gas resources, Premier Ed Stelmach revealed in a long-awaited announcement Thursday.
Introducing what he called "a framework for a new century," Stelmach said oil and gas companies will be paying $1.4 billion more a year in royalties starting in 2009.
Alberta Premier Ed Stelmach announced Thursday that starting in 2009, oil and gas companies will pay $1.4 billion more a year in royalties.
(CBC) That figure is 25 per cent less than the $2 billion recommended by a government-appointed panel that reviewed the royalty formula, which had not changed since 1992.
Stelmach rejected about half of the panel's recommendations, including a new tax on oilsands production.
However, royalties will increase for conventional oil, natural gas and oilsands projects, with Stelmach promising a simpler framework that reflects fluctuations in market prices.
"We recognize energy is a volatile industry. There is risk and there is reward. So when oil prices go up, the royalty goes up," Stelmach said in a news conference in Calgary.
The panel's report, released five weeks ago, concluded Albertans were not receiving their fair share of the province's non-renewable resources and called for an increase of $2 billion in royalties.
The report rocked the energy industry, which launched an aggressive campaign against any royalty changes. Oil and gas companies warned an increase will force them to slash jobs and billions in investment in booming Alberta.
Stelmach also said existing oilsands projects will not be grandfathered. The province will negotiate a transition to the new rates with companies, including Syncrude and Suncor, who have agreements that expire in 2016.
"We need a bigger pie. We can't just carve up the existing one," Stelmach told reporters. "We are confident we made the right decision for today and for Albertans' future."
Political observers believe the royalty decision is a defining issue for the premier, who has had the top job for just 10 months and is rumoured to be gearing up for a fall election.
Sunday, October 21, 2007
With 88 per cent of the electorate saying they don't think royalties are high enough the direction in which Stelmach will go should not be too surprising. He will go quite a ways towards the 20 per cent with perhaps some grandfathering to exclude some producers of natural gas. Stelmach was not the oil people's choice for leader. As with Dione his choice just shows that conventions don't always work as they "should". He might as well be part populist but not radical enough to be dumped by oil and party finances jeopardized. I predict that he won't call for Alberta ownership of the oil patch!
All eyes turn to tight-lipped premier
Much at stake as powerful oil industry squares off against voting public
Archie McLean
The Edmonton Journal
Sunday, October 21, 2007
EDMONTON - On one side is the man holding the black homemade sign at Wednesday's oil workers rally.
"IF I LOSE MY JOB I WON'T VOTE FOR ED."
On the other is a recent Edmonton Journal and Calgary Herald poll suggesting 88 per cent of Albertans don't believe the government collects its "fair share" from oil and gas royalties.
Premier Ed Stelmach will talk to the province Wednesday night in a televised address.
He has heard from the royalty review panel, which suggested raising royalty rates by about 20 per cent, heard from the oil companies and heard from Albertans.
Now he has a decision to make.
What's at stake? For starters, about one-third of the province's annual revenue and perhaps its future prosperity.
If that's not enough, it has the potential to reshape the province's political landscape.
Stelmach is the new leader of an old party.
Despite seeing his poll numbers fall over his first few months in office, Albertans haven't yet formed strong opinions of him. For a leader lacking a strong identity, this issue -- which has dominated editorial pages and call-in shows for more than a month -- may come to define him. He may even call an election on it.
"It's a watershed, politically," former Premier Peter Lougheed said Friday.
Stelmach has lived up to his reputation for listening to all sides and points of view before making up his mind.
Tory MLAs say he has been so guarded with the royalty decision that they have no idea what he'll do. After each MLA told him in caucus last week what constituents are saying, Stelmach simply told them to be patient.
He was dismissive when asked if it's the most important decision of this career.
"Everybody says it's going to [be], but once we're passed this, I'm sure there will be something else coming forward."
Stelmach has offered sparse clues as to what he will do, saying only that "the status quo is not an option."
Alberta Liberal Leader Kevin Taft says Stelmach has created a political mess for himself. If he adopts the Hunter report -- named after panel leader Bill Hunter -- he angers the oilpatch. If he attempts a compromise, he risks solidifying a reputation that he can't make tough decisions.
"No matter what he does, there are going to be people unhappy," Taft says.
The Liberals face their own political problems surrounding the report. They need at least a cordial relationship with the oilpatch if they ever hope to form government.
Taft has kept a low profile the past few weeks, preferring to watch the rhetorical battles from the sideline. He agreed broadly with the Hunter report's recommendations, but has not worked out an exact position. His caucus is meeting with Hunter and other panel members on Monday and will begin rolling out a response this week.
NDP Leader Brian Mason has taken to criticizing the Liberals as much as the Conservatives. He believes the report's recommendations are the minimum the government can do.
"What's at stake in this decision is the future of the province of Alberta and the kind of life that the next generation and the generation after that are going to have," he said. Mason will outline his views today at a town hall meeting at 2 p.m. at Alex Taylor School.
Mason has been running an election campaign since early September, believing the government will likely go to the polls this fall.
Whenever the vote takes place, it's difficult to imagine the Conservatives losing rural seats. Still, oil companies have threatened to yank investment from the province and rural job losses may be the one thing that could do it.
Doug Griffiths, the MLA for Battle River-Wainwright, said those jobs need to be protected. "We have to be incredibly careful about this. Because if it does cost jobs, I don't care how much money comes in. Two billion dollars is not worth 10,000 jobs or 20,000 jobs."
Not including form letters, Griffiths said only three people have contacted him to say the government should fully adopt the report, while more than 100 have said the government should be careful not to harm the economy.
Dwight Logan, Grande Prairie's new mayor, said the political divisions in his town are particularly stark.
With local MLA Gord Graydon set to retire, Logan said the new nominee will have a tough time navigating those divisions.
Don't harm the economy. Stand up to oil companies. Get a fair share. Whatever Stelmach does, he will have to convince Albertans that his royalty plan does all three. For a premier whose communication skills are not his strongest trait, it will be a difficult challenge.
If there's one Albertan who knows what Stelmach is going through, it is Lougheed, who was at the helm in 1972, when the province raised royalty rates.
"It's a very high-pressure position that he's involved in," Lougheed said.
"The public is very focused on it. My thoughts go out to him."
With files from Jason Markusoff and Darcy Henton
amclean@thejournal.canwest.com
- - -
WHERE THEY STAND
Liberals
- Raise royalties by about 20 per cent, as outlined in Hunter report.
- Haven't endorsed report; will meet with panel members monday.
NDP
- Hunter report doesn't go far enough. Raise royalties by even more if oil goes over $120 a barrel.
Alberta Alliance
- Don't raise royalties. Report would "destroy Alberta" by crippling industry.
The other guys
- Alberta Green Party -- says the Hunter report is a step in the right direction, but wants royalties based on the environmental costs.
- Wild Rose Party -- not yet a party, it is split on report.
© The Edmonton Journal 2007
All eyes turn to tight-lipped premier
Much at stake as powerful oil industry squares off against voting public
Archie McLean
The Edmonton Journal
Sunday, October 21, 2007
EDMONTON - On one side is the man holding the black homemade sign at Wednesday's oil workers rally.
"IF I LOSE MY JOB I WON'T VOTE FOR ED."
On the other is a recent Edmonton Journal and Calgary Herald poll suggesting 88 per cent of Albertans don't believe the government collects its "fair share" from oil and gas royalties.
Premier Ed Stelmach will talk to the province Wednesday night in a televised address.
He has heard from the royalty review panel, which suggested raising royalty rates by about 20 per cent, heard from the oil companies and heard from Albertans.
Now he has a decision to make.
What's at stake? For starters, about one-third of the province's annual revenue and perhaps its future prosperity.
If that's not enough, it has the potential to reshape the province's political landscape.
Stelmach is the new leader of an old party.
Despite seeing his poll numbers fall over his first few months in office, Albertans haven't yet formed strong opinions of him. For a leader lacking a strong identity, this issue -- which has dominated editorial pages and call-in shows for more than a month -- may come to define him. He may even call an election on it.
"It's a watershed, politically," former Premier Peter Lougheed said Friday.
Stelmach has lived up to his reputation for listening to all sides and points of view before making up his mind.
Tory MLAs say he has been so guarded with the royalty decision that they have no idea what he'll do. After each MLA told him in caucus last week what constituents are saying, Stelmach simply told them to be patient.
He was dismissive when asked if it's the most important decision of this career.
"Everybody says it's going to [be], but once we're passed this, I'm sure there will be something else coming forward."
Stelmach has offered sparse clues as to what he will do, saying only that "the status quo is not an option."
Alberta Liberal Leader Kevin Taft says Stelmach has created a political mess for himself. If he adopts the Hunter report -- named after panel leader Bill Hunter -- he angers the oilpatch. If he attempts a compromise, he risks solidifying a reputation that he can't make tough decisions.
"No matter what he does, there are going to be people unhappy," Taft says.
The Liberals face their own political problems surrounding the report. They need at least a cordial relationship with the oilpatch if they ever hope to form government.
Taft has kept a low profile the past few weeks, preferring to watch the rhetorical battles from the sideline. He agreed broadly with the Hunter report's recommendations, but has not worked out an exact position. His caucus is meeting with Hunter and other panel members on Monday and will begin rolling out a response this week.
NDP Leader Brian Mason has taken to criticizing the Liberals as much as the Conservatives. He believes the report's recommendations are the minimum the government can do.
"What's at stake in this decision is the future of the province of Alberta and the kind of life that the next generation and the generation after that are going to have," he said. Mason will outline his views today at a town hall meeting at 2 p.m. at Alex Taylor School.
Mason has been running an election campaign since early September, believing the government will likely go to the polls this fall.
Whenever the vote takes place, it's difficult to imagine the Conservatives losing rural seats. Still, oil companies have threatened to yank investment from the province and rural job losses may be the one thing that could do it.
Doug Griffiths, the MLA for Battle River-Wainwright, said those jobs need to be protected. "We have to be incredibly careful about this. Because if it does cost jobs, I don't care how much money comes in. Two billion dollars is not worth 10,000 jobs or 20,000 jobs."
Not including form letters, Griffiths said only three people have contacted him to say the government should fully adopt the report, while more than 100 have said the government should be careful not to harm the economy.
Dwight Logan, Grande Prairie's new mayor, said the political divisions in his town are particularly stark.
With local MLA Gord Graydon set to retire, Logan said the new nominee will have a tough time navigating those divisions.
Don't harm the economy. Stand up to oil companies. Get a fair share. Whatever Stelmach does, he will have to convince Albertans that his royalty plan does all three. For a premier whose communication skills are not his strongest trait, it will be a difficult challenge.
If there's one Albertan who knows what Stelmach is going through, it is Lougheed, who was at the helm in 1972, when the province raised royalty rates.
"It's a very high-pressure position that he's involved in," Lougheed said.
"The public is very focused on it. My thoughts go out to him."
With files from Jason Markusoff and Darcy Henton
amclean@thejournal.canwest.com
- - -
WHERE THEY STAND
Liberals
- Raise royalties by about 20 per cent, as outlined in Hunter report.
- Haven't endorsed report; will meet with panel members monday.
NDP
- Hunter report doesn't go far enough. Raise royalties by even more if oil goes over $120 a barrel.
Alberta Alliance
- Don't raise royalties. Report would "destroy Alberta" by crippling industry.
The other guys
- Alberta Green Party -- says the Hunter report is a step in the right direction, but wants royalties based on the environmental costs.
- Wild Rose Party -- not yet a party, it is split on report.
© The Edmonton Journal 2007
Thursday, October 18, 2007
Stelmach allegedly contradicts royalty recommendation
I expect that Stelmach will probably increase royalties but not as much as recommended. He will also grandfather against the wishes of the panel. This will be enough to placate his donors while boosting his popularity because he increased royalties.
Alleged Stelmach quote contradicts royalty recommendation
Last Updated: Friday, October 12, 2007 | 3:45 PM MT
The Canadian Press
Alberta Premier Ed Stelmach came under fire Friday over remarks he reportedly made behind closed doors that contradict a government-appointed panel on energy royalties.
Stelmach was quoted as telling business leaders he "will not trounce existing agreements" on royalties, which is the opposite of the panel's call to raise royalty rates.
Two reports concluded Albertans are not getting their fair share of energy royalties.
(CBC)
"It was our recommendation that there would be no grandfathering," Bill Hunter, head of the panel that called for a $2-billion increase in annual royalties, said Friday.
Stelmach was not available to clarify his remarks, but two of his staff, including one who was in the room when he spoke, said they wouldn't dispute the quote.
"It sounds like something he might have said," said David Heyman with the premier's communications staff in Calgary. "I didn't have a tape recorder and I wasn't taking any notes."
The premier was speaking to about 50 business executives at a breakfast event in Calgary on Thursday. His alleged remarks were reportedly passed on to a reporter by someone who attended the speech.
"I'm not disavowing the quote," said Tom Olsen, Stelmach's communications director. "What I am saying is that no decisions have been made and the premier is committed to meeting the objectives of the Hunter report."
'I think this premier is about as transparent as a slab of granite.'
—Brian Mason, Alberta NDP leaderNDP Leader Brian Mason warned that if Stelmach grandfathers existing royalty agreements, he'd be turning his back on billions of dollars in energy revenues that "the people of Alberta are owed.
"It really sounds to me like he's already made up his mind that the oil companies are going to win here," Mason said Friday.
The NDP leader also chastised Stelmach for sharing his views with business leaders while refusing to provide the same information to other Albertans.
"I think this premier is about as transparent as a slab of granite," said Mason.
"A government that is so heavily dependent on corporate donations, particularly from big oil, is not going to be able to be transparent with the people of Alberta about its dealings. It's just too incestuous a relationship."
The energy industry has been making daily announcements that thousands of jobs and billions of dollars worth of investments will be lost to Alberta if the proposed royalty increases are adopted.
Alleged Stelmach quote contradicts royalty recommendation
Last Updated: Friday, October 12, 2007 | 3:45 PM MT
The Canadian Press
Alberta Premier Ed Stelmach came under fire Friday over remarks he reportedly made behind closed doors that contradict a government-appointed panel on energy royalties.
Stelmach was quoted as telling business leaders he "will not trounce existing agreements" on royalties, which is the opposite of the panel's call to raise royalty rates.
Two reports concluded Albertans are not getting their fair share of energy royalties.
(CBC)
"It was our recommendation that there would be no grandfathering," Bill Hunter, head of the panel that called for a $2-billion increase in annual royalties, said Friday.
Stelmach was not available to clarify his remarks, but two of his staff, including one who was in the room when he spoke, said they wouldn't dispute the quote.
"It sounds like something he might have said," said David Heyman with the premier's communications staff in Calgary. "I didn't have a tape recorder and I wasn't taking any notes."
The premier was speaking to about 50 business executives at a breakfast event in Calgary on Thursday. His alleged remarks were reportedly passed on to a reporter by someone who attended the speech.
"I'm not disavowing the quote," said Tom Olsen, Stelmach's communications director. "What I am saying is that no decisions have been made and the premier is committed to meeting the objectives of the Hunter report."
'I think this premier is about as transparent as a slab of granite.'
—Brian Mason, Alberta NDP leaderNDP Leader Brian Mason warned that if Stelmach grandfathers existing royalty agreements, he'd be turning his back on billions of dollars in energy revenues that "the people of Alberta are owed.
"It really sounds to me like he's already made up his mind that the oil companies are going to win here," Mason said Friday.
The NDP leader also chastised Stelmach for sharing his views with business leaders while refusing to provide the same information to other Albertans.
"I think this premier is about as transparent as a slab of granite," said Mason.
"A government that is so heavily dependent on corporate donations, particularly from big oil, is not going to be able to be transparent with the people of Alberta about its dealings. It's just too incestuous a relationship."
The energy industry has been making daily announcements that thousands of jobs and billions of dollars worth of investments will be lost to Alberta if the proposed royalty increases are adopted.
Alberta Oil Workers Rally Against Royalty Hikes
Wow! This seems a good opportunity for some Buzz Hargrove clone to organise these chaps into a company approved no-strike union. As noted, it appears that the demonstration was in part sponsored by companies and certainly was not supported by the Alberta Federation of Labor. It is understandable though that some workers could easily be convinced to oppose anything they think might hurt their job opportunities.
Alberta oil workers rally against royalty hikes
Labour leader suspicious of PR firm hired to promote rally
Last Updated: Wednesday, October 17, 2007 | 12:07 PM MT
CBC News
Fearing for their livelihoods, hundreds of oil workers gathered outside the Alberta legislature Wednesday to protest higher royalties, on the same day a research group called on the province to hike the rates charged to energy companies by 90 per cent.
A protester carries a sign referring to the much-hated national energy program that rocked Alberta's economy in the 1970s.
(CBC)
The workers are worried about huge job losses and an economic slowdown if the province follows through on recommendations by a government-appointed panel to charge oil and gas companies another $2 billion a year for the right to extract resources.
Premier Ed Stelmach is reviewing the panel's report, which concluded Albertans had been shortchanged for years. An official response is expected by next week.
On Wednesday, the Parkland Institute released its own report saying royalties should be boosted by 90 per cent, rather than the "timid" 20 per cent recommended by the panel. The group also called for government ownership of energy companies.
Continue Article
Research director Diana Gibson said Albertans should get the same kind of return on the province's resources as a high-paying energy executive would get for his shareholders.
Energy companies have launched an offensive against any royalty increases, warning they would be forced to trim jobs and drastically cut back on investments in Alberta.
Energy workers arrive for a rally at the Alberta legislature protesting any changes to royalty rates.
(CBC)
Dave Hamsing, who runs a drilling company south of Calgary, said companies are already scaling back operations, waiting to see how the government responds to the royalty review.
Hamsing has only two rigs booked this winter, after six were cancelled. He fears another bust in Alberta is a possibility.
"The ones who suffer from the fallout will be us, the service companies, entrepreneurs, employees, families. The rest of Alberta is going to suffer if they implement the royalty report in its state," said Derrick Jacobson, owner of a small oil service company in Red Deer.
"It's not threats anymore, I mean some companies have shifted operations to Saskatchewan already."
'This is clearly a rally that's been organized by employers.'
—Gil McGowan, Alberta Federation of LabourJacobson called Wednesday's protest in Edmonton a "grassroots oil workers rally," but the involvement of a high-priced public relations firm is raising questions.
"This is clearly a rally that's been organized by employers, not rank-and-file oilfield workers," said Gil McGowan, president of the Alberta Federation of Labour.
He believes some smaller companies and their employees are being swayed by "big oil scare tactics."
"In places like Suncor and Petro-Can and Husky, those members are telling us very clearly that they support the recommendations being put forward and in fact many of them are saying that they should go further."
McGowan has organized his own rally, scheduled for Thursday night in Fort McMurray, to counter the one at the legislature.
With files from the Canadian Press
Alberta oil workers rally against royalty hikes
Labour leader suspicious of PR firm hired to promote rally
Last Updated: Wednesday, October 17, 2007 | 12:07 PM MT
CBC News
Fearing for their livelihoods, hundreds of oil workers gathered outside the Alberta legislature Wednesday to protest higher royalties, on the same day a research group called on the province to hike the rates charged to energy companies by 90 per cent.
A protester carries a sign referring to the much-hated national energy program that rocked Alberta's economy in the 1970s.
(CBC)
The workers are worried about huge job losses and an economic slowdown if the province follows through on recommendations by a government-appointed panel to charge oil and gas companies another $2 billion a year for the right to extract resources.
Premier Ed Stelmach is reviewing the panel's report, which concluded Albertans had been shortchanged for years. An official response is expected by next week.
On Wednesday, the Parkland Institute released its own report saying royalties should be boosted by 90 per cent, rather than the "timid" 20 per cent recommended by the panel. The group also called for government ownership of energy companies.
Continue Article
Research director Diana Gibson said Albertans should get the same kind of return on the province's resources as a high-paying energy executive would get for his shareholders.
Energy companies have launched an offensive against any royalty increases, warning they would be forced to trim jobs and drastically cut back on investments in Alberta.
Energy workers arrive for a rally at the Alberta legislature protesting any changes to royalty rates.
(CBC)
Dave Hamsing, who runs a drilling company south of Calgary, said companies are already scaling back operations, waiting to see how the government responds to the royalty review.
Hamsing has only two rigs booked this winter, after six were cancelled. He fears another bust in Alberta is a possibility.
"The ones who suffer from the fallout will be us, the service companies, entrepreneurs, employees, families. The rest of Alberta is going to suffer if they implement the royalty report in its state," said Derrick Jacobson, owner of a small oil service company in Red Deer.
"It's not threats anymore, I mean some companies have shifted operations to Saskatchewan already."
'This is clearly a rally that's been organized by employers.'
—Gil McGowan, Alberta Federation of LabourJacobson called Wednesday's protest in Edmonton a "grassroots oil workers rally," but the involvement of a high-priced public relations firm is raising questions.
"This is clearly a rally that's been organized by employers, not rank-and-file oilfield workers," said Gil McGowan, president of the Alberta Federation of Labour.
He believes some smaller companies and their employees are being swayed by "big oil scare tactics."
"In places like Suncor and Petro-Can and Husky, those members are telling us very clearly that they support the recommendations being put forward and in fact many of them are saying that they should go further."
McGowan has organized his own rally, scheduled for Thursday night in Fort McMurray, to counter the one at the legislature.
With files from the Canadian Press
Sunday, October 14, 2007
Alberta's Inconvenient Truths
Stelmach can hardly lose with the general public if he increases oil royalties. To better fund the Heritage Fund will hardly lose him support either. It sounds as if Stelmach will not raise royalty rates the full amount recommended but will certainly raise them. I gather this is what he intends by his claim that he is not going to be intimidated by the oil companies or those "on the other side". As this article shows even if the royalties were raised the full amount Alberta would still rank below the top 50 percent of countries in terms of royalties.
Of course as I have mentioned before there is not even a hint that Alberta might itself own oil companies and take all the profits for provincal coffers. This is what Chomsky calls "framing" , questions are always framed in terms of the status quo and exclude any alternatives--even though in this case the alternative is not particularly radical except in terms of our subservient role. Even conservative sheiks in the Arab Emirates have enough sense to see owning their own oil companies as a means of accumulating great gobs of cash for their sheikdoms. Enough cash to go searching to buy out oil and other companies globally. Of course Canada worries about these state companies for security reasons. Such sales might compromise our role as being an endless spigot to be turned on to service US energy needs. That is the real inconvenient truth.
Alberta's inconvenient truths
TheStar.com - Columnist - Alberta's inconvenient truths
Rookie premier Ed Stelmach faces three crucial decisions that will define his future - and the oil-rich province's
October 14, 2007
David Olive
Business Reporter
In office less than a year, Alberta Premier Ed Stelmach is confronted with three of the toughest decisions any premier of Canada's most prosperous province has ever had to make.
The first and most obvious, expected within days, is whether to hike royalty rates on oil and gas producers by 20 per cent, as recommended by a controversial report Stelmach himself commissioned.
But that's not Stelmach's biggest challenge. While no expert panel is urging him to do so, Stelmach must decide whether to revive Alberta's pitifully small Heritage Fund so that it can one day serve Albertans as a rainy day fund in a way that similar "sovereignty funds" in Norway and Alaska are set to do.
Third, there is the man-made ecological disaster that has become the Athabasca oil sands, prominently featured in An Inconvenient Truth, Al Gore's Oscar-winning documentary about the global warming crisis. With an estimated additional $100 billion (all figures U.S.) in oil-sands projects on the drawing board, the already damaged ecosystem of northeast Alberta will be in still greater peril without political action.
Much depends on the character of Stelmach, 56, who enjoys little of the popularity that came so easily to predecessor Ralph Klein at the height of his acclaim. A compromise winner in last December's Progressive Conservative leadership contest, Stelmach suffers the same lack of legitimacy as fellow Albertan Joe Clark after the latter's 1976 fourth-ballet victory over much better-known rivals.
Clark never overcame the constant infighting that followed. And Stelmach, a farmer who represents Fort Saskatchewan-Vegreville in the legislature, is a rural, conservative politician in a province that is increasingly urban and, if not liberal, than centrist. Stelmach's popularity has nose-dived almost from the moment he became premier, and his job prospects appear bleak in the general election anticipated next spring.
Yet while there's little in the former school trustee's record to suggest a proclivity for bold initiatives, it's simplistic to regard Stelmach as the helpless victim of events beyond his control, as the current depiction often has it.
Stelmach actually has the potential to be Alberta's best premier since Peter Lougheed, securing Alberta's future prosperity and global technological leadership decades into the future, if he embraces the most innovative options before him.
Already it appears Albertans are eager to give Stelmach that chance. He has gained in popularity since the six-person expert panel on oil and gas royalties issued its damning report in September. "Albertans do not receive their fair share of energy development and they have not been receiving their fair share for some time," panel chairman Bill Hunter said last month in insisting that Alberta has been forfeiting an annual $2 billion or so in revenues by chronically failing to adjust its royalty regime to reflect rising world commodity prices and the royalty regimes of other oil-producing jurisdictions.
Stelmach's response was to show some spine, in contrast to a Klein government that set oil-sands royalty rates absurdly low to attract investment when oil prices were in a slump in the 1990s, and clung to that giveaway approach long after oil prices skyrocketed. "You're in for a surprise," Stelmach told reporters last month, expecting they had guessed he too would favour a status quo agreeable to the industry.
"I won't be intimidated by any position taken by either the oil industry or others that may take an opposing position," the premier said.
And the intimidation has been widespread and fierce. Industry giants Imperial Oil Ltd., controlled by Exxon Mobil Corp., ConocoPhillips Canada, EnCana Corp. and others quickly demonized the royalty report, questioning its methodology and threatening economic deprivation for Albertans if the report was adopted without amendment.
The Stelmach government even entertained a visiting coalition of Canadian institutional investors, including the Ontario Teachers' Pension Plan, begging Alberta to leave well enough alone. And Klein, who in truth had worn out his welcome with Albertans by the time he agreed to step down last year, has weighed in with an assault that equates the report's recommendations with regimes like Venezuela, where outright expropriation of corporate holdings has lately been the norm.
But Stelmach is playing a strong hand. Alberta currently has the 11th-lowest royalty take of 100 world oil-producing countries, which would rise to just 44th if the report was fully implemented. If the provisions were fully adopted, which is unlikely, Alberta's royalty regime would be on par with those of India, South Africa and Nigeria.
A fortuitously timed report by Alberta's auditor general early this month said Edmonton had repeatedly been advised by its own energy officials to revise its royalty regime upward since 2004. Auditor-General Fred Dunn said, "I don't know why they chose not to act," and that the province's own department of energy estimated Alberta could have collected at least $1 billion more a year in royalties "without stifling industry profitability."
Polls show a majority of Albertans support a proposed increase on oil-sands royalties, to the panel's recommended 33 per cent from 25 per cent, but wisely reject the report's proposed hikes on conventional oil and gas production, which is in decline, and provides a livelihood for the small- to medium-sized players who make up the vast majority of the oilpatch.
The heavy-handed threats of the big oil producers – Canadian Natural Resources Ltd. alone said last week it will shelve $20 billion worth of future projects, at a cost of some 4,000 contractor jobs – have played into Stelmach's hands.
Global oil firms are desperate for reserves, and Alberta's oil sands represent more than 50 per cent of the world's reserves available for non-state investment. Threats to move to other jurisdictions are almost laughable. Where will the producers go in search of a similarly giant reserve base that also boasts a politically stable regime – Russia, Kazakhstan, Iraq, Venezuela, Sudan?
With a current world oil price above $80, up about one-third since last year, the industry is poised to reap a second consecutive year of record profits. And with oil headed for $100 a barrel by the reckoning of most forecasters, it's simply unthinkable that oil majors like Exxon Mobil, ConocoPhillips and Royal Dutch Shell PLC will abandon the tens of billions of dollars already sunk into oil-sands upgraders, refineries and pipelines. Neither will they shelve expansion plans, since the existing infrastructure ensures a lower cost per barrel as each sprawling project expands.
Alienating the oilpatch, Alberta's largest industry, is a political slam-dunk but it will mean bucking the Petroleum Club establishment, and that won't be without some pain for Stelmach's caucus. A more difficult challenge, though, is tackling the Heritage Fund, whose paltry assets have prompted Lougheed to describe his successors as poor managers of Alberta's resource birthright (see "Whither" bottom left).
Finally there is the environmental crisis of Athabasca, North America's largest source of CO{-2} emissions. The region, to the northeast of Edmonton, has become a moonscape of strip mines. (Heavy oil lies close to the surface and is mined, not drilled.) The Athabasca River is suffering rapid depletion given that huge amounts of water are required to process heavy oil. And the oil-sands operators have created some of Alberta's largest lakes, consisting of post-production toxic water.
A portion of that same incremental revenue – from increased royalties, a sales tax and a carbon tax – could be deployed through subsidies on a 50-50 basis with oil producers to accelerate producers' work on developing new technologies to cut CO{-2} emissions and begin the job of remediation of Athabasca's despoiled landscape.
Alberta already is the global leader in oil-sands extraction and processing technology, dating from the launch of Great Canadian Oil Sands (now Suncor Energy Inc.) in 1967. The prospect now lies on the near horizon for Alberta to become the leading exporter of state-of-the-art environmental technology in oil sands exploitation to the globe's other sizable, and largely undeveloped, oil-sands reserves, notably those of Venezuela.
Jeffrey Immelt, CEO of General Electric Co., was in Alberta late last month to exhort his audiences at the Petroleum Club and the Calgary Chamber of Commerce to ramp up the development of environmental technologies in order to diversify the economy. GE itself has identified 30 per cent of its portfolio of appliances, jet-aircraft engines and lighting products as goods that can be profitably redesigned as ecologically friendly.
For the policy wonks at Alberta's Pembina Institute, Parkland Institute and Canada West Foundation, many of the innovations within Stelmach's grasp are old news they have been urging Edmonton policymakers to embrace for years. Immelt put a bottom-line spin on them.
"You do things for the long-term health of your company and your investors," said Immelt, elaborating on GE's "Ecoimagination" strategy. "I don't think you can do things because you saw An Inconvenient Truth and had an epiphany."
Of course as I have mentioned before there is not even a hint that Alberta might itself own oil companies and take all the profits for provincal coffers. This is what Chomsky calls "framing" , questions are always framed in terms of the status quo and exclude any alternatives--even though in this case the alternative is not particularly radical except in terms of our subservient role. Even conservative sheiks in the Arab Emirates have enough sense to see owning their own oil companies as a means of accumulating great gobs of cash for their sheikdoms. Enough cash to go searching to buy out oil and other companies globally. Of course Canada worries about these state companies for security reasons. Such sales might compromise our role as being an endless spigot to be turned on to service US energy needs. That is the real inconvenient truth.
Alberta's inconvenient truths
TheStar.com - Columnist - Alberta's inconvenient truths
Rookie premier Ed Stelmach faces three crucial decisions that will define his future - and the oil-rich province's
October 14, 2007
David Olive
Business Reporter
In office less than a year, Alberta Premier Ed Stelmach is confronted with three of the toughest decisions any premier of Canada's most prosperous province has ever had to make.
The first and most obvious, expected within days, is whether to hike royalty rates on oil and gas producers by 20 per cent, as recommended by a controversial report Stelmach himself commissioned.
But that's not Stelmach's biggest challenge. While no expert panel is urging him to do so, Stelmach must decide whether to revive Alberta's pitifully small Heritage Fund so that it can one day serve Albertans as a rainy day fund in a way that similar "sovereignty funds" in Norway and Alaska are set to do.
Third, there is the man-made ecological disaster that has become the Athabasca oil sands, prominently featured in An Inconvenient Truth, Al Gore's Oscar-winning documentary about the global warming crisis. With an estimated additional $100 billion (all figures U.S.) in oil-sands projects on the drawing board, the already damaged ecosystem of northeast Alberta will be in still greater peril without political action.
Much depends on the character of Stelmach, 56, who enjoys little of the popularity that came so easily to predecessor Ralph Klein at the height of his acclaim. A compromise winner in last December's Progressive Conservative leadership contest, Stelmach suffers the same lack of legitimacy as fellow Albertan Joe Clark after the latter's 1976 fourth-ballet victory over much better-known rivals.
Clark never overcame the constant infighting that followed. And Stelmach, a farmer who represents Fort Saskatchewan-Vegreville in the legislature, is a rural, conservative politician in a province that is increasingly urban and, if not liberal, than centrist. Stelmach's popularity has nose-dived almost from the moment he became premier, and his job prospects appear bleak in the general election anticipated next spring.
Yet while there's little in the former school trustee's record to suggest a proclivity for bold initiatives, it's simplistic to regard Stelmach as the helpless victim of events beyond his control, as the current depiction often has it.
Stelmach actually has the potential to be Alberta's best premier since Peter Lougheed, securing Alberta's future prosperity and global technological leadership decades into the future, if he embraces the most innovative options before him.
Already it appears Albertans are eager to give Stelmach that chance. He has gained in popularity since the six-person expert panel on oil and gas royalties issued its damning report in September. "Albertans do not receive their fair share of energy development and they have not been receiving their fair share for some time," panel chairman Bill Hunter said last month in insisting that Alberta has been forfeiting an annual $2 billion or so in revenues by chronically failing to adjust its royalty regime to reflect rising world commodity prices and the royalty regimes of other oil-producing jurisdictions.
Stelmach's response was to show some spine, in contrast to a Klein government that set oil-sands royalty rates absurdly low to attract investment when oil prices were in a slump in the 1990s, and clung to that giveaway approach long after oil prices skyrocketed. "You're in for a surprise," Stelmach told reporters last month, expecting they had guessed he too would favour a status quo agreeable to the industry.
"I won't be intimidated by any position taken by either the oil industry or others that may take an opposing position," the premier said.
And the intimidation has been widespread and fierce. Industry giants Imperial Oil Ltd., controlled by Exxon Mobil Corp., ConocoPhillips Canada, EnCana Corp. and others quickly demonized the royalty report, questioning its methodology and threatening economic deprivation for Albertans if the report was adopted without amendment.
The Stelmach government even entertained a visiting coalition of Canadian institutional investors, including the Ontario Teachers' Pension Plan, begging Alberta to leave well enough alone. And Klein, who in truth had worn out his welcome with Albertans by the time he agreed to step down last year, has weighed in with an assault that equates the report's recommendations with regimes like Venezuela, where outright expropriation of corporate holdings has lately been the norm.
But Stelmach is playing a strong hand. Alberta currently has the 11th-lowest royalty take of 100 world oil-producing countries, which would rise to just 44th if the report was fully implemented. If the provisions were fully adopted, which is unlikely, Alberta's royalty regime would be on par with those of India, South Africa and Nigeria.
A fortuitously timed report by Alberta's auditor general early this month said Edmonton had repeatedly been advised by its own energy officials to revise its royalty regime upward since 2004. Auditor-General Fred Dunn said, "I don't know why they chose not to act," and that the province's own department of energy estimated Alberta could have collected at least $1 billion more a year in royalties "without stifling industry profitability."
Polls show a majority of Albertans support a proposed increase on oil-sands royalties, to the panel's recommended 33 per cent from 25 per cent, but wisely reject the report's proposed hikes on conventional oil and gas production, which is in decline, and provides a livelihood for the small- to medium-sized players who make up the vast majority of the oilpatch.
The heavy-handed threats of the big oil producers – Canadian Natural Resources Ltd. alone said last week it will shelve $20 billion worth of future projects, at a cost of some 4,000 contractor jobs – have played into Stelmach's hands.
Global oil firms are desperate for reserves, and Alberta's oil sands represent more than 50 per cent of the world's reserves available for non-state investment. Threats to move to other jurisdictions are almost laughable. Where will the producers go in search of a similarly giant reserve base that also boasts a politically stable regime – Russia, Kazakhstan, Iraq, Venezuela, Sudan?
With a current world oil price above $80, up about one-third since last year, the industry is poised to reap a second consecutive year of record profits. And with oil headed for $100 a barrel by the reckoning of most forecasters, it's simply unthinkable that oil majors like Exxon Mobil, ConocoPhillips and Royal Dutch Shell PLC will abandon the tens of billions of dollars already sunk into oil-sands upgraders, refineries and pipelines. Neither will they shelve expansion plans, since the existing infrastructure ensures a lower cost per barrel as each sprawling project expands.
Alienating the oilpatch, Alberta's largest industry, is a political slam-dunk but it will mean bucking the Petroleum Club establishment, and that won't be without some pain for Stelmach's caucus. A more difficult challenge, though, is tackling the Heritage Fund, whose paltry assets have prompted Lougheed to describe his successors as poor managers of Alberta's resource birthright (see "Whither" bottom left).
Finally there is the environmental crisis of Athabasca, North America's largest source of CO{-2} emissions. The region, to the northeast of Edmonton, has become a moonscape of strip mines. (Heavy oil lies close to the surface and is mined, not drilled.) The Athabasca River is suffering rapid depletion given that huge amounts of water are required to process heavy oil. And the oil-sands operators have created some of Alberta's largest lakes, consisting of post-production toxic water.
A portion of that same incremental revenue – from increased royalties, a sales tax and a carbon tax – could be deployed through subsidies on a 50-50 basis with oil producers to accelerate producers' work on developing new technologies to cut CO{-2} emissions and begin the job of remediation of Athabasca's despoiled landscape.
Alberta already is the global leader in oil-sands extraction and processing technology, dating from the launch of Great Canadian Oil Sands (now Suncor Energy Inc.) in 1967. The prospect now lies on the near horizon for Alberta to become the leading exporter of state-of-the-art environmental technology in oil sands exploitation to the globe's other sizable, and largely undeveloped, oil-sands reserves, notably those of Venezuela.
Jeffrey Immelt, CEO of General Electric Co., was in Alberta late last month to exhort his audiences at the Petroleum Club and the Calgary Chamber of Commerce to ramp up the development of environmental technologies in order to diversify the economy. GE itself has identified 30 per cent of its portfolio of appliances, jet-aircraft engines and lighting products as goods that can be profitably redesigned as ecologically friendly.
For the policy wonks at Alberta's Pembina Institute, Parkland Institute and Canada West Foundation, many of the innovations within Stelmach's grasp are old news they have been urging Edmonton policymakers to embrace for years. Immelt put a bottom-line spin on them.
"You do things for the long-term health of your company and your investors," said Immelt, elaborating on GE's "Ecoimagination" strategy. "I don't think you can do things because you saw An Inconvenient Truth and had an epiphany."
Wednesday, October 3, 2007
Fire (Alberta) energy minister over royalty statements
This is not too surprising. No doubt politicians see rewards in protecting corporate profits while ignoring needs for infrastructure and social spending. I wonder what if anything members of the Calgary School such as Tom Flanagan think about the low royalties--or do they think they are too high?
October 3, 2007
Fire energy minister over royalty statements: Taft
By JEREMY LOOME, LEGISLATURE BUREAU
Energy Minister Mel Knight should be fired, Liberal Leader Kevin Taft said yesterday, accusing the minister of misleading the legislative assembly about oil royalties.
It came a day after the Liberals also called for Premier Ed Stelmach to hold an election and fire former energy minister, now seniors minister, Greg Melchin.
That stemmed from a damning report by the auditor general that leading politicians ignored their own staff and didn't raise combined energy revenue, costing taxpayers billions of dollars.
"The public record clearly shows Albertans have been lied to," Taft said. "The auditor general tells the truth about the government's record of handling Albertans' resources; government ministers, on the other hand, have been misleading the legislature and the public."
Stelmach wasn't biting yesterday, saying he's "not interested in a witch hunt" against his ministers and continues to have faith in both.
The Liberals say they'll raise a point of privilege over the statements when the fall session of the legislature begins.
If Knight is found to have breached the rules of the house, he could face a range of penalties, although he could not be removed from office. Taft cited the Alberta Hansard, a record of statements in the legislature, in which Knight responded on April 30, 2007, to Energy critic Hugh MacDonald's question about a 2005-06 internal royalty review.
MacDonald demanded to know why a freedom of information request on the review came back with pages censored from one of the related reports, pages he later learned confirmed lower-than-standard royalty rates for Alberta.
First, Knight suggested there were "pieces of information in any report that may be fundamental bits of information that are required for the government's purposes that are not allowed out in public."
When MacDonald demanded to know why that would include a chart from a report within the tabled documents showing Alberta is being shortchanged, Knight responded that "there is nothing in any of those documents that would indicate to anybody that we have not collected a fair share of royalties for Albertans. I must add that that was a grand attempt at a question." In fact, the 2005-06 royalty report showed that department staff felt the province could be taking up to $2 billion more in revenue.
A spokesman for Knight said yesterday the minister wasn't referring to all of the tabled documents when he said there was "nothing in any of those documents" but to a specific report within the royalty package that had a chart censored under FOIP, and that MacDonald had asked about specifically.
Bob McManus said the reason the minister spoke in the plural may have been because he was referring to the individual pages of the individual report as separate "documents." He was not able to reach the minister for clarification by press time.
Knight also said in the same session that "under this government we are building a stronger Alberta, and the royalty review will prove that."
But the review, released just weeks ago and awaiting a government response, also confirmed Alberta is getting bargain-basement "economic rent" on resources.
October 3, 2007
Fire energy minister over royalty statements: Taft
By JEREMY LOOME, LEGISLATURE BUREAU
Energy Minister Mel Knight should be fired, Liberal Leader Kevin Taft said yesterday, accusing the minister of misleading the legislative assembly about oil royalties.
It came a day after the Liberals also called for Premier Ed Stelmach to hold an election and fire former energy minister, now seniors minister, Greg Melchin.
That stemmed from a damning report by the auditor general that leading politicians ignored their own staff and didn't raise combined energy revenue, costing taxpayers billions of dollars.
"The public record clearly shows Albertans have been lied to," Taft said. "The auditor general tells the truth about the government's record of handling Albertans' resources; government ministers, on the other hand, have been misleading the legislature and the public."
Stelmach wasn't biting yesterday, saying he's "not interested in a witch hunt" against his ministers and continues to have faith in both.
The Liberals say they'll raise a point of privilege over the statements when the fall session of the legislature begins.
If Knight is found to have breached the rules of the house, he could face a range of penalties, although he could not be removed from office. Taft cited the Alberta Hansard, a record of statements in the legislature, in which Knight responded on April 30, 2007, to Energy critic Hugh MacDonald's question about a 2005-06 internal royalty review.
MacDonald demanded to know why a freedom of information request on the review came back with pages censored from one of the related reports, pages he later learned confirmed lower-than-standard royalty rates for Alberta.
First, Knight suggested there were "pieces of information in any report that may be fundamental bits of information that are required for the government's purposes that are not allowed out in public."
When MacDonald demanded to know why that would include a chart from a report within the tabled documents showing Alberta is being shortchanged, Knight responded that "there is nothing in any of those documents that would indicate to anybody that we have not collected a fair share of royalties for Albertans. I must add that that was a grand attempt at a question." In fact, the 2005-06 royalty report showed that department staff felt the province could be taking up to $2 billion more in revenue.
A spokesman for Knight said yesterday the minister wasn't referring to all of the tabled documents when he said there was "nothing in any of those documents" but to a specific report within the royalty package that had a chart censored under FOIP, and that MacDonald had asked about specifically.
Bob McManus said the reason the minister spoke in the plural may have been because he was referring to the individual pages of the individual report as separate "documents." He was not able to reach the minister for clarification by press time.
Knight also said in the same session that "under this government we are building a stronger Alberta, and the royalty review will prove that."
But the review, released just weeks ago and awaiting a government response, also confirmed Alberta is getting bargain-basement "economic rent" on resources.
Sunday, September 30, 2007
Encana issues royalty warning
Even as it records record breaking profits EnCana warns that the Alberta government better not ask for more of the cream. The cries are predictable but even if some specific areas such as gas may attract less investment the gas is still there and prices are likely to go up in time. A slowdown in investment in Alberta might not be all that bad but with US demand for Canadian oil and gas it is unlikely to slow down that much. Perhaps it would be a good idea to have a bit of breathing space while those increased royalties give Alberta the money to invest in much needed infrastructure that is lagging behind growth. It will be interesting to see if Stelmach will yield to corporate pressure or to what degree.
OIL AND GAS
EnCana issues royalty warning
Threatens to cut $1-billion in spending if report's recommendations are adopted in full
DAVID EBNER AND KATHERINE HARDING
September 29, 2007
CALGARY, EDMONTON -- EnCana Corp., Canada's largest energy company, waded into the debate over Alberta's royalties system yesterday, warning that it would slash $1-billion from planned 2008 spending of $3-billion in the province if recommendations to increase the government's take from the industry are adopted in full.
Randy Eresman, EnCana's chief executive officer, said the royalty changes as proposed would reduce the number of wells drilled in Alberta, with wide-ranging consequences, from fewer hotel bookings to less new car purchases, warning in general of "extensive job losses."
Talisman Energy Inc. and Nexen Inc., two other industry heavyweights, echoed EnCana's concerns in subsequent interviews.
It was the strongest industry assault yet on a landmark report issued earlier this month by an independent panel that concluded Alberta has been missing out on billions of dollars in energy money.
"My message to everyone is let's just calm down," Premier Ed Stelmach told reporters after learning of EnCana's statement. He repeated that the province aims to strike a balance between fair royalties and encouraging industrial development. "We're analyzing all the recommendations."
The Alberta legislature is rife with rumours that Mr. Stelmach may call a snap election later this fall after his government decides what to do about royalties. He has long said, however, that he would prefer to wait until spring at the earliest to take Albertans to the polls.
EnCana, North America's largest natural gas producer and a growing oil sands operator, said it is in favour of a balanced conclusion on royalties. This was a contrast with what industry almost uniformly said earlier this year when energy companies during the public review of the issue insisted there was no need for changes.
"We are open to changes to Alberta's royalties," Mr. Eresman said in the statement. He did not give interviews yesterday.
EnCana, which booked the biggest profit in Canadian corporate history last year, said most of its potential cutbacks would be in natural gas. It refused to say what it means for its oil sands developments.
"I don't want to get into specifics, because they're very complex," EnCana spokesman Alan Boras said.
The review panel's report indicated that, under its recommendations, about 80 per cent of more than 100,000 natural gas wells in Alberta would pay less royalties, based on 2006 prices. EnCana said the changes would hurt future development, arguing that many new opportunities "will simply not be economically viable." Mr. Eresman said he would move capital spending to other places the company works, areas that include British Columbia, Wyoming, Colorado and Texas.
Talisman Energy, which produces about 80 per cent of its natural gas in Alberta, has already said it is cutting back on spending because of low gas prices and also said it would look at moving capital to other regions of the world if the new rules are adopted.
"We're likely to cut our capital [in Alberta] by more, but we're still working it out," Jim Buckee, who stepped down as Talisman's CEO this month, said in an interview, adding that higher royalties don't work at current gas prices. "Maybe if the gas price is in double figures, then there's some room, but there's no room now."
Nexen is still assessing the impact of the proposed changes on its projects.
"At this point, we obviously share the same concerns as EnCana," said Carla Yuill, a Nexen spokeswoman.
Most of the attention over the royalties report has been on the oil sands but, based on the recommendations, additional dollars would initially come from conventional oil and gas production, which still attracts more capital spending than the oil sands. While industry players are conceding the oil sands can absorb higher royalties, much of the worry centres on conventional production, indicated by EnCana saying most of its cuts would come in gas.
OIL AND GAS
EnCana issues royalty warning
Threatens to cut $1-billion in spending if report's recommendations are adopted in full
DAVID EBNER AND KATHERINE HARDING
September 29, 2007
CALGARY, EDMONTON -- EnCana Corp., Canada's largest energy company, waded into the debate over Alberta's royalties system yesterday, warning that it would slash $1-billion from planned 2008 spending of $3-billion in the province if recommendations to increase the government's take from the industry are adopted in full.
Randy Eresman, EnCana's chief executive officer, said the royalty changes as proposed would reduce the number of wells drilled in Alberta, with wide-ranging consequences, from fewer hotel bookings to less new car purchases, warning in general of "extensive job losses."
Talisman Energy Inc. and Nexen Inc., two other industry heavyweights, echoed EnCana's concerns in subsequent interviews.
It was the strongest industry assault yet on a landmark report issued earlier this month by an independent panel that concluded Alberta has been missing out on billions of dollars in energy money.
"My message to everyone is let's just calm down," Premier Ed Stelmach told reporters after learning of EnCana's statement. He repeated that the province aims to strike a balance between fair royalties and encouraging industrial development. "We're analyzing all the recommendations."
The Alberta legislature is rife with rumours that Mr. Stelmach may call a snap election later this fall after his government decides what to do about royalties. He has long said, however, that he would prefer to wait until spring at the earliest to take Albertans to the polls.
EnCana, North America's largest natural gas producer and a growing oil sands operator, said it is in favour of a balanced conclusion on royalties. This was a contrast with what industry almost uniformly said earlier this year when energy companies during the public review of the issue insisted there was no need for changes.
"We are open to changes to Alberta's royalties," Mr. Eresman said in the statement. He did not give interviews yesterday.
EnCana, which booked the biggest profit in Canadian corporate history last year, said most of its potential cutbacks would be in natural gas. It refused to say what it means for its oil sands developments.
"I don't want to get into specifics, because they're very complex," EnCana spokesman Alan Boras said.
The review panel's report indicated that, under its recommendations, about 80 per cent of more than 100,000 natural gas wells in Alberta would pay less royalties, based on 2006 prices. EnCana said the changes would hurt future development, arguing that many new opportunities "will simply not be economically viable." Mr. Eresman said he would move capital spending to other places the company works, areas that include British Columbia, Wyoming, Colorado and Texas.
Talisman Energy, which produces about 80 per cent of its natural gas in Alberta, has already said it is cutting back on spending because of low gas prices and also said it would look at moving capital to other regions of the world if the new rules are adopted.
"We're likely to cut our capital [in Alberta] by more, but we're still working it out," Jim Buckee, who stepped down as Talisman's CEO this month, said in an interview, adding that higher royalties don't work at current gas prices. "Maybe if the gas price is in double figures, then there's some room, but there's no room now."
Nexen is still assessing the impact of the proposed changes on its projects.
"At this point, we obviously share the same concerns as EnCana," said Carla Yuill, a Nexen spokeswoman.
Most of the attention over the royalties report has been on the oil sands but, based on the recommendations, additional dollars would initially come from conventional oil and gas production, which still attracts more capital spending than the oil sands. While industry players are conceding the oil sands can absorb higher royalties, much of the worry centres on conventional production, indicated by EnCana saying most of its cuts would come in gas.
Sunday, September 23, 2007
Two articles on Alberta Oil Royalties
Ed Stelmach was obviously not the choice for leader of the oil barons. Now Stelmach has a report that shows why. With Ralph Klein they had a leader who gave them great value for the money they invested in him. Stelmach could very well be a bit of a problem to manage. However, as one article shows raw bitumen is being piped into the US resulting in no value added in Alberta, exactly what Stelmach was supposed to stop.
At least the Edmonton papers do not join in the silly babble about killing the goose that lays the golden egg. They just want their fair share of the funds from the eggs. Anyway the eggs (oil) is already all there. There is nothing to kill just the problem of getting the most from its extraction. As the royalty report shows Alberta is one of the world's kindest royalty regimes. It is Albertans who are getting royally goosed.
Sunday » September 23 » 2007
Klein's 'don't worry, be happy' royalty ideology doesn't cut it
Review panel member finds Third-World accounting practices
Sheila Pratt
The Edmonton Journal
Sunday, September 23, 2007
Evan Chrapko and his brother, Shane, farm boys from Two Hills, built a small software company into a multimillion-dollar business. They sold it for $850 million in the dot.com boom a few years ago. Now they are working on biofuels, turning cattle manure into biogas for electricity, ethanol or plain heat.
So Evan knows a thing or two about big business and markets, which was one reason Premier Ed Stelmach appointed him to the royalty review panel.
Chrapko had other expertise that Stelmach wanted. He spent years as an internal auditor for international oil companies. His dot.com company specialized in software to let companies track ongoing costs of massive construction projects or operations at power plants.
So he also knows a thing or two about accounting and company expenses too.
When Chrapko began work on the royalty panel, he went looking at that basic accounting data about provincial royalties. He was "horrified" to discover the Alberta energy department has no accurate records of how much royalty money is owing compared to how much is actually collected -- which means there's no way to find out if the department has collected the right amount over many years.
"This province will join the top five-ten oil producers in the world and we have record-keeping that works for Third World countries in the 1960s," says Chrapko.
Can you imagine running an income tax system that way, not caring if people submit receipts for their expenses? Or whether their claims are legitimate?
So Chrapko is keen on the panel's recommendations for a royalty accounting system to ensure companies are paying what they're supposed to.
Oil companies are doing their best to discredit the panel's report which says Albertans should collect another $2 billion in royalties.
This is Albertistan, some cry, or Caracas, Venezuela, on the Bow River. The economy will slow, companies will leave.
Chrapko refuses to be rattled by the outcry. "Oil companies have a job to do -- to continue to maximize their return" to shareholders, he says, so they'll keep pushing.
But that doesn't change the fact that the owners of the resources, Albertans, have a right to their fair share and they're not getting it, he says.
Between 2002 and 2006, governments across the globe began to raise royalty rates as oil prices soared to record levels -- the very years when former premier Ralph Klein said Alberta didn't need a royalty review.
"The hallmark of the Klein years was 'don't worry, be happy,' " says Chrapko. "But he wasn't speaking for a lot of people."
No one seemed to be speaking for average Albertans in those days, says Chrapko, but they certainly spoke to the panel.
The panel compared Alberta's royalty take to other that of oil producing countries. It found this province has among the lowest royalties across the globe, especially in the oilsands. Everywhere, from Texas to Norway, the owners take a bigger share than Alberta.
In 2004, Venezuela raised royalty rates to among the highest level for all oil-producing countries. Companies like Exxon grumbled but they still didn't pull out, says Chrapko, (though that changed in 2006 when Venezuela nationalized some of the oil sector.)
The panel never considered that kind of increase. Their reasonable proposals still leave Alberta with one of the lowest royalty regimes.
Let's also not forget right here at home Newfoundland Premier Danny Williams successfully negotiated a small equity stake (five per cent) for his province in three offshore oil deals and has released a 35-year energy plan that calls for a ten-per-cent stake in future projects.
Oilsands companies especially are hollering that they can't afford higher royalties because their construction costs are escalating in this high-inflation economy (never mind that it was their rapid rush into the oilsands that created much of the problem.)
Chrapko has little sympathy, he says, because the people of Alberta take only one-per-cent royalty until the projects become profitable.The higher the costs of construction and operating in those early years before a profit is made, the longer we forgo royalties -- " a significant loss to Albertans as resources owners," says the report.
Oil companies, Chrapko adds, have mostly ignored the fact that the panel also recommends lower royalties on 82 per cent of conventional oil and gas, including new wells for coalbed methane -- because wells producing at a lower rate should pay a lower royalty.
Chrapko had never met Ed Stelmach until a few months before he was asked to sit on the royalty review panel and he's never been very interested in politics.
He's impressed that Stelmach didn't try to influence the panel. That's a "breath of fresh air," in Alberta he says, where usually this work "gets done by insiders and never made public."
One of the major strengths of the report is that it states more clearly than the Klein government ever did that Albertans are the owners of the resource and royalty rates should flow from that starting point. It's important, and a relief, to have that principle firmly back on the table.
Then consider this. The day after the panel's report came out, as the hue and cry began, both Petro-Canada and Teck Cominco bought an increased share of the massive Fort Hills oilsands project.
spratt@thejournal.canwest.com
© The Edmonton Journal 2007
Copyright © 2007 CanWest Interactive, a division of CanWest MediaWorks Publications, Inc.. All rights reserved.
September 23, 2007
Lights dim on Alberta's economic future
By NEIL WAUGH, EDMONTON SUN
It was a one-step-forward-two-steps-back kind of week for Ed Stelmach.
Who is technically Alberta's premier. But still must face the folks in an election to confirm it.
The release of forestry guy Bill Hunter's bold report into what's wrong with the Tories oil, gas and oilsands royalty regime (Bill says there's plenty) made the premier's day.
Even though the fat cats in the Calgary oil towers were pretending like their secretaries had to talk them down off the window ledges after they read the "Our Fair Share" document.
The most draconian recommendation calls for a massive 4% "severance tax" on oilsands production before plant payout. That's over and above the oppressive 1% royalty that the developers are now stung with. Yes, it's really scary folks.
And after the massive costs are fully covered by the generous Alberta taxpayers, the royalty rate climbs from 24 to 33%.
The end of the world as we know it.
If this is the plan that Stelmach wants to wrap his election platform in, I say go for it Ed.
But that's only part of the problem.
Because a year ago when royalties became a gotcha issue on the PC leadership trail, Stelmach was more focused on a far serious problem. Can't blame him since Upgrader Alley overlaps the western part of his riding.
And that's the sinister plans by EnCana, Exxon Mobil and others to begin shipping massive volumes of raw oilsands bitumen down zipper pipelines to Illinois and Texas. Along with thousands of high paying, permanent jobs.
Stelmach compared it to stripping the "top soil" off a farm and trucking it Stateside.
So concerned was Candidate Ed with the threat to Alberta's long term economic future, the first thing he did when he became Premier Ed was to send out a mandate letter ordering that a "value added strategy" be developed.
At the same time he also called for the royalty inquiry.
But there were two fundamental difference.
Stelmach clearly didn't trust the energy department bureaucrats to essentially review their own blunders and turned the royalty probe over to Finance Minister Lyle Oberg.
The report Oberg delivered was on time and on the money.
Alberta's royalty regime is broken and needs to be fixed before any more of our billions go over the dam.
That's the good news.
The bad news came two days later after the myopic National Energy Board rubber stamped the offensive Keystone pipeline project which sees 600,000 barrels-a-day of raw bitumen and 17,000 jobs flushed down the big inch to the States.
Alberta Federation of Labour president Gil McGowan branded it a "bitumen superhighway."
And there's a second and worse deal for Albertans called the Alberta Clipper line waiting in the wings.
While Alberta NDP leader Brian Mason - flanked by Alberta construction union brass who are already steaming over the Tories' go-to-work-or-go-to-jail court orders their members were served with last week - accused the premier of "barely lifting a finger to stop it from happening."
Good shot Brian.
Except, ironically, Stelmach did. The only problem, he gave the job to the wrong guys.
Because the value-added strategy was Job One on Energy Minister Mel Knight's to-do list.
But now it appears Knight and his blundering energy-crats are stalling on this report also.
Just like former energy minister Greg Melchin shamefully suppressed the previous royalty probe.
The one Ralph Klein got burned in Hunter's document for not giving a "tinker's dam" about.
And what should have been a win-win week for the premier, as he desperately tries to untangle himself from the mess that Ralph left behind before the March election, turned into doggie doo.
It also makes a pre-Christmas cabinet shuffle a tantalizing possibility.
Especially if Stelmach doesn't get the bounce in the polls that the royalty review and municipal infrastructure deal is supposed to give him. There's already talk.
At least the Edmonton papers do not join in the silly babble about killing the goose that lays the golden egg. They just want their fair share of the funds from the eggs. Anyway the eggs (oil) is already all there. There is nothing to kill just the problem of getting the most from its extraction. As the royalty report shows Alberta is one of the world's kindest royalty regimes. It is Albertans who are getting royally goosed.
Sunday » September 23 » 2007
Klein's 'don't worry, be happy' royalty ideology doesn't cut it
Review panel member finds Third-World accounting practices
Sheila Pratt
The Edmonton Journal
Sunday, September 23, 2007
Evan Chrapko and his brother, Shane, farm boys from Two Hills, built a small software company into a multimillion-dollar business. They sold it for $850 million in the dot.com boom a few years ago. Now they are working on biofuels, turning cattle manure into biogas for electricity, ethanol or plain heat.
So Evan knows a thing or two about big business and markets, which was one reason Premier Ed Stelmach appointed him to the royalty review panel.
Chrapko had other expertise that Stelmach wanted. He spent years as an internal auditor for international oil companies. His dot.com company specialized in software to let companies track ongoing costs of massive construction projects or operations at power plants.
So he also knows a thing or two about accounting and company expenses too.
When Chrapko began work on the royalty panel, he went looking at that basic accounting data about provincial royalties. He was "horrified" to discover the Alberta energy department has no accurate records of how much royalty money is owing compared to how much is actually collected -- which means there's no way to find out if the department has collected the right amount over many years.
"This province will join the top five-ten oil producers in the world and we have record-keeping that works for Third World countries in the 1960s," says Chrapko.
Can you imagine running an income tax system that way, not caring if people submit receipts for their expenses? Or whether their claims are legitimate?
So Chrapko is keen on the panel's recommendations for a royalty accounting system to ensure companies are paying what they're supposed to.
Oil companies are doing their best to discredit the panel's report which says Albertans should collect another $2 billion in royalties.
This is Albertistan, some cry, or Caracas, Venezuela, on the Bow River. The economy will slow, companies will leave.
Chrapko refuses to be rattled by the outcry. "Oil companies have a job to do -- to continue to maximize their return" to shareholders, he says, so they'll keep pushing.
But that doesn't change the fact that the owners of the resources, Albertans, have a right to their fair share and they're not getting it, he says.
Between 2002 and 2006, governments across the globe began to raise royalty rates as oil prices soared to record levels -- the very years when former premier Ralph Klein said Alberta didn't need a royalty review.
"The hallmark of the Klein years was 'don't worry, be happy,' " says Chrapko. "But he wasn't speaking for a lot of people."
No one seemed to be speaking for average Albertans in those days, says Chrapko, but they certainly spoke to the panel.
The panel compared Alberta's royalty take to other that of oil producing countries. It found this province has among the lowest royalties across the globe, especially in the oilsands. Everywhere, from Texas to Norway, the owners take a bigger share than Alberta.
In 2004, Venezuela raised royalty rates to among the highest level for all oil-producing countries. Companies like Exxon grumbled but they still didn't pull out, says Chrapko, (though that changed in 2006 when Venezuela nationalized some of the oil sector.)
The panel never considered that kind of increase. Their reasonable proposals still leave Alberta with one of the lowest royalty regimes.
Let's also not forget right here at home Newfoundland Premier Danny Williams successfully negotiated a small equity stake (five per cent) for his province in three offshore oil deals and has released a 35-year energy plan that calls for a ten-per-cent stake in future projects.
Oilsands companies especially are hollering that they can't afford higher royalties because their construction costs are escalating in this high-inflation economy (never mind that it was their rapid rush into the oilsands that created much of the problem.)
Chrapko has little sympathy, he says, because the people of Alberta take only one-per-cent royalty until the projects become profitable.The higher the costs of construction and operating in those early years before a profit is made, the longer we forgo royalties -- " a significant loss to Albertans as resources owners," says the report.
Oil companies, Chrapko adds, have mostly ignored the fact that the panel also recommends lower royalties on 82 per cent of conventional oil and gas, including new wells for coalbed methane -- because wells producing at a lower rate should pay a lower royalty.
Chrapko had never met Ed Stelmach until a few months before he was asked to sit on the royalty review panel and he's never been very interested in politics.
He's impressed that Stelmach didn't try to influence the panel. That's a "breath of fresh air," in Alberta he says, where usually this work "gets done by insiders and never made public."
One of the major strengths of the report is that it states more clearly than the Klein government ever did that Albertans are the owners of the resource and royalty rates should flow from that starting point. It's important, and a relief, to have that principle firmly back on the table.
Then consider this. The day after the panel's report came out, as the hue and cry began, both Petro-Canada and Teck Cominco bought an increased share of the massive Fort Hills oilsands project.
spratt@thejournal.canwest.com
© The Edmonton Journal 2007
Copyright © 2007 CanWest Interactive, a division of CanWest MediaWorks Publications, Inc.. All rights reserved.
September 23, 2007
Lights dim on Alberta's economic future
By NEIL WAUGH, EDMONTON SUN
It was a one-step-forward-two-steps-back kind of week for Ed Stelmach.
Who is technically Alberta's premier. But still must face the folks in an election to confirm it.
The release of forestry guy Bill Hunter's bold report into what's wrong with the Tories oil, gas and oilsands royalty regime (Bill says there's plenty) made the premier's day.
Even though the fat cats in the Calgary oil towers were pretending like their secretaries had to talk them down off the window ledges after they read the "Our Fair Share" document.
The most draconian recommendation calls for a massive 4% "severance tax" on oilsands production before plant payout. That's over and above the oppressive 1% royalty that the developers are now stung with. Yes, it's really scary folks.
And after the massive costs are fully covered by the generous Alberta taxpayers, the royalty rate climbs from 24 to 33%.
The end of the world as we know it.
If this is the plan that Stelmach wants to wrap his election platform in, I say go for it Ed.
But that's only part of the problem.
Because a year ago when royalties became a gotcha issue on the PC leadership trail, Stelmach was more focused on a far serious problem. Can't blame him since Upgrader Alley overlaps the western part of his riding.
And that's the sinister plans by EnCana, Exxon Mobil and others to begin shipping massive volumes of raw oilsands bitumen down zipper pipelines to Illinois and Texas. Along with thousands of high paying, permanent jobs.
Stelmach compared it to stripping the "top soil" off a farm and trucking it Stateside.
So concerned was Candidate Ed with the threat to Alberta's long term economic future, the first thing he did when he became Premier Ed was to send out a mandate letter ordering that a "value added strategy" be developed.
At the same time he also called for the royalty inquiry.
But there were two fundamental difference.
Stelmach clearly didn't trust the energy department bureaucrats to essentially review their own blunders and turned the royalty probe over to Finance Minister Lyle Oberg.
The report Oberg delivered was on time and on the money.
Alberta's royalty regime is broken and needs to be fixed before any more of our billions go over the dam.
That's the good news.
The bad news came two days later after the myopic National Energy Board rubber stamped the offensive Keystone pipeline project which sees 600,000 barrels-a-day of raw bitumen and 17,000 jobs flushed down the big inch to the States.
Alberta Federation of Labour president Gil McGowan branded it a "bitumen superhighway."
And there's a second and worse deal for Albertans called the Alberta Clipper line waiting in the wings.
While Alberta NDP leader Brian Mason - flanked by Alberta construction union brass who are already steaming over the Tories' go-to-work-or-go-to-jail court orders their members were served with last week - accused the premier of "barely lifting a finger to stop it from happening."
Good shot Brian.
Except, ironically, Stelmach did. The only problem, he gave the job to the wrong guys.
Because the value-added strategy was Job One on Energy Minister Mel Knight's to-do list.
But now it appears Knight and his blundering energy-crats are stalling on this report also.
Just like former energy minister Greg Melchin shamefully suppressed the previous royalty probe.
The one Ralph Klein got burned in Hunter's document for not giving a "tinker's dam" about.
And what should have been a win-win week for the premier, as he desperately tries to untangle himself from the mess that Ralph left behind before the March election, turned into doggie doo.
It also makes a pre-Christmas cabinet shuffle a tantalizing possibility.
Especially if Stelmach doesn't get the bounce in the polls that the royalty review and municipal infrastructure deal is supposed to give him. There's already talk.
Thursday, September 20, 2007
Royalties Hike would Kill "golden goose"!
These are pitiful and predictable comments. I was watching CBC TV yesterday and some international investment fellow was interviewed who had just read over the report. His response was that the royalties levels would still be less than many other countries!
It only makes sense for the Alberta government to make a reasonable return on its natural resources. There are lots of problems that the provincial government faces that an influx of new cash could certainly help. The problem with Alberta is that many of its politicians are glad to sell out their resources for a few crumbs from Big Oil. Well quite a few crumbs!
Thursday » September 20 » 2007
Royalties hike would kill 'golden goose'
Claudia Cattaneo And Jon Harding
National Post
Thursday, September 20, 2007
CALGARY - Debate raged inside and outside Alberta yesterday over how to divide fairly the spoils from the province's envied oilsands deposits following a government-appointed panel's recommendation that would see oil companies slapped with another $2-billion annually in taxes and royalties.
"Do they really wish to kill this golden goose with one fell swing of the tax axe?" said economist Dennis Gartman, editor of the Gartman Letter, an influential investment newsletter based in Virginia, who was "shedding tears" about Alberta going "socialist" and wondering whether the provincial government has "gone mad."
"We want out of all things Canadian, and we want so immediately. We can return at a later date, when these proposals are turned down by the legislature involved. Until then, discretion is the far, far better part of valour. Goodbye Canada; it was fun while it lasted."
Even former Alberta premier Ralph Klein emerged from retirement to voice a strong opinion against radical changes, saying he fears for the industry that directly or indirectly employs one in three people in the province.
"There is one thing for sure, we have had a fair and clear and comprehensive royalty regime where the rules are the same for everyone," said Mr. Klein, who helped raise the oilsands' profile globally to attract investment and was one of the architects of the current oilsands royalty regime.
"It was a regime created by industry and government. Those kinds of rules don't change on a whim. Companies are nervous."
But reflecting the other camp in what has become a heated debate in Canada's most business-friendly province, Calgarian John Zalischuk said he doubts oil companies will abandon ship.
"People living in the real world know that this is not going to happen," he said in an e-mail. "If there is any energy company that does not like the new rules, they can leave and they will be replaced by someone else. They can always go back to Venezuela, Russia, Kazakhstan or Africa and try to negotiate a better deal," Mr. Zalischuk said.
Meanwhile, a major lobbying effort has begun to influence Premier Ed Stelmach, a novice who is seen as being naive for having triggered so much acrimony and is expected to pay a political price regardless of which way he leans.
The six-member panel, headed by retired forestry executive Bill Hunter, said in its 104-page report released on Tuesday that Albertans aren't getting a fair share of the province's oil wealth and urged a 20% increase to the billions the debt-free government already collects.
The recommendations, while still under consideration by the province, sank oilsands stocks across the board, even as oil prices touched a new record high of US$82.51 per barrel.
J.P. Veitch, an institutional broker at Westwind Partners, Inc. in Calgary, said he has been inundated with calls from clients in Canada and the United States "livid with this report and the subsequent uncertainty."
A litany of Canadian investment banks also pulled no punches in their assessment of the proposals in the Our Fair Share report.
FirstEnergy Capital Corp. warned the proposed measures, in a report entitled "Albertastan? Misguided Intentions and the Fair Share Option," would be "negative if adopted, and will slow down the development of oilsands."
BMO Capital Markets called its report: "Assassinating the Goose?" and predicted a negative impact on oil and gas share values. Peters & Co. said "the changes proposed by the panel are incredibly harsh."
Tim Hearn, CEO of Imperial Oil Ltd., Canada's largest oil company, said the panel failed to take into account the cumulative impact of policy changes in the past year that have added costs. Meanwhile, industry costs are soaring and the high Canadian dollar has cut the value of a Canadian oil barrel by a third.
"It's very important that whatever we come up with we end up with a vibrant and competitive industry, not end up doing something that we will all collectively regret," he said in Toronto.
Glen Schmidt, CEO of oilsands startup Laricina Energy Ltd., warned the panel "seems only to have identified the maximum possible tax grab to push the sector to the edge."
The Alberta government said it would have a formal response next month, stirring concerns that the province's oil-dependent economy will be on edge until the dust settles.
The report's key recommendations are that the total government take -- taxes and royalties --from oilsands projects increase to 64%, from the current 47% and that the new rules apply to projects across the board, including industry pioneers Suncor Energy Inc. and Syncrude Canada Ltd. that have Crown agreements that lapse in 2015. The report acknowledges that scrapping such agreements could give those developers grounds for lawsuits.
The panel believes Alberta should jump on the global trend of demanding a greater share from its oil wealth and argues that many of the world's producing countries that did so got away with it without seeing an exodus of investment, with Venezuela being the only exception. "Newfoundland's recent 5% and 10% buy-in deals are a very current Canadian example," the report said.
It also recommends a 5% increase in government charges for conventional oil and gas projects, with higher producing wells bearing the brunt of the increase, while low producers would get a break.
"Adopting this report, the Alberta government slams the door on any growth of conventional gas," said George Gosbee, chairman of Tristone Capital Inc. "I guarantee you would never see the production high of 17 billion cubic feet a day that we reached in 2000 ever again in our lifetime."
© National Post 2007
Copyright © 2007 CanWest Interactive, a division of CanWest MediaWorks Publications, Inc.. All rights reserved.
It only makes sense for the Alberta government to make a reasonable return on its natural resources. There are lots of problems that the provincial government faces that an influx of new cash could certainly help. The problem with Alberta is that many of its politicians are glad to sell out their resources for a few crumbs from Big Oil. Well quite a few crumbs!
Thursday » September 20 » 2007
Royalties hike would kill 'golden goose'
Claudia Cattaneo And Jon Harding
National Post
Thursday, September 20, 2007
CALGARY - Debate raged inside and outside Alberta yesterday over how to divide fairly the spoils from the province's envied oilsands deposits following a government-appointed panel's recommendation that would see oil companies slapped with another $2-billion annually in taxes and royalties.
"Do they really wish to kill this golden goose with one fell swing of the tax axe?" said economist Dennis Gartman, editor of the Gartman Letter, an influential investment newsletter based in Virginia, who was "shedding tears" about Alberta going "socialist" and wondering whether the provincial government has "gone mad."
"We want out of all things Canadian, and we want so immediately. We can return at a later date, when these proposals are turned down by the legislature involved. Until then, discretion is the far, far better part of valour. Goodbye Canada; it was fun while it lasted."
Even former Alberta premier Ralph Klein emerged from retirement to voice a strong opinion against radical changes, saying he fears for the industry that directly or indirectly employs one in three people in the province.
"There is one thing for sure, we have had a fair and clear and comprehensive royalty regime where the rules are the same for everyone," said Mr. Klein, who helped raise the oilsands' profile globally to attract investment and was one of the architects of the current oilsands royalty regime.
"It was a regime created by industry and government. Those kinds of rules don't change on a whim. Companies are nervous."
But reflecting the other camp in what has become a heated debate in Canada's most business-friendly province, Calgarian John Zalischuk said he doubts oil companies will abandon ship.
"People living in the real world know that this is not going to happen," he said in an e-mail. "If there is any energy company that does not like the new rules, they can leave and they will be replaced by someone else. They can always go back to Venezuela, Russia, Kazakhstan or Africa and try to negotiate a better deal," Mr. Zalischuk said.
Meanwhile, a major lobbying effort has begun to influence Premier Ed Stelmach, a novice who is seen as being naive for having triggered so much acrimony and is expected to pay a political price regardless of which way he leans.
The six-member panel, headed by retired forestry executive Bill Hunter, said in its 104-page report released on Tuesday that Albertans aren't getting a fair share of the province's oil wealth and urged a 20% increase to the billions the debt-free government already collects.
The recommendations, while still under consideration by the province, sank oilsands stocks across the board, even as oil prices touched a new record high of US$82.51 per barrel.
J.P. Veitch, an institutional broker at Westwind Partners, Inc. in Calgary, said he has been inundated with calls from clients in Canada and the United States "livid with this report and the subsequent uncertainty."
A litany of Canadian investment banks also pulled no punches in their assessment of the proposals in the Our Fair Share report.
FirstEnergy Capital Corp. warned the proposed measures, in a report entitled "Albertastan? Misguided Intentions and the Fair Share Option," would be "negative if adopted, and will slow down the development of oilsands."
BMO Capital Markets called its report: "Assassinating the Goose?" and predicted a negative impact on oil and gas share values. Peters & Co. said "the changes proposed by the panel are incredibly harsh."
Tim Hearn, CEO of Imperial Oil Ltd., Canada's largest oil company, said the panel failed to take into account the cumulative impact of policy changes in the past year that have added costs. Meanwhile, industry costs are soaring and the high Canadian dollar has cut the value of a Canadian oil barrel by a third.
"It's very important that whatever we come up with we end up with a vibrant and competitive industry, not end up doing something that we will all collectively regret," he said in Toronto.
Glen Schmidt, CEO of oilsands startup Laricina Energy Ltd., warned the panel "seems only to have identified the maximum possible tax grab to push the sector to the edge."
The Alberta government said it would have a formal response next month, stirring concerns that the province's oil-dependent economy will be on edge until the dust settles.
The report's key recommendations are that the total government take -- taxes and royalties --from oilsands projects increase to 64%, from the current 47% and that the new rules apply to projects across the board, including industry pioneers Suncor Energy Inc. and Syncrude Canada Ltd. that have Crown agreements that lapse in 2015. The report acknowledges that scrapping such agreements could give those developers grounds for lawsuits.
The panel believes Alberta should jump on the global trend of demanding a greater share from its oil wealth and argues that many of the world's producing countries that did so got away with it without seeing an exodus of investment, with Venezuela being the only exception. "Newfoundland's recent 5% and 10% buy-in deals are a very current Canadian example," the report said.
It also recommends a 5% increase in government charges for conventional oil and gas projects, with higher producing wells bearing the brunt of the increase, while low producers would get a break.
"Adopting this report, the Alberta government slams the door on any growth of conventional gas," said George Gosbee, chairman of Tristone Capital Inc. "I guarantee you would never see the production high of 17 billion cubic feet a day that we reached in 2000 ever again in our lifetime."
© National Post 2007
Copyright © 2007 CanWest Interactive, a division of CanWest MediaWorks Publications, Inc.. All rights reserved.
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