On Wednesday morning while heading to do a property evaluation I was listening to Dave Rutherford on 630CHED. I listened to him rip into some guy for making his mind up about the Royalty review when the caller clearly hadn’t. It was Dave’s position that the proposed increases were “bad for Alberta” and “the royalty review report was flawed”. Listening to his rant I couldn’t help but wonder where does someone get good honest information about this topic.
The premier “Steady Eddy” has yet to show his hand as to what he’s going to do, we just know he says the “status quo” is not an option. I understand that we should know the governments position on this sometime this week. The royalty review panel has suggested a 20% increase and the oil industry has cried foul, and has suggested that there will be serious consequences if there is an increase of this magnitude, including the cancellation of numerous projects and more. Currently Alberta receives roughly 10 billion in Oil and Gas royalties. It’s anticipated the increase would amount to $2 billion more in the province’s hands. Where would it go from there? Would it be wisely spent or would the money go down the pipe so to speak.
Personally I can’t help but think that there’s room for an increase. However, is a 20% instant increase realistic at a time when the bread and butter gas industry is idling? What impact would this have on the state of the correcting housing market and the current economic situation. Wouldn’t it be more prudent to do an incremental increase? I honestly don’t know enough to make that determination.
I do know we’ll never get everybody agree on this issue, but if “Steady Eddy” was reading this blog what would you say to him and his caucus? So, in the spirit of speaking directly to the premier make your point and be respectful with your comments. And as some of our finest establishments say outside their doors “No Knives”.
There are many places to get good information about royalties but the best place to start is the report itself. If people actually read this report rather than reacted to the media hype of ’20% increase in royalties’, then there might not be as much anxiety surrounding this report. The fact is, 57% of current conventional oil wells would be paying LESS and 82% of natural gas wells would be paying LESS royalties. There would be a noticable increase in unconventional extraction, namely the oil sands, which have up until now, have only been paying 1% until their extensive and very expensive infrastructure was conpleted. We would NOT be facing a mass exodus. The fact that there are some companies hurting at the moment is because of international fluctuating natural gas prices (which happen to be very low at the moment) and yet the cost of doing business is inflated because the industry (oil sands) cannot keep up with demand. Putting the brakes on the breakneck pace of development in the oil sands may help to stabalize costs across the board and companies can start realizing profits again because royalties in NG are decreasing.
This is just a simple snapshot from a layman’s perspective, but I highly recommend reading the report, as well as the auditor general’s report. Both the Royalty Review and the Auditor’s report can be found by googling them.
Yes, I remembered an article on Globe and Mail saying that the royalty review is aimed at the tar sands only. Currently, they pay almost no royalty at all, as part of a deal to lure them here. Since the bread-and-butter gas industry is declining in reserve, the tar sand will have to contribute more. I am 100% certain that the increase will be implemented. The question is how much over how long a time frame.
Ed,at the end of your life the only thing that will count is whether you acted with integrity to your elected office. The oil will only increase in value over time. We owe it to our children to get a fair price for it. But Ed, I know you won’t listen because you already made the deal to send unrefined crude away from our province (exporting jobs and revenue).
I don’t believe for one moment you will act for the best interest of this and future generations. Nothing personal Ed. I’m sure the NDP/Libs would be seduced by the oil dollars too. The oil lobby put forth thier arguments just like the tobbaco lobby or the gun lobby. The reality is the world is addicted to oil and only fools give it away.
I Albertan’s and Ed fail to act to BOTH increase the royalty take AND manage the collected funds MUCH BETTER than we truly are idiots who don’t deserve to be winners of the geological lottery. End of story. No need for debating this one. Please Ed Act on the findings.
O
As a petroleum engineer, by my own estimates, this will affect the profitability of the corporations to do business here. However, they will still collect significant returns on investment to remain competitive. I believe the benefits to the Alberta people outweigh the risks, and therefore they should enact ALL of the proposed royalty changes.
My two caveats are:
1) Enact royalty review appraisals on a periodic basis so that it is done in a fair and transparent manner.
2) Oil and gas companies, as well as the government need to reassure investors.
I say this because I am currently witnessing a loss of investment capital for small O&G companies. Especially privately held ones. The loss of investment capital means no capital expenditures for the next year. I see this as the biggest risk presented by the royalty review.
I should also add that, IMO, the loss of investment capital is driven by fear and lack of investor confidence, not material losses.
I am predicting, because it was stated today in the media by a leaked source, that the details of the royalty decision will be rolled out over the next few days after the warm up TV speech tonight, and that it will not be good for the oil patch.
Why ?
Good news gets delivered in one fell swoop……bad news gets disseminated in small bite size portions.
Hope I am wrong.
Can anyone say 100$ oil!!!! hehe….well the royalty were based on prices at 32$ oil…which made Oilsands feesible…at this point where oil is at 84$….you got to be kidding if you think we -Albertans are gone sit by while you take our oil out and sell it at huge profits…..
God talk about huge profits, how much did Shell or Petro Can make last year – BILLIONS….and you think they will pull out if we raise our royalty tax….you got to be goddam kidding….oil is gold…and I dont care if SHELL / ESSO / Petro or Pedro get huffed and puffed….they will take it they will scream but they will take it….why……because ladies and gentelman there is nowhere else too go……try going to Siberia to get some oil…no infastructre – corruption – and you might build it and the Communist turned Capitalist will take it away….haha…..”dont raise it or we will take it elsewhere!” …”where???” …really where you gone go…to make safe billions
))))
Greg nailed it on the head.
There is no other place on the planet right now that offers so much oil in such a safe and profitable environment. If Alberta had the same royaly structure as Norway we would be pulling in more than 30 BILLION EVERY YEAR 3-4 times current royalties!!! That is 100 BILLION less in just five years! WOW not only are we getting shafted with Retail prices we’ve been getting ripped off big time on Royalty rates for far too long! I don’t have current numbers but I estimate Norway has around 200 billion in the bank due to their wise oil management. This dwarfs Alberta’s measly 13 Billion heritage fund or whatever number it is currently at?
Wake up people. Norway is the model Alberta should have followed years ago. People try and argue that Norway is Socialist and they take half of your paycheck!? Wake up Canada takes half of your paycheck in indirect taxes BUT you don’t get half the social programs Norway has? Canada IS a dictatorship, socialist democracy all in one if you like it or not?
Oil companies can leave if they want. If they want to leave Billions of dollars of profit behind then go right ahead. There are many others will take their place very soon and will gladly pay the new royalty. Supply/demand is only getting worse, far worse in the coming years. Oil is going through the roof soon. This is just the start. Oil is the same as real estate and it is a sellers market for a long time to come. This is also why the slowdown in Alberta real estate will not last long.
AA, I never expected that I would say this: I fully agree with what you said. Especially the “dictatorship” part. Canada will never be a true great power, until we elect our prime minister.
Wow AA, didn’t see that one coming.
I don’t quite agree with the dictatorship statement, but our government definitely isn’t doing a good job.
You hit the nail on the head about high taxes with little social programs. Our government seems to be stuck trying to mirror the americans for the most part instead of looking to successful european countries like Norway.
WOW !!!
Bunny agreed with something I said?
I smell an imposter?
And how about getting a military that could actually defend our country when needed?
On a another note I heard a story/report on the radio that I was a bit surprised at. It was speaking with people who moved to Edmonton from Quebec and how they found living here. Almost everyone interviewed really liked it here? Migration from Quebec to Alberta is very high recently as well? Hey come on down we got too many houses for sale and too many jobs to fill!!!
Maybe we should get some Quebecor’s to negotiate our royalty rates? No offense but they seem to do very well in negotiations and seem to get lots of money from the Feds or whoever they do business with! Hardly thought I would ever come up with a Quebec Alberta alliance scenario? HA HA!!! Maybe we should both seperate and form our own country? Ontario seems to be lost in space after re-electing a guy who outright lied to them and even ran saying he would not undo his lie? They have very short memories? Quebec’s people are not nearly as naive as Ontario’s.
I notice Condo prices in Calgary and Edmonton may be rising in price this month? Is this true? SFH don’t seem to be dropping too much either? Are we just waiting for the log jam to break before prices tumble? I am doubting more and more that a heavy correction will happen at all? I know all the data suggests prices should fall but again this may be one of those time when what should happen just doesn’t?
For me, the most shocking thing I heard was summed up in CBC’s online story about the TV address tonight: “The premier says the government’s response will be balanced between what Albertans deserve for the province’s resources, and the interests of the big oil and gas companies.” A balance? What? The Premier has a responsibility to sell Alberta’s assets at whatever price the market can bear. He has none to protect the interests of the energy companies. I actually think the only goal should be to get “what Albertans deserve for the province’s resources”. Anything else, and he’s in violation of his fiduciary duty as Premier.
Stelmach knows which way his bread is buttered. Royalties stay the same, he knows the voters of AB might complain, but the memory of the voter is fleeting.
Quebecors moving to Edmonton? that’s news to me.
I’m so proud of everyone getting along in this blog, what a nice change!
I guess we are all in agreement when it comes to this subject.