Alberta Royalty Review = The death of the Alberta oilpatch

[ed99]

Originally Posted by Quinn

I know absolutely nothing about the energy royalty program, but I'm sure the panel, which includes a former Shell VP, knows plenty.

I expect he does too, but they made a lot of assumptions, especially on development costs and depletion rates which are already out of date.

Originally Posted by Quinn

Absolutely! And when BC, WY and CO are totally depleted, Encana and friends will be welcome back here, assuming they haven't been beaten to the punch. By that time Alberta will have deeper pockets, a better public infrastructure, and hopefully, a better standard of living for all our citizens. Our government will have been among the first in North America to focus on long-term overall prosperity instead of short-term financial gain.

If it is not economic for EnCana to develop, why would it be so for anybody else? Besides, all the companies pay for lease agreements to develop the resources, so nobody is going to beat anybody to the punch.

On the second point- the changing the royalty regime may have the reverse effect. Everybody wants to go after the oilsands, which industry has generally accepted. It's natural gas development that is really going to be hurt, and significantly more money goes into that then oilsands. The AB government may see a short rise in royalties next year, but a decrease in tax revenue and royalties soon after with a net negative effect on natural gas development.

Originally Posted by Quinn

For the record I haven't heard of any public complaints by any other major industry player.

Really? However, as mentioned it is the smaller gas companies and service companies that are going to take most of the pain.

Reading the papers and this board, for most people this is an ideological debate and not about adjusting the royalty structure so it will interesting to see what Steady Eddy does. Without trying to address everything else that has come up on this thread, the main point us oil and gas folk are making is that unlike what the report asserts, some parts of the industry and the communities around it will severely affected.

[Sebae again]

Within the next 30 years, there won't be any fossil fuel burning vehicles.The price of oil will come down dramatically and the major consumer will be the manufacturing industry. During that time frame,prices will remain steady as any supposed increases in demand will be offset by a global concern to go ''green'' The governnent and oil companies revenues will both fall. Anyone want to hold onto any oil stocks?

[Ruth]

Originally Posted by fencer

1. Please read the exec summary of the royalty report before you comment
2. I think the Journal had commented on that the 1 billion cut from Encanna had already been planned. As the gas side in Alberta is already slowing. Personally you just have to go to Nisku to see all the gas rigs sitting in the yard
3. Corporations make donation for tax purposes...not because of goodwill
4. Alberta is booming...it isn't going to be the Corporation who pays for infrastructure.....royalty taxes will. Don't see any Corp in Fort Mac announcing that they are going to spend profit on a road.
5. Our royalty rules should be reviewed to reflect current conditions

3. Yes that is true that one most donation there is a tax benefit - as there is for most individual that make donation to registered charities and societies. So if you make a donation you are only doing it for the tax purposes and not the goodwill? Personally if I make a donation the taxation part of it does not come into play. I happen to know that a lot of it is for goodwill on the part of the corporate world but do not for a moment deny that the tax write off does play a part.


4 Exactly - and those royalty taxes come from who????



5 Yes they should be - and it should reflect current costs and risks. It should also more accurately reflect the current state of affairs in the world or market price of both natural gas and oil.

[Delphinus]

I am reluctantly wading into this one now against possibly my better judgment..

On the day that the royalty review findings were released, I had the opportunity to meet the Honorable Ed Stelmach briefly as he addressed my company's user group forum, which in the room held many industry players from across North America. You'll be happy to know that I asked him some very tough questions. (I asked him what is the difference between the title "The Honorable" and "The Right Honorable." Ohhhh Rick Mercer I am not, but I try. .. I try.)

I have to say, he is a stand up guy. He's very likeable in person.

....

Anyhow, I am all for a royalty review. However I am a little concerned about the recommendations. I am not certain if they are a bit of a negotiation tactic, ie. if you ask for "X" but expect to get "half X" and so on. I'm not really sure. For sure, with the price of oil, there's room for ... discussion, shall we say.

Not quite aware of the full details of the recommendations but I have read two reports from financial institutions which are giving advice to investors regarding their projections. These are not the oil companies, these are fund managers. And .. well.. they're quick to point out that the recommendations are not law, but they do say there will be negative impacts. The projections seem to indicate that it's the juniors who will bear the worst brunt of this.

But the comments regarding natural gas ... they are indeed correct. I don't understand how gas already can not be profitable, looking at my heating bill .. but it's true, I have seen first hand that there's no money to be made in natural gas at the moment, in fact, there are companies that are in the red.

So .. while I do favour a review of the royalties, I think that there may be a case for compromise at least in some of the points.

[rigger11]

i know first hand as to why it is not feasable to drill for the natural gas that we have here in AB. you have to take into consideration the cost of drilling that well. here is an example of the cost break down of a drilling rig per day.
(this is basedon the last rig that i was on, oh and it was drilling for gas up in zama)

$20,000/day jsut for the rig
$500/day for the loader
$500/day for the crewtruck
$3000/day for the camp(maybe more not 100% sureon this 1)
then there is the crew pay anywhere from 11 -13 guys a week wages from $21-39 dollars/hour + overtime
then there is the rental of the drill collars and pipe adn the cost of the drill bits, anywhere from 2-6 bits of different quality and price range(the most expensive one that i saw was $75,000
then there is the cost of the drilling mud(which if it is a bad whole can cost over a million just for the mud)
and then the cost of all the other rentals(shacks,400 bbl tanks, light plants, 3 sided tanks)
and if it is a directional hole then that costs more too....

and well, when it sells at what?? 6.49 per what ever the measurement is...there is not a lot of profit in the gas sector right now.

Hello everyone. This thread showed up in a google search I have set up to keep an eye on interest in the Royalty Review.
With that in mind I would like to invite anyone interested to the following:

Concerned about Alberta and its future?
The Alberta Alliance is & we would like to meet you!

We invite you to attend a Town Hall style meeting in Calgary

Location:
Blackfoot Inn - Heritage Room
5940 Blackfoot Trail, S.E.
Calgary, AB.

Date:
Tuesday, November 27, 2007

Time:
7:00 PM

Speakers:

Duane Mather, President and CEO of Nabors Canada

John Murdoch, President and CEO of Madison Energy

Paul Hinman, MLA and Leader of the Alberta Alliance Party

The Alberta Alliance was founded on grassroots principles, we welcome all to attend. You will learn more about our party, in particular our stance on the Royalty Review. Members of our provincial council and future candidates will also be in attendance. We look forward to meeting you and sharing our vision for our province’s future.

We would also like to welcome our many new members and thank them for their generous donations.
Through them this event and the advertising have been made possible.
Listen for our radio advertising on QR77, starting on Monday

If you have any questions, please feel free to contact me.

Thanks,
Jane Morgan, CFO
Alberta Alliance Party
1-888-262-1888
www.albertaalliance.ca
info@albertaalliance.ca

[G1GY]

Wow! A four page pollitical thread in the lounge. Go figure.

[BC564]

I think the royalty reviews had to be adjusted somewhat.....when it the last time they were increased....when is the last time you got a raise.....everything should go up with the cost of living including the royalty's.... of course...this is just my opinion

[digital-audiophile]

I wouldn't call this a political discussion Politics usually involve public input, this decision was made by the governement without taking the average Albertan in mind.

I hope all the supporters of the unrealistic royalty hikes enjoy their $400 "Ed bucks" cheque while they are on unemployment after they lose their jobs due to the massive downturn in the industry

[rigger11]

Originally Posted by digital-audiophile

I wouldn't call this a political discussion Politics usually involve public input, this decision was made by the governement without taking the average Albertan in mind.

I hope all the supporters of the unrealistic royalty hikes enjoy their $400 "Ed bucks" cheque while they are on unemployment after they lose their jobs due to the massive downturn in the industry

agreed!!!!!