Alberta Royalty Review = The death of the Alberta oilpatch

[ed99]

It's sure interesting how different people see this issue depending on whether they are in the oil industry or not. It almost seems like we are looking at different things.

I work at EnCana so you know where I'm coming from. Just one comment about moving investment out of Alberta- it is simple fact, not a threat or scare mongering. The increase in royalties means that many of our AB projects that we had planned for next year are not as profitable as projects in BC or the US, so that is where the money will go.

Yep, the good folks in AB own the oil and gas and the government has leased the right to develop it in exchange for up to hundreds of millions of dollars in some cases. Changing the royalty structure breaks that deal. Legal? Yep. Fair? Depends on which side of the deal you are on.

Has the province benefited from oil and gas wells drilled in the 50s? We have no PST here and our income tax rates are lower than anywhere else in the country. Chicken on the Way is advertising $15/hour for workers (though that probably includes some danger pay) where when I was a punk teenager I considered myself fortunate when I found a gas station that would pay me $4.50.

A change to the royalty structure is overdue. This one was done when oil prices were around $10/bbl. Nobody is looking for sympathy, we're living in the best of times right now. The issue is future investment in AB which is what really drives the economy. The new royalty regime is going to reduce new spending by a lot, reducing future production and therefore royalty payments. It is particularly hard on new gas drilling, which is as big as the oilsands development, and unless we have a very cold winter in the midwest US, there is going to be a lot of suffering on the gas side of the industry. More than half of Alberta's rig fleet has been parked all year, and that was before the royalty review.