Alberta Royalty Review = The death of the Alberta oilpatch

[Zylumn]

My father in the 50's worked for shell oil co. as a driller. He has mentioned there are still dozens of wells that are still producing that he drilled in the 50's. He is not reaping the benefit of those wells as I am not but hopefully my grandchildren will.
Kevin

[StirCrazy]

That is nothing but fear mongering by EnCana trying to sway public vote. you think any other Provence is going to let them in with out tougher royalties? BC cost way more just in business tax alone and the regulations here would be worse than the Alberta royalties. I am from Alberta and did my stint in the oil patch. EnCana has to release this type of press report to keep shareholder from bailing. how about including a link to the royalties page also so you can see why they are so worried.

Steve

[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.

[Pan]

Yes and your 4.50 went a lot further than todays 15. I'm sorry but unless your on the high side of the "boom" you've suffered in Alberta.

[Sebae again]

Yeah and a house costs 5 times as much. I'd have a hard time finding someone working at a gas station making $ 22.50 an hour . Compared to the early eighties, I'm only underpayed by $ 65/hr. I guess I should'nt complain. Next year could be worse.

[Quinn]

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

Originally Posted by ed99

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.

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.

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

Originally Posted by Ruth

Well they say the good lord hates a coward so I might as well wade into this debate.
I do work for an oil company - not Encana - but out of BC. I do remember the NEP and the absolute devistation that brought about so that yet another government could buy eastern votes.
I think that the question every Albertan should be asking is why the heck would we want to give this government yet more $$$. Let's face it, there is more $$$$ going into the government coffers than any Oil Companies. I think who really has to be questioned is the Alberta government. They have seriously mismanaged the $$$ that are going in right now and now they want more! (and one of the above poster said that big corporations are heartless). Maybe if there was more revenue going to the province they could give everyone $500 checks next year. Talk about a stupid way to spend over a billion dollars. Alberta should be ashamed of itself for the condition they have let their roads and infastructure get into. I am old enough to remember the day when driving across the border from BC to Alberta was a startling reminder of how inept the BC government was about maintaining infastructure - it is now the opposite.

So because we don't like our provincial government, we should give the money to corporations? Maybe, if everyone had an equitable portion of shares in each of those corporations! The answer here is to change the government - we've already tried the alternative, privatization, and that clearly didn't work (except in the case of liquor stores, probably because there are more than three or four players in that industry). Regarding the NEP, at least we should be able to agree that this time, the money is staying in Alberta, instead of being handed out to have-not provinces with totally incompetent governments. Additionally, the global energy picture is fundamentally different now. In the end, this entire debate comes down to greed. The oil companies, their management and their shareholders want to keep as many of the profits to themselves. Slightly more left-wing Albertans want to keep the money in Alberta. And everyone else wants us to share it out, either to other provinces, or further. For over 70 years, Alberta's natural resources have belonged to Albertans, and my opinion is that with such a great resource under our feet, our government should act in the interests of Albertans!

[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.

[digital-audiophile]

Originally Posted by StirCrazy

That is nothing but fear mongering by EnCana trying to sway public vote. you think any other Provence is going to let them in with out tougher royalties? BC cost way more just in business tax alone and the regulations here would be worse than the Alberta royalties. I am from Alberta and did my stint in the oil patch. EnCana has to release this type of press report to keep shareholder from bailing. how about including a link to the royalties page also so you can see why they are so worried.

Steve

Here is a link to the main royalty review webpage http://www.albertaroyaltyreview.ca/index.html

I'm a second generation oilman myself, my dad was a Shell company man for 35 years. I've seen the ups and downs through my life as a child and now as an adult in the patch myself.

I agree that the boom in Calgary hurts a good number of people, I make a fair salary but I still find myself waiting for my next pay cheque most months. That however has to do more with our society than Alberta itself.

I agree that a review is required, but as mentioned by my fellow EnCanan, we have no PST and the lowest provincial income tax in the Country. We see benfits that the other provinces do not. There -is- work here, it may be epensive to live, but look at the martimes, there is a reason there are people flooding from the east coast to Alberta every dayh.. it may be more expensive but at least you can get a job other than bagging groceries at Sobey's.

Should every Albertan get their fair share? sure, How about native Albertans get a bigger share than the guy who just moved here last week? My great great grandfather came to Alberta and worked the coal mines before he started ranching, which continued on to my grandfather and father.. I am the first generation of my family that hasn't worked the ranch. Am I more deserving of extra revenue?

Anyhow, read the info make your own decision, all I am confident in however is that there are hundreds of thousands of people in Alberta working directly in the oilpatch that will fight the current review tooth and nail until it is fair and equitable for both big oil and the people of Alberta.

[StirCrazy]

what a lot of you people need to understand is the "Oil Patch" is out of control in Alberta. my home town that 18 years ago you could get a house for 60K, now the same house is listing for 400+K is that right... no.. Alberta is so artificially inflated right now it isn't even funny, and because of that I cannot afford to move back when I retire with out working. Grab a clue... when minimum wage jobs are paying 20.00/hr something is wrong and the economy can only support it for so long.

Alberta needs new developments like a hole in the head, what they need to do is suck back and invest in making existing sites more profitable instead of doing the bulk drilling. Now I have 3 cousins that between them own two drilling companies and I an still in touch with them so I am not exactly talking out my ***. they don't know which side to be on but they do agree Alberta is out of control and something needs to be done.

[Matt]

Higher royalties will slow down investment and new drilling? And that's bad news how?

There is no imperitive to extract all the hydrocarbons as fast as possible. We're selling our house, brickload by brickload, and all the while cackling about the money we're getting. Are we getting enough to build a new house (economy) when the bricks are gone?