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.

[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.