Alberta Royalty Review

[Okotokian]

Just heard the first Encana commercial on this on the drive in... the intimidation and scare tactics begin. They are probably using the same PR firm that gave the liberals the "Conservatives are scary and will destroy healthcare" line.

There is one thing few have noted that plays into this debate, at least in my opinion. People worry about driving out the oil companies if the royalties go up... well folks, they will be leaving eventually anyway... Supplies in the Western Sedimentary Basin are declining. gas shipments from Alberta are projected to decline over time. Why do you think there is such a push to get McKenzie and Alaska going? One of the reasons is to keep the pipelines heading east and south full. We have a declining resource on our hands here folks. And I for one don't propose we give it away at firesale prices until it's gone. If it comes to it, I'd rather have higher royalties extracted over a longer period of time.

As for oil companies running from Alberta, perhaps they will run to Newfoundland, where they have just signed a deal with higher royalties AND a portion of the project equity handed over to the government.

[bearbait]

well im in oil country....ive seen bussness drop off by 85% since they have started this roylties thing...rigs are being released as soon as holes are compleated..drilling programs cancelled...on average it costs the oil co 2-3 million dollers to drill, compleate and bring that well into service...the oil co's are not the bad guys..yes they make money...thats what any bussness dose..but the affects this could have not only on the province but on the country is huge...yes i work in the patch..i make good cash and am accustem to my lifestyle...i also work long hours and sacrifice my family life to make the cash i do...

do u realy think it will benifit albertans to jack the royalties???we have had huge surpluses for years...do u get free health care???how about a tax break???i see no benifit for us as a population at all...leave well enough alone...mabey the polititions should take a wage cut at the same time...and no more tax free paychecks for them...

go ahead kill our econimy, put people on the street...then they will say what happened...i see it first hand, this year is slow as it is if this gose through it will only get worse...
rob

[bingo1010]

Originally Posted by orca

The panel and Stalmack have it in there head that the golden goose can't fly away and move investments to another location. Do they not remember what hapened in the mid 80's when OIl moved out of Alberta. Who's going to pay for all the infastructure and hospitals when they leave. and house prices drop by 30%

maybe when houses drop 30% the average joe will actually be able to afford to buy one, would be nice to see the inflation in the province drop back a couple of points.

[russ]

Originally Posted by bearbait

well im in oil country....ive seen bussness drop off by 85% since they have started this roylties thing...rigs are being released as soon as holes are compleated..drilling programs cancelled...on average it costs the oil co 2-3 million dollers to drill, compleate and bring that well into service...the oil co's are not the bad guys..yes they make money...thats what any bussness dose..but the affects this could have not only on the province but on the country is huge...yes i work in the patch..i make good cash and am accustem to my lifestyle...i also work long hours and sacrifice my family life to make the cash i do...

do u realy think it will benifit albertans to jack the royalties???we have had huge surpluses for years...do u get free health care???how about a tax break???i see no benifit for us as a population at all...leave well enough alone...mabey the polititions should take a wage cut at the same time...and no more tax free paychecks for them...

go ahead kill our econimy, put people on the street...then they will say what happened...i see it first hand, this year is slow as it is if this gose through it will only get worse...
rob

The slow started well before anyone uttered the word royalty increase. It's just an excuse or scapegoat. Just look at the deal Nfld. just got, higher royalty rates and a stake in ownership.

[sullijr]

I read somewhere not too long ago that the money "loaned" to ALPAC for the startup of the Grassland lumber plant still hasn't been repaid in fact not one interest payment paid.Diashawa also walked away with a lot of money when they closed down. I wonder if all their debts were repaid to the people of Alberta?
I hope that Stelmack calls the bluff here are lots of other companies unfortunately overseas that would gladly take over the operation of the Alberta oil industry.
The oil royalties are also owed to the people of Alberta.It is time that government stopped giving away the resourses of this province and not being properly compensated.
The CEO's of the oil companies certainly are being paid and bonused,at whose expense.After more than 50 years military service, working for MOT and Nav Canada never once a bonus or recognition for the job we did or a decent living wage I have no sympathy for the oil or lumber companies having to pay their share of the profit.

[Kelly & Beth]

they do believe that changes need to be made just not to the extent that is proposed.


http://www.encana.ca/media/currentto...view/index.htm

[LB 270]

I like quite a few guys don't understand all of the workings of the royalty's but I thought hey the gas and oil are here so leave if you want, you'll be back.
I recently talked to a customer of mine who is in the gas industry and he is peed right off about the royalty increases for gas because it costs so much more to drill a gas well than an oil well. The royalty pay out doesn't differentiate between the two and gas is alot weaker than oil, price wise. It was another slant to the issue that I was unaware of.
My business is a luxury business (pool tables) and I don't want the economy to slow down any but it can't sustain the levels to which it has risen in the past 5 years forever. Gulp. I'm glad I bought my house before the price went stupid and do not have every toy available on credit. I don't know what is going to happen but like it or not we are at the mercy of Stelmach. Double gulp.
Lance

[bearbait]

russ,
the slow down was on to get service co's back in check...so yes it was already a slow year as i had stated the first time i posted....

the oil co's offered to up the roylties but had said when the price drops on oil and gas so should the royalties....

gov said no...they are trying to work with the govenment but to no avail.

wonder if our strong dollar has anything to do with it???im sure the americans dont like that..and this move will kill our dollar again..

all my stuff is payed for but alot of guys are going to go bankrupt if it gose through...
rob

[Sporty]

I agree there needs to be changes but it needs to be done reasonably and implemented over time so that everyone can adjust, from oil companies to hotels. My husband works in the oil patch and he's told me the costs of running and maintaining a rig compared to what the oil company actually takes out of it is less than what they spend to get it going to begin with. I tend to believe what he says after 20 years in the patch over the media who are writing biased, uninformed news about this royalty increase.

I think so many Albertans are looking at the high wages of oil execs and not understanding the dynamics of the industry. To punish the oil execs means punishing every day hard working Albertans.

Alberta is too intertwined in this sector and absolutely needs to diversify but to force it will not make it happen, it could lead Alberta into another recession. So yea for those that don't own houses yet or for those that bought houses before the real estate boomed are safe but sadly those that bought 500k houses end up with a house that is only worth 300k is a kick in the pants. I also don't trust our government to put any money back to Alberta that they receive from these increases and expect to see many bureaucrats with nice big raise increases instead.

There are many businesses that are tied to the patch in Alberta so if something happens in the patch it affects everyone.

[Chung66]

Originally Posted by sullijr

I read somewhere not too long ago that the money "loaned" to ALPAC for the startup of the Grassland lumber plant still hasn't been repaid in fact not one interest payment paid.Diashawa also walked away with a lot of money when they closed down. I wonder if all their debts were repaid to the people of Alberta?
.

With Daishowa-Marubeni, it was 100% Japanese investment 0 % Alberta Government. Unless something has happend within the last 3 days, should still be going strong in Peace River. Actually the Daishowa people were pretty ticked when they did not get the same loans that Alpac did.
Alpac has a penalty assessed against them for their loan default. They had a portion of their landbase taken away. Landbase to a forest company is long term production.

Didn't mean to hijack, had to clarify this up

I'm back. (Formerly known as Smokinjoe) Thanks to the wife deleting my profile.

Anyways, I am a Wellsite Supervisor, and because of the threats of the royalty changes, I have been without work for almost 2 months now. The drilling has almost completely stopped. Oil companies have stopped until they hear the final decision on the royalties. Many of the major players have said they will simply boycott the new royalties and not drill an inch this winter.

That affects ALL of Alberta, even pipelines. What do they plan to pipe-happy thoughts?

[chuck0039]

isn't this just a reveiw? it's not a bill waiting to get passed, if what i have been hearing is correct the money that the alberta government has been collecting has not gone up since oil was 20 to 30 dollars a barrel. What's the big deal if they do raise it.it would be a long time coming, i have also been told that if they reveiw comes back and it is decided to raise the royalties that it will be a gradual raise not like the guys that determine when gas prices will raise. (overnight by sometimes .10 cents a liter). If the big oil companys want to try and bluff this i say let them. go to Saskatchwan, they will be back once hey realize how good they have it here and remember the oil belongs to Alberta not the big oil companys.

[The Elkster]

The royalty is a % take so if prices go up the royalties go up accordingly. Why do you think the gov't is making record surpluses the past few years. It ain't farming thats doing it I will say that much.

People wanna just look at royalties without any understanding of all the underlying factors at play here nor accurately valuing all they are getting from exploitation of the resource. Everyone wants a villian and everyone thinks they deserve more more more...whats new. They had better watch what they ask for...they may be begging for a jobs creation system with all the new royalty money...yeah right it'll net the average Albertan so much more.
The biggest oil benefit to the average Albertan doesn't come in the way of royalties it comes from the huge dollars spend in exploration and development and the jobs and tax revenue that creates all the way down the line. You only have to live in a place without those perks to appreciate just how valuable that is...ask a nephie or a BC forest worker if all you've ever known is the relatively plush AB job market.

Company A outlays 1 billion in spending...30-40% goes to land and government costs
Approx 60% goes to finding and development (providing jobs jobs jobs! and that money is then is taxed and retaxed as the trickle down occurs meaning the average Albertan (even non-oil workers) benefit again on this money - tax revenue helps everyone)
If they are doing well Oil companies make 10% year over year (good and bad years averaged)...that is hardly rape and pilliage returns. Of course all that is reported is that they made 100 million and we only got a crumby 30% royalty...its never explained what it took to get that 100million nor all the other benefits. Makes for a good news story and whips the masses into a frenzy thats for sure.

Royalties go up and Company A's profit potential goes down to 3-4% and they look and say we can make 10% return in Columbia we're taking our cash and putting it there (taking a better like any individual would do if they found a better savings plan so lets not villify the companies for that lest we be hypocrites). Now we have higher royalties on less production and net nothing extra on that end plus we lose jobs and all the taxes that those generate all the way down the line...GOOD DEAL eh. Hey but house prices are down with a bust...but dohhhhhh I lost my job and even at $300K I can't buy dohhhhhhhhhhhhhhhhhhhhhh.

It pays to look at the big picture and maybe appreciate not only the downsides to the boom...life is never perfect. I don't know many who are hurting more now than what people felt when things were depressed back in the 80's. How quickly we forget.

[Tredeb]

Originally Posted by russ

No debt - is that according to the government. I'd bet it's not to the GAAP rules (Generally Accepted Accounting Practices) the only jurisdiction that's adopted that to my knowlege is B.C. Alberta has no "net debt" and I'll bet it fails the acid test big time.

Alberta acheived no net debt back in the 90's. they acheived no debt period, a few years after that.

[HiCountryBugle]

From all of the discussion, opinions and facts on this subject ... it sounds like the crown is justified in collecting more royalty revenue on some O&G products (maybe not on products that yield lower rate of return like natural gas).

In cases where the crown has mineral rights, the province of Alberta should collect higher royalty revenues when commodity prices are high. These are non-renewable and non-sustainable resources. The boom will eventually end. In the meantime, all of the benefits that come with the boom are offset by the drawbacks that so many people have alluded to (inflated home prices, overpaid labour, lack of competition in the service sector, gouging, etc.). A more stable economy with sustained development would be best. A little less greed maybe ...?? The oil companies may leave or slow down in some areas ... they will be back. The resource is in demand and it is limited. Other sectors of the economy would be quite happy with a "year over year" rate of return less than 10%.

The big rant over the royalty review is fueled by BIG OIL. They want to maximize their profits, and lets face it they have a lot of political clout in this province. Every time the Encana ad comes on the radio any more I change channels ... they obviously have lots of cash to throw at trying to persuade the public.

I hope Premier Stelmach makes some fair changes to the O&G royalty system. I doubt it will cause the big bust that some people are fearful of at current market prices. BIG OIL may slows things down a tad to prove their point, but responsible O&G operators still have a lot of excellent opportunities in this province, even if royalties are increased.

[AbAngler]

Bottom line, the royalties can't be bumped up as much as was recommended by the review panel. Oil companies and the province have to meet somewhere in the middle. And they will. Is is political suicide to increase royalties as much as was recommended. The good times will end abruptly.

Right now, things are on hold on the operations side, even for the company I work for (junior). We're buying mineral rights like we've never before since the big boys have slowed down. This is a positive sign, as down the road, we will be drilling all that land.

Let's just hope the boys at the top make the right decision, and I'm sure they will.

[steveo10]

The oil companies have been slashing work for the last work now.... and now the gov't is the scapegoat for the slowdown

[Jamie]

All I am interested in is how much does a comparable province, State or country charge these company's? And that should include the fact Alberta is a very stable environment to work in. We have skilled trades, modern transportation, a friendly Government and other than Wiebo we have no terrorists or people looking to kidnap you.

I see no need to be the most expensive.. But I damn sure we can not be the cheapest.

Now if the report agrees with what I say and was done in a responsible manner... Screw the Oil company's, they will drill here any how. I would love to see a report with no spin on it and easy to read facts and figures. (Unlike a certain Grizz report)

Thanks
Jamie

BTW didnt we reduce royalties back in the mid 90's??

[russ]

Originally Posted by Tredeb

Alberta acheived no net debt back in the 90's. they acheived no debt period, a few years after that.

Not if you apply real accounting rules.

[chuck0039]

Just a question here and may be a little off topic but why does the alberta gov not create an oil company owned by the Alberta goverment. kind of like they had when the province owned the liquors stores back in the day? This way they won't need to raise the royalties, and it will i think be a good invesment for the future of alberta because they won't be restricted to work just in alberta. I still believe that gradualy raising the royalties will not affect alberta if done slowly and not to greedy.

[The Elkster]

The thing the people have to remember is that Gov't take/Royalties are only part of the economics companies face around the globe. Ya can't just say "Hey Sudan gov't is getting 70% on their oil and gas" and then claim we're getting screwed. One has to consider that their finding/development/operating costs are a fraction of what ours are. The reserves are bigger the labor cheaper and the low hanging fruit (reservoirs) is still around. That is still the case in many countries in Africa and South America and while AB is a stable environment that only goes so far in dictating where a company will plug holes....at some point they look at the risk Vs gain that other places offer and say its worth the risk. They are not gonna say "hey we're loosing money or making a measly 2% return BUT hey we're stable". They will take the money and go somewhere else...and no its not petty pouting...its common sence economics.

Most AB companies have AB people leading them and they don't want to see AB hurting and that is why they are speaking up. In the end they have to do what is best for their shareholders if they don't they are in big trouble. They are simply warning that while they don't want to move operations they will have to if the economics are pushed into the red. The news of course portrays these to be "threats" and "intimidation" and the general public work themselves into a lather because of course oil companies make lots of money so they must be evil.

Its funny I don't see many people selling the house they bought for $150K for a modest price of $200K. They are selling right now for a big gain of $500K...does that make them evil? Funny how we conveniently villify things when it suits our needs.

[bearbait]

i guess you have to be in the patch to see it first hand hey elkster...
if it gose through all the critics that dont understand will be saying how did this happen?well greed!!!

as i said before what benifit dose it have for the avrage albertan???
none...we have had surpluses for years and no tax cuts no free health care..
give your heads a shake and when the province crashes you will understand!!
rob

[russ]

Originally Posted by The Elkster

Its funny I don't see many people selling the house they bought for $150K for a modest price of $200K. They are selling right now for a big gain of $500K...does that make them evil? Funny how we conveniently villify things when it suits our needs.

Yup and that profit looks really good until you try to replace the house. I think it's comparing apples to oranges.

[bearbait]

russ,
just curious what u do for a living?

[Jamie]

Quote
"Its funny I don't see many people selling the house they bought for $150K for a modest price of $200K. They are selling right now for a big gain of $500K...does that make them evil? Funny how we conveniently villify things when it suits our needs."

Thats exactly the problem...You just have it backwards
The Oil/Gas belongs to Alberta.. Not the Oil companys. Its Alberta who wants to make sure they are selling it for the market price...


Jamie

[russ]

Originally Posted by bearbait

russ,
just curious what u do for a living?

I work in an industry that requires an understanding of inflation and how it affects real purchasing power. The term for Elkster's example is Phantom Profits.

What do you do for a living?

[Duk Dog]

I had heard from someone familiar with when Leduc was discovered (late 1940's) that it was decided that an energy and utilities board was needed to regulate this new found wealth. Supposedly at the time Imperial Oil huffed and puffed that it wasn't required and it would kill any forward momentum and that they would have to leave Alberta. If this is in fact true here we are what 60 years later the province is booming more then ever and Imperial Oil is still very much here. Sound familiar to the tune from Encana and other similar corporations?

[bearbait]

russ,
i am the area sales manager and dispatcher for a large trucking co in whitecourt swan hills and fox creek.

[bearbait]

hey duk....esso has pulled the better part of there operations out of alberta.

[Duk Dog]

Originally Posted by bearbait

hey duk....esso has pulled the better part of there operations out of canada.

I just pulled this off the Imperial Oil web site.....

Imperial Oil is one of Canada's largest corporations and a leading member of the country’s petroleum industry. It is one of Canada's largest producers of crude oil and natural gas, is the country's largest petroleum refiner, and has a leading market share in petroleum products sold through a coast-to-coast supply network that includes close to 2,000 service stations.