Fair Share??

[ivbinconned]

Or put another way...from another site...

"Everyone is talking about a "fair" royalty without defining what is fair!"

So the oil/gas companies get to
-speculate on land,
- rent the mineral rights from the government
- pay landowners / residence to do seismic (who then pay taxes to the government
- Do the seismic (paying a seismic company who pay taxes, then the employees pay taxes
- Analyse the results (employees get paid who then pay taxes
- Pay to drill a well (drillers/employees pay taxes)
- hopefully discover marketable reserves
- Pay to design and build facilities to produce reserves (companies/employees paying taxes all the way along)
- Give the government their royalties
- Find a buyer for the "peoples" energy
- Final, if they should turn a profit.....pay corporate taxes.

So Eddie Strom er Stelmach wants to upset the apple cart to score points the the socialists.

Alberta is ROLLING in taxes.


The larger the oil/gas producer the easier their capital will leave the province for better rates of return. It all about RoR, which includes costs of production(very high in Alberta) and Risk (was Low in Alberta but is now increasing).

The report was incomplete anyways and always bad policy to go off of incomplete information



As an armchair economist it's always amusing to hear people ranting on about "Big Oil" presumably vs those "mom and pop" offshore drilling and tar sand upgrader projects we all reminesce about. Since the tar sands belong to "the people" perhaps a compromise can be reached whereby for every 100lbs of tar sand mined by "Big Oil" a 100 lb bag of tar sand can be shipped to the home of every Canadian who wants one to do with as they please. As for being "exploited" by "Big Oil", my brother, who works in the oil patch has in turn "exploited" "Big Oil" over the years to the tune of a two storey house, maintenance for a wife, four children and several dogs, cats and hamsters, cars, minivans, vacations and a pension. Numerous others have done the same. Given a choice between the exploitation and the bags of tar sand delivered to the basement, I as a low tax paying Albertan will take the exploitation thank you very much. The fastest way to kill the economy out here will be to morph overnight into another tin pot, business unfriendly jurisdiction in which contracts and government business agreements are worth less than the toilette paper in the washrooms. That's not to say it won't happen. I saw it before with the NEP. Only this time, I've got a wad of cash to clean up on some cheap foreclosed houses.





Re: Big oil, big money etc. We need to get rid of the term "oil," and use "kilowatts." The word "oil" conjures thoughts of a thick, gooey liquid that sticks to your Carhart coveralls or your garage floor. A liquid that spews smoke into the atmosphere when ignited, and makes Calgary oil men greedy and rich.
One US gallon of heavy diesel equals 40 Kilowatt hours. I don't know what a gallon of crude works out to, but a metric tonne of Fort McMurry crude works out to approx. 11,700 Kilowatt hours of energy. For you English chaps, One horsepower hour=.75 Kilowatt hours.
Kilowatts can always be re-converted back to any other form or source of energy.
A lot of the negative attitude towards oil companies is generated by the CBC and Radio-Canada. Have you ever noticed how they always use film footage of the Fort Mac refineries that was shot in sub zero weather. In reality, what you see going up into the atmosphere is water vapour. The film does however tickle the fanny of the "Suzukian Cult."
They (CBC-R-Canada) do the same when they film the power stations at Estevan and Coronach. In sub-zero weather, you can see the stack on the power station at Coronach from 60 miles away. On a warm day, no visible smoke is emmitted.

[Lifer]

"IF the pioneers and explorers and risk takers and gold panners had all been told, "go ahead, dig, drill and explore if you want to take the risk...but what ever you find...what ever you gain...THAT, you must remember belongs to everyone"!!!"

I respect those pioneers and am thankful that they have come to this country and have helped develop it into what it is today. And we are talking about today not yesterday.


The report states that "Albertans own the resources" do you agree with this statement?
Does this mean that the knowledge and effort to develop this great resource belongs to all Albertans?

"Fair" does need to be defined. Is it fair that Alberta's "METR" (marginal effective tax rate) as defined by the report is lower then the U.S?

Is it fair that the committee used for the royalty review was slanted towards business?

Is it fair that what they put out as minimum changes will be compromised on?

Is it fair that ones fear of government waste can drive them?("Funnel more throough the government and watch the abuse !!! ").

A balance of respect needs to be found.

[ivbinconned]

"And we are talking about today not yesterday."

Rubish!!

People may change....but

Principles NEVER change!

[carebear300]

I am from sask so you have to consider where this is coming from(behind the iron curtain) Fair is fair when it comes to royalties and we won't ever be able to determine what is really fair to satisfy everybody, but before you people in alberta get carried away this royalty bit remember what happened in saskatchewan fifty years ago, we had a premier that told the oil companies that the people of saskatchewan would determine how and when the oil would be developed and with that one statement the oil companies all pulled out and moved to alberta. So a friendly warning be careful how you treat the goose that laid the golden egg.

[ivbinconned]

New royalties will end Alberta's boom

Start of a new anti-oil industry era?

Claudia Cattaneo
National Post
Thursday, October 25, 2007

This is not Alberta's finest hour.

Premier Ed Stelmach rolled out a new deal yesterday on oil and gas development, the mainstay of his economy and Canada's biggest spender, that is sure to deflate a phenomenal boom and redefine the province's image. In Calgary, the mood was somber among big players and small. The new terms re-enforce the message that even in the country's top oil producing province, this is a new anti-oil industry era.

Under the new royalty framework, which will come into effect in barely a year, government take on oilsands projects will increase to a usurious 65%, from 47%, at today's oil prices, dramatically reducing the incentive of gambling billions of capital on projects in one of the most challenging regions of Canada, northeastern Alberta. Oilsands projects, including those already up and running, will start paying the public purse even before recovering their investment at rates as high as 9%, rather than the current 1%, and after investment is recovered, at a rate of up to 40%, from the current 25%, depending on oil prices.

Under the new policy, the province appears to have has shrugged off its potential to be a global energy leader and opted instead for mediocrity, bigger government and an adversarial relationship with the sector that has lined its pockets.

It's a deal that places Alberta alongside the hydrocarbon-rich Banana Republics of this world - places like Kazakhstan, Venezuela and Ecuador - where deals are ripped up and promises broken.

To those in the private sector who were willing to move mountains to turn low-grade oilsands deposits into highly coveted oil supplies to meet the world's energy needs, the new framework will feel like a slap in the face.

Those outside Alberta - from oil companies to pension funds - that were invited not long ago by the previous government of Ralph Klein to partake in the development of its energy riches, will take note that this is government that can't be trusted. In an egregious move, the new framework says existing legal agreements will be renegotiated, suggesting possible legal battles between the province and the two companies that pioneered the oilsands business, Suncor Energy Inc. and Syncrude Canada Ltd. There will be no grandfathering, which means the new rules will spread the pain equally among all players.

Energy consumers will also feel the hit. Canada's oilsands are one of the few places globally that can produce more oil. With the government demanding a bigger share of an already economically challenged business, supply growth will not be as aggressive as planned, pushing oil prices even higher.

The natural gas side of the business, which is already feeling pain in Canada, was done no favours in this process and supplies could fall even more than under current projections.

So what prompted Canada's overachieving province to burst its own balloon? Albertans became convinced that they were getting ripped off by Big Oil, that development was overheated, that they could stand to benefit more from high oil prices. The issues blossomed from a lack of understand of the existing royalty regime, and Mr. Stelmach's milked the misconceptions to score political points.

The premier, a farmer from Northern Alberta, showed little appreciation for the implications of his actions, suggesting the sector will continue to thrive.

Now the ball is in the oil and gas industry's court. Will it follow through with its threats, or will it go back to work?

The first reviews are damning. Rick George, chief executive of Suncor, a company that rarely enters the fray, said the changes "are substantial and could have a significant impact on industry economics. Imperial Oil Ltd. said "these are substantial changes to the royalty structure and will result in much higher costs."

Glen Schmidt, CEO of oilsands startup Laricina Energy Ltd, said: "Clearly the government has increased its take, clearly it has an impact on economics, and it may have a secondary impact on our cost of capital, which has an impact on our ability to invest."

One thing is certain: Oil companies are ruthless operators. When faced with an adversarial government, they sit it out until conditions improve. It wouldn't be surprising if they took action just to make the point.

[mustardman]

This could cause Exxon's profits to tumble from $47 Billion in 2006 to $46.9 Billion .

[wilagro]

ivbinconned: Thank gawd our Premier (not yours), took decisive action regarding royalties...not as much as I would like to have seen though.

If the oil companies move to Saskatchewan, I am sure that you will be out there welcoming them with open arms and letting them steal you blind as Ralph Klein did in Alberta. WE wouldn't have had near the problem in determining a fair royalty return if Getty and Ralph had not stacked the deck in favour of the oil companies in the first place.

Ralph Klein and his gang cost us a mint in more ways than you can imagine. Stelmach is doing something FOR Albertans instead of TO Albertans. What a refreshing change.

[ivbinconned]

Royalty decision all about politics
Stelmach seeks support, but most Tory voters not interested in making 'Big Oil' pay
Lorne Gunter, Freelance
Published: 2:47 am
The first indication I had that Premier Ed Stelmach's Thursday royalty announcement was going to be as atrocious as it was -- and it was just about as atrocious as it could be -- came Wednesday when a source inside the government boasted to me "It's going to be politically popular, but the oil companies are going to hate it!"

That's something to be proud of? Knowing, deliberately angering the province's biggest industry purely for the sake of political gain?

And that is all Thursday's announcement was all about -- politics. It was not about being fair to both Albertans and the energy companies -- the resource owners and the extractors. It was not about planning for the future or ensuring a legacy for our children and grandchildren, as the premier claimed.

And it certainly wasn't about "stability and predictability," even though the premier claimed at least a dozen times that that was his goal.

By breaking existing royalty deals with Alberta's two largest oilsands companies -- Syncrude and Suncor -- Stelmach has shown his government is unreliable, that even after companies have invested tens of billions under signed-and-sealed investment contracts, the Tories are willing to go back on their word whenever it suits them.

Thursday's ill-advised, unnecessary, investment-repelling cash grab was purely and simply about saving the political skin of a floundering, indecisive, tin-eared politician.

And in the end, the crew around Stelmach couldn't even get the politics right.

The general mood in Alberta has shifted since the royalty review panel released its report in mid-September.

After the province's energy companies started showing how the recommended royalty gouge would hurt their bottom lines and provoke them to move jobs and billions in investments elsewhere, many Albertans (though not all) lost their initial zeal to make "Big Oil" pay and pay and pay.

This is, I would guess, especially true among people inclined to vote for, donate to and work on behalf of Tory candidates.

Just as the premier earlier this year badly misjudged the enthusiasm within his party for rent controls, he has also misjudged the support his new high royalties will garner among bedrock Conservatives.

A turnoff to Tory voters?

After having built expectations so high of new riches in the public trough, Stelmach had to agree to raise royalties. Still, by raising them as much has he has -- almost as far as the poorly crafted royalty panel report recommended -- he will very likely turn off tens of thousands of Tory voters, without winning over enough Liberal and NDP vote to compensate.

That's especially bad news for Tory re-election hopes since Tory seat totals fluctuate up and down based not on increases and decreases in opposition party vote totals. (The Liberals, for example, have lost popular votes in each of the last three elections.) Rather, Tory success depends on convincing their own base to come out and vote rather than sitting on their hands.

Unfortunately, Thursday's assault on the province's principal employer and the source of its current prosperity will do nothing to marshal Tories to get out and cast ballots. Energy investors, oil and gas executives, oil service entrepreneurs and even rig workers are disproportionately Tory, and since yesterday's announcement will disproportionately harm their livelihoods they are likely to stay home in droves at the next election.

[wilagro]

Ivbinconned: Lorne Gunter is so full of it most of the time. All of the neighbours that I have spoken to, agree with Stelmach and believe that his plan will work just fine. Such a relief to have that ignorant Ralph Klein OUT (but unfortunately not forgotten), and a sensible man as Premier.

The oil pool that I live over is 3/4 gone and what did we get out of it...practically nothing...but boy did they ever screw up the highways. Costs a fortune to repair them and the wear and tear is constant.

BIG OIL should pay BIG royalties.

[ivbinconned]

Wilagrow...if you owned the mineral rights on your land, would you rlease your claim to the government for the benifit of the government to do with as it pleases??

Render not unto Caesar

Terence Corcoran
Financial Post


Friday, October 05, 2007


Two thousand years ago, the Roman emperor Tiberius, no friend of freedom and under whose reign Jesus Christ was executed, declared the Roman state to be exclusive owner of all mineral rights. Since around that time, just about every government through history has found it convenient to seize ownership of underground mineral rights and extract fat "royalties."

The idea of government ownership of mineral rights -- gold, copper, coal, oil, gas, etc. -- is today so entrenched it is beyond question, even among the extraction industries who pay the royalties. "Render unto Caesar the things which are Caesar's," as Jesus Christ reportedly said before Caesar's underlings orchestrated his execution. Today in Canada, rendering unto Caesar means rendering unto the emperor of Alberta new royalties that would pull another $2-billion into government coffers.

Modern Caesars, of course, have reworked the language, so that the rendering is now supposedly done onto "the people," the citizens and voters for whom the government claims to act as beneficial surrogate. When the Alberta Royalty Review Panel last month recommended a new royalty regime for Alberta oil and gas, it said the resources "belong to the people" and the people are not getting a "fair share" of revenue from their mineral rights.

The review panel's report played this angle to the hilt. Royalties, it claimed, are different from taxes. "When a government designs a tax system, it must justify every dollar or fraction of a dollar it takes away from wage earners and business, because that money belongs to the people who earned it. Alberta's natural resources belong to Albertans, and this is a different proposition. The design of a royalty and tax system for energy resources therefore must justify every dollar that does not go to the owners."

Even Tiberius could have used these guys. So now "every dollar" of revenue from mineral resources belongs to Caesar, and every dollar that Caesar doesn't get must be justified.

Not to make too sensational a point about this, but we have over the centuries moved from Caesarism to communism in resource ownership. It need not be this way. In fact, it isn't always this way, even in Alberta. Private owners, under freehold, own almost 9% of mineral rights in the province. These owners render nothing onto Caesar, although they do pay a special freehold tax.

These freehold lands, the result of the evolution of land allocation through Canadian history, control their own mineral properties. Some freehold land is owned by major corporations, including EnCana and Imperial Oil. Parts of Imperial Oil's original Leduc find were on freehold land that the government had no control over. The government received no royalty payments.

Alberta historian and author James Gray, in his book Troublemaker!, writes that after Imperial found oil at Leduc in 1947, "the lucky farmers who had their oil rights were able to set themselves up for life with the cash bonuses and royalties they got from the oil companies. Across the road, their neighbours on land for which the government retained the mineral rights were lucky to get a few hundred dollars compensation for the damage done by a drilling site on their land."

In earlier days when Canadian governments granted land to homesteaders and others, including the CPR, the owners assumed both surface rights and sub-surface rights. Over time, in Alberta, the government came to control 81% of mineral rights (Ottawa and native bands control the remainder). But governments did not come to own resources by any natural right. They took it -- through legislation, federal-provincial agreement and other means.

Today only 3% of Alberta's oilsands mineral rights are owned by freeholder. If private owners owned 100% of the oilsands, the scale and form of development might today be much different. How different is impossible to say. Without governments trying to manage and direct things, there might be a lot less of it, or maybe a lot more development but through smaller-scale projects.

Under freehold, royalty payments-- if the rights were owned by other than the developer -- would get negotiated on a case-by-case basis. How and if royalties were paid would be a private matter, determined by contract and property rights. It happens all the time in any business and property development. There's no Caesar sitting by claiming ownership and demanding payment.

Public ownership and royalties are a pretext for taxation and political control. The government of Alberta collects no royalties from farmers who grow grains, the raw material for ethanol, on surface land. But the province arbitrarily demands royalties from energy firms that produce oil, the raw material for gasoline, from land underneath the grain field.

The greater sham, however, is the claim of the Alberta review panel that higher royalties are needed to raise the "people's share" of underground mineral resources. On the contrary, the plan will reduce the people's share. If new royalties drive away investment -- which even the panel agrees will happen -- the lost investment and spending -- in the tens of billions of dollars -- will be much greater than the increased royalties collected by government.

Contrary to the review panel's fraudulent claim that "the people" will win, the fact is that the people will lose and the winner will be Caesar.

© National Post 2007