Money & Oil - Are Canadians Ripped Off?

[August1991]

I have put this topic in the Federal category because the topic concerns not only Albertans, but all provinces and territories with oil and gas.

At issue are the natural resource rents from producing oil and gas. To give an example, it costs about 50 cents/barrel to take oil from some wells in Saudi Arabia and put it on a ship. With a selling price of about $60 per barrel, there's a hefty mark-up. This profit is referred to as a natural resource rent and it is usually (but not always) captured by government royalties (taxes imposed by the State).

This is the official Albertan government web site:

The Alberta government is committed to ensuring that Albertans continue to receive a fair share of resource revenue through royalties, taxes, bonuses and rental.

In 2003, energy industry investment totaled over $20 billion and supported over 300,000 direct and indirect energy sector jobs in addition to providing royalties of over $7.6 billion – the second highest total ever delivered to Albertans. This means almost one out of every three dollars invested by the province on infrastructure, health care, education, social services, and other programs come from natural resource royalties and fees.

Alberta

It appears that the Albertan government does not impose royalties accurately, and hence it foregoes resource income.

The following is from a Pembina Institute July 2004 Report:

Norway and Alaska consistently obtained a greater portion of the economic rent available to them than most western and northern Canadian regions did. It is interesting to note the trend in Alberta, where the portion of rent captured has been lower in recent years.

One reason that Norway does better is that the State takes an ownbership position in the industry. Curiously, the Norwegian government also imposes a carbon tax on its own oil and gas production.

The Parkland Institute did a study in the 1990s but it did not explicitly calculate rents:

For example, between 1992 and 1997 the Alaska government collected about 1.6 times more in royalties and other fees from each barrel of oil and gas produced than Alberta. During the same period, the Norwegian government collected 2.7 times more per barrel than Alberta.

I think the most damning evidence is this, written by some researcher in the Edmonton Journal:

In 2001-02 Norwegians may realize more than five times more revenue per barrel of oil and gasproduced than Alberta: Cdn. $19.65 for every Norwegian barrel of oil and gas produced versus$3.88 per barrel of Alberta oil and gas produced. If Albertans received the Norwegian rate of returnon their oilsands and natural gas production, $29.2 billion in oil and gas revenues would be flowingto government coffers in 2001-02 or $23.4 billion more than is budgeted.

[Pateris]

There are many reasons why different countries get different amounts from their oil production. This is because of a variation in royalty rate and ownership.

In Norway for instance, the royalty rate is quite high - in addition the national oil company, Statoil, is partly owned by the Norwegian government and it is required to pay some percentage of it's profits into the state's coffers. The regulation of who produces Norwegian oil also ensures production and therefore government revenues.

In Alberta, the royalty rate varies depending on the resource. The royalty rate for natural gas is quite high (thus most of the government surplus comes from gas production). The royalty rate for oil production is lower. And the royalty scheme for oil sands projects is very low (1%) to promote investment in the resource. But the 1% rate only applies until the project capital is paid out. In the case of Syncrude, they will start paying 25% royalty NEXT YEAR. Meaning that the government of Alberta is about to gain even more revenue.

[B. Max]

I wouldn't put much stock in what those two outfits have to say. They are both promoters of big government and the welfare state.

[August1991]

I wouldn't put much stock in what those two outfits have to say. They are both promoters of big government and the welfare state.

<{POST_SNAPBACK}>

I understand that the Parkland Institute has a leftish reputation and I gather the Pembina Institute is concerned about the environment. To be honest though, I had never heard of either until about a week ago. The Pembina study seems well researched to me.

There are many reasons why different countries get different amounts from their oil production. This is because of a variation in royalty rate and ownership.

That is the whole issue, Pateris. It appears the Albertan government is not collecting the royalties it could. This amounts to a gift to someone else - and it is not clear who that someone is.

Let me give you one idea. There may be many small inefficient firms in Alberta competing to make oil money and in effect, they just waste the potential royalties. Evidence elsewhere in the world suggests that is likely what is happening.

I don't know Alberta politics well but it seems that the Conservatives have been in power longer than most Albertans have called themselves Albertans. On one hand, one party states are generally good at collecting resource royalties: eg. Saudi Arabia and the Soviet Union. OTOH, one party states have a tendency to waste the royalties on bizarre schemes that accomplish nothing. Maybe the Albertan government lets small Albertan oil businesses get the money the same way the Saud family gives bedouins a new Toyota pick-up truck every year. In both cases, the money gets wasted.

I would have thought that this question would be front and centre in Albertan politics. While everyone is debating whether Klein should give out $400 cheques, what is unseen is that someone else is likely getting much larger cheques and then, in effect, wrecking brand-new Toyota pick-up trucks by driving them in a sandstorm.

In the case of Syncrude, they will start paying 25% royalty NEXT YEAR. Meaning that the government of Alberta is about to gain even more revenue.

I wasn't aware of this.

[Pateris]

It appears the Albertan government is not collecting the royalties it could.  This amounts to a gift to someone else - and it is not clear who that someone is.

It's actually pretty obvious. Since the government isn't collecting massive royalties as some countries do, the money stays with the petroleum producers, who then use that money to invest in additional facilities or pay it out to their shareholders. Lots of Canadians have made a lot of money in the last couple of years as shareholders of oil companies in their RRSPs.

Back in the 1970s, the Alberta government raised the royalties rates when oil prices were high. This was part of the first boom from 1975-1981. When oil prices collapsed in 1986, the government reduced royalty rates to attract investment. In particular, oil sands projects got the sweet 1% deal to help justify those projects and make them go.

Frmo 19868 to about 1999 the price of oil ranged between $6 and $14. If the government had taken a larger royalty cut, the oil companies would have invested elsewhere in the world and the Alberta economy would have grown more slowly. Now oil prices are very high and the economics of projects is generally good. The Alberta government could raise the royalty rate again, and be truly swimming in money. But the Alberta oil industry still competes with other world projects.

If you have $10 billion to spend, and you can choose an expensive but low risk project in Alberta, versus a less expensive but higher risk project in Africa - the royalty rate in Alberta impacts your economic decision. Since we want the investment in Alberta, we need to make it more attractive than other places in the world. Is the currently royalty rate structure perfect? No. But should we automatically assume we are getting ripped off? No.

If the government of Alberta decided to raise the royalty rates, then they would HAVE to eliminate pretty much all other personal and corporate taxes. How do you think the rest of Canada would act then?

[August1991]

I'm going to resurrect this thread because of this Lougheed quote:

"Think like an owner," Lougheed said in describing how Albertans should behave with the province's natural wealth.

When asked how he would instill the province's heritage in today's 10-year-olds, Lougheed said, "I would explain it as a matter of fairness or unfairness. Why should Alberta and Saskatchewan be penalized? Why should they be treated as second-class provinces?"

When it comes to deciding how much to charge industry for rights to produce Alberta oil and gas, there is no mathematical, impartial formula.

"It was a balance we struck." The cabinet weighed targets for public revenue shares against educated guesses about royalty effects on industry investment and employment. "It was a judgement call," Lougheed said. "Our thinking was, 'What is a fair return?'

"We knew it would fluctuate over time. We thought it would be in a range of 25 per cent to 30 per cent," the former premier recalled.

"The operative words were 'fair' and 'return for the owner.' The key in all this is the owner. This is a sale of a depleting resource that's owned by the people. Once a barrel of oil goes down the pipeline it's gone forever. It's like a farmer selling off his topsoil."

CanWest

I have always thought that we in Canada undervalue our natural resources and we don't receive the royalties we deserve. Lougheed is taking a political view of the problem because he knows that's how to get politicians attention. In fact though, underpricing the resource (setting royalties too low) are an encouragement to waste as there's a gold rush to get the booty first.

In a country such as Canada, there are other problems with incorrect royalties too.

In any case, here's how Klein responds to a review about royalty rates:

But Klein said an internal review involving energy department bureaucrats was undertaken, adding he couldn't care less if it was completed since the current regime is a fair one.

"This is business as usual and there are hundreds of reviews undertaken all the time, every day," Klein said at a Stampede barbecue in the city's northeast.

"I don't know if it was completed or not nor do I give a tinker's damn whether it was completed or not."

He also dismissed the importance of the lack of a paper report for the internal review.

Calgary Sun

Ralph Klein is a fool and Albertans are fools to have elected him premier. If Albertans are rich, it surely isn't due to their electoral prowess. Another idiot like Klein and Alberta may well waste an entire inheritance.

-----

It appears the Albertan government is not collecting the royalties it could. This amounts to a gift to someone else - and it is not clear who that someone is.

It's actually pretty obvious. Since the government isn't collecting massive royalties as some countries do, the money stays with the petroleum producers, who then use that money to invest in additional facilities or pay it out to their shareholders. Lots of Canadians have made a lot of money in the last couple of years as shareholders of oil companies in their RRSPs.

True, when the Albertan government sets royalty rates too low, it is making a gift to anyone involved in the oil business at the expense of anyone who is not. But there is worse. Like anything, if something is underpriced, people tend to waste it. It gets even worse than that. If I parked 10 Lamborghinis on a public street and then announced that the first person to show up can have one for $1000, what do you think would happen?

That's what Alberta does when it sets royalties too low.

[theloniusfleabag]

Dear August1991,

You are an enigma indeed.

In fact though, underpricing the resource (setting royalties too low) are an encouragement to waste as there's a gold rush to get the booty first.

First you claim free enterprise is the best way to distribute wealth, and then you complain that the gov't isn't taking enough...

I have always thought that we in Canada undervalue our natural resources and we don't receive the royalties we deserve

I agree, but this is a communist approach (sharing the value of 'communal' resources), but I was chastized long ago for not being aware that the provinces own their resources.

Ralph Klein is a fool and Albertans are fools to have elected him premier. If Albertans are rich, it surely isn't due to their electoral prowess. Another idiot like Klein and Alberta may well waste an entire inheritance

Ralphie Klein serves 'big business'. He always has, even back when he was Environment Minister (I recall that he gave a huge foreign pulp mill, Diashowa, I believe, a 10 year exemption from meeting environmental dumping/pollution standards because they made lots of money jobs.)

[geoffrey]

Why collect more royalties in a surplus situation? Just leave it for the people that earn it.

It's funny how quickly the conservatives on this board switch to a tax and spend mentality when it comes to oil. Alberta doesn't need the money, why take it? We only pay 10% flat tax on income and no sales tax. What else can we want?

Remember most of your retirement portfolios are currently heavily situation in oil and gas if they are managed by a major bank. I suggest you start supporting the industry.

It benefits no one in the current situation to tax it more... unless your discussing slowing the economy, but that's another, already started, topic.

[Jerry J. Fortin]

I am an Albertan, and I am not involved in the oil patch. But I have my own little opinion on royalty rates.

For openers, our royalty rates are amongst the lowest in the world. Both Norway and Alaska charge lower rates than we do, that is true. But it is a little more expensive to get the oil out of the sand than out of rock or under the water. So the government recognized this and made some changes to the tax regime. That policy has worked to a large degree. To arbitrarily change the regime in place would no go over well with the oil company investors, but we could and probably should negotiate a more equitable distribution of realized profits considering the climb in market price. The oil companies can afford to do this, and the province actually needs to do this, let me tell you why. A large portion of our oil revenue is derived from conventional wells, and their production rates are falling. The known reserves of this type of oil are finite and this is where we get most of our production. The oil companies know this. As our economic position changes they have to realize that our political position will also change. They likely have some shelved plans to deal with this. There is a large price difference between biumen and synthetic oil, and there seems to be some colusion in the market pricing of bitumen. There is a lot more going on the oil patch than what meets the eye. At the moment Albertas are getting about .25 on a barrel of oil from the tar sands.

We also have one of the fastest growing economies in the world, and its all related to tar sands development. We have no provincial debt and no budget deficit. So in dealing with the oil companies they will take a hardline position, and we will need a government with a spine to work with them. The long and the short of it is that we are not getting a sufficient return on investment from this sector. The investment is the tax benefits granted to the companies by the government in the name of the tax paying citizen. This is where the rubber will hit the road and some traction will finally kock in with the public. While Albertans are by and large conservative by nature, and true capitalists to the core, when it comes to government we are strangely enough largely democratic in spirit. The conflict we are about to walk into is one which will pitt democracy verses capitalism to the forefront of our local political agenda. Whether people will want to believe it or not, there is going to be a conflict very shortly over this very subject because citizens want taxes to fall. But unless the oil companies are dealt with this can't happen. Strangely Albertans will find themselves taking a position of individual rights verses capitalistic profit motive because of the impact to the family. It is not as if we will take a hard left, God forbid, but we will take a citizen first approach on a slight libertarian curve. The government being seen as the major culprit, and the oil patch seen as the one caught between a rock and a hard place. Albertans will sympathize with the oil industry and at the same time become more angry with the government.

I will predict that this very issue will cause the demise of the Conservative government in Alberta within the next few years. It could very well create a separatist sentiment in reaction to parlimentary government in Alberta.

[August1991]

Why collect more royalties in a surplus situation? Just leave it for the people that earn it.

It's funny how quickly the conservatives on this board switch to a tax and spend mentality when it comes to oil. Alberta doesn't need the money, why take it? We only pay 10% flat tax on income and no sales tax. What else can we want?

Geoffrey, you probably won't believe me so let me refer you back to the Lougheed quote.

This is not a tax on oil. The Albertan people own the oil in the ground. They are selling the oil for others to take. If the price is too low, then Albertans are not getting fair market value for something they own.

Does this matter? Well, apart from the unfairness, when something is underpriced, alot of people scramble to get a piece of the action before it's all gone. A scramble is rarely a good way to allocate, as economists say, a rare resource.

----

The long and the short of it is that we are not getting a sufficient return on investment from this sector.

Jerry, I sometimes find your posts off the wall but here's an instance where I find your comments have alot of wisdom.

----

Dear August1991,

You are an enigma indeed.

Enigma? My Mom always said I was sweet.

First you claim free enterprise is the best way to distribute wealth, and then you complain that the gov't isn't taking enough...

I don't know if free enterprise is the best way to distribute wealth but I do have a deep appreciation for free markets - given that certain conditions are met. One is that the owner of a resource sells the resource at a "correct" price.

Ralphie Klein serves 'big business'. He always has, even back when he was Environment Minister (I recall that he gave a huge foreign pulp mill, Diashowa, I believe, a 10 year exemption from meeting environmental dumping/pollution standards because they made lots of money jobs.)

The more I learn about Ralph Klein, the more sorry I feel for Albertans.

[stubblejumper]

I would advocate a graduated royalty system based on the market price per bbl.

0-$10- 1%

$10-$20-1.25%

$20-$30- 1.75%

$30-$40- 2.5%

$40-$50-3%

$50-$60-5%

$60-$70-7%

$70-$80-10%

Just an idea ?

[Jerry J. Fortin]

Sliding scale royalties would not be my first choice. Given the choice from my perspective, I would charge the same rate of royalty as the country the company comes from. If you have a US company then I would charge the highest US rate available.

Just charge them what they charge themselves, lets be fair.

[Jerry J. Fortin]

Hey August I am off the wall! I am prone to thinking outside of the box. The same kind of thinking that got us here won't get us out !

[geoffrey]

Geoffrey, you probably won't believe me so let me refer you back to the Lougheed quote.

This is not a tax on oil. The Albertan people own the oil in the ground. They are selling the oil for others to take. If the price is too low, then Albertans are not getting fair market value for something they own.

Does this matter? Well, apart from the unfairness, when something is underpriced, alot of people scramble to get a piece of the action before it's all gone. A scramble is rarely a good way to allocate, as economists say, a rare resource.

Fair enough, I'll agree to some extent. But when it's a government taking the money, to 'sell' our oil, then I'd say the only fair way to raise this 'non-tax' would be if it was all returned in the prosperity cheques (tax cuts don't work, oil might go down again, raising taxes back is political suicide). I'm not going to agree with a government making more money under the guise of protecting my resouce? Maybe individual landowners should gain their own mineral rights and royalities would be no issue?

Sliding scale royalties would not be my first choice. Given the choice from my perspective, I would charge the same rate of royalty as the country the company comes from. If you have a US company then I would charge the highest US rate available.

Just charge them what they charge themselves, lets be fair.

Interesting idea, but borders don't really matter so much in business anymore. I have investment in U.S. companies, can you charge me more for that, even though most of their employment base is in Canada. There are some issues with country of origin taxes... free trade agreements might not like it either.

[Rue]

It certainly is an interesting question August. What I also find timely about your question is that leading into the G8 Summit, Prime Minister Harper, deliberately, with great care and choice in his words, has begun to advocate Canada as an up and coming energy superpower and is deliberately challenging Russia and presenting Canada as an alternative to Russia, when considering investing and obtaining energy supplies.

Most Canadians have missed it in the last few days, but for Harper to directly take on Putin, make a direct criticism of Russia's government monopolization of energy production and present Canada as an alternative to energy sources instead of Russia, if nothing else is amazing. It is a profoundly different approach then the Liberal government of Paul Martin-Jean Chretien which went bowing and scraping to China and other countries like some two bit banana colony looking for investments.

Harper has been selling Canada as a major supplier of natural gas, oil, hydro-electricity and nuclear power. It actually suprises me how he has chosen to tout or advocate Canada as an energy power. Its totally different to what Chretien did.

So Haper's bold and I am telling you very bold approach necessarily will cause a lot of Canadians to question, are we charging enough and will the Europeans and Americans pay us their fair share for energy or do we continue to be a banana republic of the US, and like Alberta's Premier the embarasing drunk Ralph Klein, grovel for American investment, or do what Harper is doing and present ourselves as confident, nd yes brash players in the world market.

I prefer Harper's bold approach to Ralph Klein's or Jean Chretien's butt kissing any day.

[August1991]

Another interesting interview with Peter Lougheed:

PO: I gather you also have concerns about the deferred or forgone royalties to Alberta out of the oil sands.

LOUGHEED: What about the people of Alberta? How do we get our return? Well, we get our return in terms of the conventional oil and gas production as a percentage of gross revenue.

PO: That is, what, a 20 percent royalty?

LOUGHEED: Yes, and when we developed the oil sands, because both the technology and the risk element was higher, in order to get the companies to come together, we had to move to a net profit basis, and it was the right thing to do. We negotiated that and we got Syncrude encouraged enough to move ahead with a major oil sands plan. Suncor was there, but they were smaller, and the net profit approach was the right one, but what does that mean? That means the return to the people of Alberta, who own the resource, and a lot of people in this town have a hard time with the word “ownership.” But the ownership is with the people of Alberta.

...

There is no royalty payment coming from Shell for quite a number of years. That means the people of Alberta, as the owner of the resource, are getting substantially less in the immediate term…maybe 15 years from now they will get it. So what is the hurry? Why not build one plant at a time, and I hope the new government in Alberta will reassess this and come to the conclusion that the mess, and I call it a mess, that is Fort McMurray and the tar sands will be revisited.

PO: Yes, I gather, in human terms, the living conditions in Fort McMurray aren’t very good, and the school and hospital facilities are somewhat inadequate.

LOUGHEED: Very, very poor. I was just up there on a trip, just helicoptering around, and it is just a moonscape. It is wrong in my judgement, a major wrong, and I keep trying to see who the beneficiaries are. Not the people in Red Deer, because everything they have got is costing more. It is not the people of the province, because they are not getting the royalty return that they should be getting, with $75 oil. So it is a major, major federal and provincial issue.

Policy Options

Interesting interview in general.

[geoffrey]

It's suprising that of all people August, you'd advocate a non-market solution.

When an oil company makes more money, we all win with our RRSP's and the such going up in value. Having the government take the money instead of the average Joe isn't a more efficient solution. I'd rather Canadians have more money than the government have more money.

[B. Max]

I have put this topic in the Federal category because the topic concerns not only Albertans, but all provinces and territories with oil and gas.

At issue are the natural resource rents from producing oil and gas. To give an example, it costs about 50 cents/barrel to take oil from some wells in Saudi Arabia and put it on a ship. With a selling price of about $60 per barrel, there's a hefty mark-up. This profit is referred to as a natural resource rent and it is usually (but not always) captured by government royalties (taxes imposed by the State).

I didn't notice this before. This is not an Alberta example. It is a Saudi example. The flow rates aren't even in the same ball park. The government invests nothing to find and produce the oil and gas. They collect the money for nothing, and then waste a lot of it and can't even do what they are suppose to and build roads. The money is far better of in the hands of those who produce the goods and sevices.

[Saturn]

Why collect more royalties in a surplus situation? Just leave it for the people that earn it.

It's funny how quickly the conservatives on this board switch to a tax and spend mentality when it comes to oil. Alberta doesn't need the money, why take it? We only pay 10% flat tax on income and no sales tax. What else can we want?

Remember most of your retirement portfolios are currently heavily situation in oil and gas if they are managed by a major bank. I suggest you start supporting the industry.

It benefits no one in the current situation to tax it more... unless your discussing slowing the economy, but that's another, already started, topic.

It's funny how quickly conservatives switch from "we are going to fight tooth and nail to not give our government a penny" to "we want to hand out billions to foreigners" when it comes to the oil patch.

[Saturn]

It's suprising that of all people August, you'd advocate a non-market solution.

When an oil company makes more money, we all win with our RRSP's and the such going up in value. Having the government take the money instead of the average Joe isn't a more efficient solution. I'd rather Canadians have more money than the government have more money.

By not collecting the royalties you could collect you are effectively ripping off Canadians and handing the money to foreigners. It's very nice of you to be so concerned about those poor Texans.

Hey, you got any properties you want to sell to Texans at half price? I can find you some buyers.

[geoffrey]

By not collecting the royalties you could collect you are effectively ripping off Canadians and handing the money to foreigners. It's very nice of you to be so concerned about those poor Texans.

Hey, you got any properties you want to sell to Texans at half price? I can find you some buyers.

Texans pay market price for our oil. What's your beef?

[August1991]

What's this supposed to mean?

Environment Minister John Baird questioned the wisdom of tax incentives introduced in the 1990s to boost production in Alberta's oilsands, and hinted yesterday the Conservative government might have more to say on the issue when it tables its spring budget.

...

"I cannot explain why the Liberal government of [new leader Stephane] Dion made these changes," Mr. Baird said, speaking in French.

"I'm not here to defend the policies of Stephane Dion and the Liberal party. It was the [Liberal] Cabinet with Stephane Dion that created this program. [Finance Minister Jim] Flaherty is in the middle of listening to the needs of Canadians from coast to coast, and he will present the budget not this morning, but in the coming weeks and months."

Environmentalists, the NDP and Bloc Quebecois have repeatedly called for an end to programs introduced in 1997 -- when Mr. Dion was minister of intergovernmental affairs under Jean Chretien -- that allow oil companies to write off their start-up costs with breaks on taxes and royalties.

While it helped kick-start development in the 1990s, critics say the industry is making record profits and no longer needs government assistance. Opposing parties have frequently assailed the Tories in the House of Commons as friends of the oil industry, despite the fact the tax breaks were put in place by the Liberals well before the Conservatives came to power.

National Post

Do the federal Conservatives plan to increase taxes on Alberta's oil industry?

Or is Baird just being partisan?

And isn't this really an issue for the Albertan government? The royalty gift to the tar sands was a decision in Edmonton not in Ottawa.

Is Stelmach going to sit back and leave this gift in place?

Texans pay market price for our oil. What's your beef?

That's misleading and false. The buyers of oil pay the market price to the owner of exploitation rights, less any royalties.

It is the size of those royalties that is the issue of this thread.

[geoffrey]

Texans pay market price for our oil. What's your beef?

That's misleading and false. The buyers of oil pay the market price to the owner of exploitation rights, less any royalties.

It is the size of those royalties that is the issue of this thread.

No no, the buyers of oil pay the market price.

The company removing the oil gets market price minus royalties in revenue.

The Texans are paying market price. Syncrude, Suncor and anyone else pulling oil out of Alberta are getting the good deal, with which they employ Albertans (and Canadians in general, seriously reducing the burden on social programs back East).

Any profits leaving Canada are subject to a vast array of taxes that are collected Federally and distributed amongst all Canadians.

I also have a hard time with a Federal and Provincial government extending benefits to companies to encourage development of a rather uneconomical resource (most of the time) and then taking them away when times get good. These companies based their financial models and development plans on the government's commitment, you can't go changing the rules half way through the game. It'd be a serious scar in Canada's attractiveness to foreign investment if the government starting inticing people to invest in Canada and then slapping huge unexpected taxes on them once they start making money.

[August1991]

Jeffrey Simpson summarizes well the Alberta Royalty Review Panel report:

It remains an open question in Alberta whether the bozo years will continue, but how the Alberta government reacts to a scathing report into its royalty regime will help answer that question.

The bozo years were characterized politically by indolent leadership, drift, showmanship, unthinking ideology and a persistent lack of vision, all masked by buoyant oil and natural gas revenues. They were also remarkable for the Family Compact that developed between Alberta's energy industry and its government. In exchange for campaign contributions and political support from the oil patch, the Conservatives offered the lowest royalty rates, supportive tax policies and enthusiastic rhetorical endorsement.

The full measure of this mutual back-scratching has just been exposed in almost lurid detail by the Alberta Royal Review Panel that, read properly, condemns just about every policy adopted during the bozo years. Like a great novel, the panel's report opens with a memorable line: "Albertans do not receive their fair share from energy development."

...

The result, said the panel, is shortchanging Albertans by $2-billion a year. Even if the new proposals were adopted, Alberta's take would still remain below that of other jurisdictions - not of Angola or Venezuela or Iran, but of good old right-wing places such as Dick Cheney's Wyoming and George Bush's Texas.

It has bordered on the comical, therefore, to hear the florid rhetoric emanating from some quarters in the oil patch and its tin drummers in the local media. The report's charts destroy these "arguments," since the numbers illustrate that Alberta will remain more than attractive in comparison to other North American sites.

G & M

Too many Albertans (like many on this forum) believe that a government without a deficit or without a debt is a competent government. It just ain't so.

What's truly sad is that Albertans are pissing away their inheritance in the form of subsidies to small, inefficient oil & gas companies. The loss in lower royalty rates is far greater than anything Alberta pays in equalization.

---

Simpson's last paragraph is a good point for all Canadian governments:

Alberta doesn't need to do a Newfoundland and spend a lot of money buying small bits of equity in projects, no bit of which will give the government control. Instead, Alberta can exercise its stewardship as public owner of the resources in a more responsible manner than what occurred under the previous government.

Edited September 25, 2007 by August1991

[August1991]

Stelmach has decided.

Alberta Premier Ed Stelmach announced Thursday that Albertans will get $1.4 billion more in energy royalties by 2010 -- about 25 per cent less than a review panel recommended.

Stelmach made the announcement at a much-anticipated press conference set up to give his response to a provincial review panel's recommendations to increase royalties that oil companies pay to the government.

Stelmach said his government has modified some of the recommendations and rejected others. The review panel had recommended an increase of $2 billion annually.

Stelmach said the $1.4 billion dollar increase is a substantial increase of 20 per cent from the current system of royalties from conventional oil, natural gas and oil sands projects. Under current calculations, royalties from the energy sector will put about $10.5 billion into Alberta coffers. That's about one third of the province's total annual revenues.

The new system "will also be market sensitive," said Stelmach.

"So when oil prices go up, the royalties (will) go up."

CTV

I have a suspicion that the Albertan government is still not capturing all of these resource rents and hence the rents are dissipated in competition between small Albertan oil patch firms. Maybe the Albertan government should simply auction off mineral rights and get out of this business entirely.

Edited October 26, 2007 by August1991