Alberta Royalty Review = The death of the Alberta oilpatch
 

You can go here to express your concerns with or without sharing your name.

http://www.alberta.ca/home/598.cfm

This will not just hurt the oil and gas industry but every last piece of business in Alberta.

This will cause oil companies to drop drilling activity and in turn will hurt all the services all the way down to hotels restraunts and well even our hobby as people will have less cash in their pockets due to a serious downturn in the econmy.

Go to the site, express your concerns, talk to your MLA.. lets get this thing killed.

Or get some of the billions back fr the greedy Multinationals who profit by raping the land...

-not that I really believe strongly that way, but a review is in order.

I think its about time, it won't change anything, they will still make obscene amounts off of oil, they always do. Alberta's economy needs to slow down anyways. For innumerable reasons. Ever wonder why despite rising costs of everything, labor, production materials etc, oil companies post record earnings every quarter?

The new royalty structure if passed will do the same to Alberta that the NEP did in 1980. Depressed economy soaring interest rates, job losses. This is not a wise move. I don't just say that becuase I am paid by big oil but as a Calgarian and an Albertan I can see the disater looming. Last October we were crushed by the income trust taxation, this october we have the potential to be crushed on the royalty review.

For example, EnCana put out a press release this morning stating that they will cut their 2008 activity by $1 Billion (roughly 30-40% decrease) if the royalty structure is changed. How does this increase revenue to the province of Alberta and it's citizens.

I quote : "The proposed changes will have immediate and long-term impacts on working Albertans. The magnitude of the expected capital reductions is the tip of the iceberg. In the short term, these changes would mean extensive job losses across the industry. There will be fewer wells drilled, completed, pipelined, operated and serviced. There will be fewer hotel bookings, vehicle purchases, landowner lease payments, restaurant meals and lower property taxes in the areas where EnCana operates, and that is just about every corner of Alberta, from the smallest towns to the biggest cities. More importantly and over the long term, well-paying, permanent jobs will not materialize across Alberta."

The full press release can be found here - http://www.encana.com/investors/news...950052710.html


Anyone who thinks this is a good thing for Alberta does not understand all the facts IMHO.

I don't buy into that
 

You'd think that big oil would just close up shop and go somewhere else to get their oil - cheaper.....where would that be?!? Iraq? It is a bit hard there with a civil war. Iran? Haven't started that war yet......

It is not going to dry up the Alberta Oilpatch. Big Oil has made record profits - and it is only fair that it is time to review the royalties paid - they can well afford it. Only thing that would dry up the oilpatch is lack of demand and that would be if the US suddenly figured out another source of energy.

a bit of fearmongering going on methinks.

greedy people like to stay greedy (not people on here, I am meaning the ones in the big chairs...unless YOU are THEY! :( )

Fear mongering from the oil companies? Bah...
I sneezed while flying over the middle east....oil shot up 20 bucks a barrel

Encana thinks quite a lot of themselves does it not. Do you work for Encana? Maybe they should save money instead of building useless skyscrapers. An I Quote!!!

Encana's webpage
Encanas second quarter cash flow exceeds 2.65 BILLION (US) or $3.33 Per share up 55%....

They will be like shell, hire "consultants" to find nice ways of firing people, resulting in skyrocketing shareholder prices and a bonus to the ceo or board of directors, which would have paid the salaries of those laid of for 20 years.

If it were a perfect world this would be a good thing. More money put back into communities and infrastructure. However, in reality it's going to mean less money in the pockets of people and more money wasted by our government as usual.

I actually do work for EnCana as a consultant :)


What will happen is that EnCana will invest their money into other areas, Saskatchewan, British Columbia, Wyoming, Colorado. Wouldn't we rather keep this work in our own province?

They invest where they see profit, they see profit here for a long time, its just a typical industry response when asked to give up more of their money. Every industry does it.

There is already not much profit when gas is at $7MMCF and it costs $6MMCF to produce right now, when the cost now goes up to $6.95MMCF to produce after royalty adjustments it is no longer viable to drill these wells.

This will cause the loss of jobs not only in the energy sector and will do nothing but hurt our economy.

Anyone that is old enough to remember the NEP and what it did to Alberta will be able to talk about job losses and things like people having to sell houses for $1 and walk away from their mortgages. :(

I'll help you find a new job in my hydrogen powered car :0

Personally I think if Encana doesn't like it,they should take a walk.It our oil/gas and if they want it they should be paying us our price.They need our oil more than we need them to drill for it.Any oil/gas company that isn't happy here is welcome to be replaced by one that will be.BTW I'm plenty old enough to remember the end of the last boom,and it was hard for some people,but when we see a 55% rise in profit of an already hugely profitable company,profit made on a resource that is owned by the citizens of the province (myself I think all Canadians should own it, but I don't think it works that way)then its time to spread the wealth.

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

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

My father work out at the caroline gas plant (caroline alberta) he was a higher up there. It's going to run dry a good 20 years before they said it would. But that is the only one he knew of thaat did that. Internal estimates of their resources say they are not going to run out any time soon

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.

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.

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.

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.

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.

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?

What is going to happen to Alberta several decades from now when all the easy and cheap oil and gas has been extracted? There will be thousands and thousands of people out of work, and without the education or training to find work outside the oil industry.

It makes sense to slow down the rate of extraction of the oil and gas from Alberta. First it will mean more efficient and environmentally sound resource extraction. Second it will leave more resources for the future, 40 60 or 80 years from now, when we will appreciate having some oil and gas left, and people in Alberta will still need jobs. Extracting all of the oil and gas as fast as possible might make short-term economic sense for the oil companies but it doesn't make sense for taxpayers, workers, or the environment.

A friend is moving to Fort MacMurray where I am told a dumpy 3-bedroom home costs $600,000.00 and blue-collar workers earn six figure salaries. Any guesses on how much a house in Fort MacMurray will be worth in 20 or 30 years when the jobs are gone. How many people will have sunk their life savings into a house that is now worth less than a hundred grand?

The oil and gas belong to all the people in Alberta and all the people in Canada. They let the oil and gas companies extract it from the ground. It is not the companies' right to do this, it is a privilege we allow them. Of course the government of Alberta should maximize its profits from the resources that belong to the people. By maintaining high royalty rates the government can preserve oil and gas for the future as well as preserving long-term employment for the future rather than a boom-and-bust economy.

I have no connection to the oil industry but I have invested in many of these companies in the past. I can tell you that as corporations, they are simply machines for making money with no other consideration whatsoever for people jobs environment or anything. Any noise these companies make about caring about the economy, caring about jobs, paying attention to the environment etc. is just a smokescreen. They care about money, money, money and nothing else. We should recognize the sociopathic nature of corporations and create strict regulations to use corporations for the public benefit. If corporations do not benefit the public, they should not be allowed to exist at all.

ok well the way i see it is it is a bad thing to have Encana pull out of Ab. does anyone else remember last september/october when Encana cut some where around 5-6 billion out of their exploration budget?

the rig count in september 26 of 06 in alberta was 215 active rigs
then again on september 19 the count was 317 active rigs
one week later 112 rigs shut down.

this year the count is 230 rigs active as of septeber 25
september 18 235 active rigs

we are bairly above the active mark or last year. and antone that works in the patch knows how long and slow this years breakup was. if Encana pulls more money out of the budget then other oil companies will more then likely do the same and then the rig counts will fall even more.

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.
People like to talk about big corporations making $ - hello - that is what being in business is all about. It is easy to sit back and be envious of someone or thing that has more than you and point fingers and say it isn't right - that is human nature. But really think about the money that does get put back in to the communities in the way of jobs, income that supports just about every other business in a lot of communities, large corporate donations that help in a big way hospitals, community organizations and charities of all kinds. I work in the community relations part of the industry and can tell you it is not small $$$ we are talking about.
Whew! rant over for now but I could go on.

1. Please read the exec summary of the royalty report before you comment
2. I think the Journal had commented on that the 1 billion cut from Encanna had already been planned. As the gas side in Alberta is already slowing. Personally you just have to go to Nisku to see all the gas rigs sitting in the yard
3. Corporations make donation for tax purposes...not because of goodwill
4. Alberta is booming...it isn't going to be the Corporation who pays for infrastructure.....royalty taxes will. Don't see any Corp in Fort Mac announcing that they are going to spend profit on a road.
5. Our royalty rules should be reviewed to reflect current conditions

Not quite as simple as govt bad, people good. Who pays for roads, who pays for teachers etc etc. Yes, yes, they waste money but its not that simple. In a perfect world the govt wouldn't spend our money without care and consideration as to where it goes. Also in a perfect world you wouldn't work for a company that is ruining the planet, and I wouldn't drive a car that needed people to ruin the planet. And yes corporations exist for the sole purpose of making money, yeah, basic business 101. But at what price? How far should they be allowed to go? Should One or a group of shareholders be able to dictate laws to govt so it benefits them? There is a reason why the minimum wage is so low, and its not the workers. Should corporations have the same rights as an individual? Should they be allowed to get away with things that the regular folks would go jail for? I dunno about you, but last time i was 2 billion in debt the govt didn't bail me out. How can a business run without making profit for 5 or six years but still gets govt bailouts? Is it simply the govt fault for giving it to them? Should CEO's make millions because they fire people? How much is too much, there is wealth, there is obscene wealth, and then frankly there is ridiculous. Just because you can doesn't mean you should. I truly wish the govt would spend wiser, but study political history around the world and you will notice it doesn't matter the platform or the party the govt will always break the promises it makes to get elected. The Tories are no better than the Liberals who are no better than the NDP, with the slight possibility of the green party being somewhat better, but focusing to exclusively on the environment to the detriment of well everything else. When does the good of all of us outweigh the greed of the bastards?

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

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.

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!

So, the implication is that if the GOA can't manage it well, it should be given away? Kind of a mismanagement fine, with proceeds to big oil? Given the auditor-general's report, we've already been paying that fine for years.

Once the bucks are in the treasury, I've at least got a chance at seeing them spent to my benefit, or to the public good in some way. Please, though, no more ralph-bucks (eddies-readies)?

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.

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.

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.

Within the next 30 years, there won't be any fossil fuel burning vehicles.The price of oil will come down dramatically and the major consumer will be the manufacturing industry. During that time frame,prices will remain steady as any supposed increases in demand will be offset by a global concern to go ''green'' The governnent and oil companies revenues will both fall. Anyone want to hold onto any oil stocks?

3. Yes that is true that one most donation there is a tax benefit - as there is for most individual that make donation to registered charities and societies. So if you make a donation you are only doing it for the tax purposes and not the goodwill? Personally if I make a donation the taxation part of it does not come into play. I happen to know that a lot of it is for goodwill on the part of the corporate world but do not for a moment deny that the tax write off does play a part.


4 Exactly - and those royalty taxes come from who????



5 Yes they should be - and it should reflect current costs and risks. It should also more accurately reflect the current state of affairs in the world or market price of both natural gas and oil.

I am reluctantly wading into this one now against possibly my better judgment..

On the day that the royalty review findings were released, I had the opportunity to meet the Honorable Ed Stelmach briefly as he addressed my company's user group forum, which in the room held many industry players from across North America. You'll be happy to know that I asked him some very tough questions. (I asked him what is the difference between the title "The Honorable" and "The Right Honorable." :lol: Ohhhh Rick Mercer I am not, but I try. .. I try.)

I have to say, he is a stand up guy. He's very likeable in person.

....

Anyhow, I am all for a royalty review. However I am a little concerned about the recommendations. I am not certain if they are a bit of a negotiation tactic, ie. if you ask for "X" but expect to get "half X" and so on. I'm not really sure. For sure, with the price of oil, there's room for ... discussion, shall we say.

Not quite aware of the full details of the recommendations but I have read two reports from financial institutions which are giving advice to investors regarding their projections. These are not the oil companies, these are fund managers. And .. well.. they're quick to point out that the recommendations are not law, but they do say there will be negative impacts. The projections seem to indicate that it's the juniors who will bear the worst brunt of this.

But the comments regarding natural gas ... they are indeed correct. I don't understand how gas already can not be profitable, looking at my heating bill .. but it's true, I have seen first hand that there's no money to be made in natural gas at the moment, in fact, there are companies that are in the red.

So .. while I do favour a review of the royalties, I think that there may be a case for compromise at least in some of the points.

i know first hand as to why it is not feasable to drill for the natural gas that we have here in AB. you have to take into consideration the cost of drilling that well. here is an example of the cost break down of a drilling rig per day.
(this is basedon the last rig that i was on, oh and it was drilling for gas up in zama)

$20,000/day jsut for the rig
$500/day for the loader
$500/day for the crewtruck
$3000/day for the camp(maybe more not 100% sureon this 1)
then there is the crew pay anywhere from 11 -13 guys a week wages from $21-39 dollars/hour + overtime
then there is the rental of the drill collars and pipe adn the cost of the drill bits, anywhere from 2-6 bits of different quality and price range(the most expensive one that i saw was $75,000
then there is the cost of the drilling mud(which if it is a bad whole can cost over a million just for the mud)
and then the cost of all the other rentals(shacks,400 bbl tanks, light plants, 3 sided tanks)
and if it is a directional hole then that costs more too....

and well, when it sells at what?? 6.49 per what ever the measurement is...there is not a lot of profit in the gas sector right now.

Hello everyone. This thread showed up in a google search I have set up to keep an eye on interest in the Royalty Review.
With that in mind I would like to invite anyone interested to the following:


If you have any questions, please feel free to contact me.

Thanks,
Jane Morgan, CFO
Alberta Alliance Party
1-888-262-1888
www.albertaalliance.ca
info@albertaalliance.ca

Wow! A four page pollitical thread in the lounge. Go figure. :lol:

I think the royalty reviews had to be adjusted somewhat.....when it the last time they were increased....when is the last time you got a raise.....everything should go up with the cost of living including the royalty's.... of course...this is just my opinion

I wouldn't call this a political discussion :p Politics usually involve public input, this decision was made by the governement without taking the average Albertan in mind.

I hope all the supporters of the unrealistic royalty hikes enjoy their $400 "Ed bucks" cheque while they are on unemployment after they lose their jobs due to the massive downturn in the industry :p

agreed!!!!!