October 1, 2007 - Auditor General Fred Dunn gives Alberta's royalty tracking system a failing grade, stating that "the principals of transparency and accountability, I believe, were not followed. I'm not impressed" and that "the department's monitoring and technical review findings were communicated to decision-makers. The question is: Did they hear or were they listening? At the end of the day, I don't know, but they chose not to act."
October 2, 2007 - Energy Minister Mel Knight dresses down the Auditor General for criticizing senior government officials.
October 11, 2007 - NDP call for legislation enshrining royalty changes. CBC reports that "Paul Stanway, Stelmach's spokesman, said Thursday that the premier will stick with whatever decision the government makes on the royalty report, and that it's too early to tell if legislation will be necessary."
October 19, 2007 - Premier Ed Stelmach defends the old royalty regime.
October 23, 2007 - Liberal leader Kevin Taft announces that he would increase royalty rates by 20%.
October 25, 2007 - Stelmach proposes changes to the royalty regime, introducing a plan to increase royalties by 20%, or $1.4 billion annually, beginning in 2009. Finally, Albertans will get start getting their fair share... in 2009.
October 26, 2007 - Energy stocks gain value the day after the royalty increase announced. The sky does not fall.
October 28, 2007 - Alberta PC members support royalty increase.
October 30, 2007 - Former Premier Peter Lougheed endorses the royalty increase.
January 2008 - Oil tops $100 per barrel. People lose all perspective and start talking about permanent $180 per barrel oil.
January 23, 2008 - NDP leader Brian Mason hangs out with Sarah Palin in Alaska and likes their royalty system.
February/March 2008 - ... Alberta Election... Stelmach defeats Pierre Trudeau!
October 2008 - Alan Greenspan: capitalism is broken.
November 2008 - Global Economic Crisis continues. Oil prices drop and hover around $50 per barrel. Perspective returns.
November 18, 2008 - The Government of Alberta inks a new royalty deal with Syncrude.
November 19, 2008 - A year after announcing increases to royalties (starting in 2009), Stelmach announces cuts to royalties, putting Alberta in a position to lose $1.8 Billion in revenues over the next five years.
As a friend of mine put it:
"The ever-changing business rules will ultimately hurt the hard working people of my home province, and will tear apart Alberta's international reputation as a good place to do business. At this point, I think the Saudi Arabian government can offer more economic certainty than Premier Stelmach."
I hate to be an "I told you so"er type person, but the mighty oil rich may just dreaming of the better times sooner than later. Super expensive oil will wax and wane, why can no one in the government realize and prepare for the troubling times as well as the good?
ReplyDeleteWell, now it looks like Stelmach & Co. simply pretended to change the royalty rules in order to kick the legs out from under the NDP and ALP on the royalty issue just in time for the election. I guess they were only kidding about that whole "do right by Albertans," thing.
ReplyDeleteI'm sure the wingnuts and Big Oil sycophants in the Wildrose Alliance are thrilled, though.
Like my anonymous friend said, above, leadership on this issue (and others) means preparing for good times even while we're looking at troubling ones.
Well, hate to spoil the fun by inserting, well, facts into the debate, but Syncrude and Suncor already had contracts in place guaranteeing them lower royalty rates to 2015 before the new royalty regime came into play.
ReplyDeleteThe Alberta government - contary to the implication, didn't move rates up and then down again.. what they did is refuse to simply tear up earlier contracts by re-nogiating with Syncrude..
The other two choices were:
a)Completely ignore the earlier contacts, rip them up, an impose the new regime without negotiation; or
b)Leave the royalties at the contracted, lower rates until 2015.
Which of those two choices, Dave, would you have chosen - as clealry, the renegotiation avenue wasn't acceptable?
roblaw, your facts are relevant.
ReplyDeleteBut facts remain the resource royalty rate is still too LOW. If I remember correctly Canada has the lowest OIL extraction royalties in the world, because of Tar Sands special rules. But I guess that does help the Big Oil investment into Alberta in the short term and makes certain political groups very happy. But without sufficient OIL extraction royalties Alberta will not be able to pay for its growing demand for social services let a long have investment into none OIL industry required for its long term future.
The incredibly low OIL extraction royalties is hurting and will hurt Alberta's long term economic stability.
Does anyone seriously believe that if oil goes back up to $100/barrel, royalty rates will go back up again?
ReplyDeleteArt.. read the above again.. royalty rates did not go down due to lowered oil prices.. the royalty deal made with Syncrude was lower than the recent royalty amendments as a compromise between living up to the original lower rate and just ripping it up.
ReplyDeleteAnd - Socially Active.. our royalty rates are not the lowest in the world.. however, it is complicated, because other factors influence royalty rates, including costs of production (ours is higher than Alaska, Australia, Brazil, Algeria, Egypt, Kazachstan, and Lybia.. but lower than Norway and the U.K... our dollar is seen as more volatile than many other countries.. but then the "risk" of production in Alberta is much lower..
To be honest.. I don't know enough to honestly say that we need a better deal or not comparatively speaking.. but, if others on the flip-side politically are honest, they might say they aren't sure either.
What we must do, first and foremost, is to get rid of the Alberta Tories and Stelmach. This is the top priority for any Albertan who loves his or her province.
ReplyDeleteStill looking for a political party to support this month, eh Werner? What's the going rate for your political punditry these days?
ReplyDeleteOn a more serious note, Roblaw is right. Royalties are incredibly complex. You cannot honestly look at royalty rates in isolation without looking at well productivity and costs to bring on wells into production. Some royalty regimes allow full cost payout of wells before climbing to very high royalty rates (but thereby guaranteeing companies their capital back for a successful well). Other juridictions have very low rates, but the well productivity is so low, it still takes years to pay off the capital.
And, just to be clear, Roblaw was referring to Syncrude and Suncor oilsands royalties, not royalties for conventional production.
Notice the creative history, Dave. You insert Taft's pledge to raise royalties before the PC action, and before Stelmach's "defense" of the old system, both completely without proper context. In reality, Taft was clueless before and after the royalty announcement, which in large part contributed to his defeat in the following election. I submit if he would have come out clearly on one side or the other, he would have come out further ahead, certainly further ahead in Calgary. Stelmach's defense of the old system simply amounted to saying it accomplished what it intended to do at the time - stimulate drilling. [note rates during part of Lougheed's time were lower than Klein's... and yet I am certain you would not accuse him of cosying up to Big Oil... a different time, and different prices and costs is the real reason]
And if I recall Lougheed was pretty supportive of Stelmach's decision on royalties (he was often quoted about it), yet I am positive he would not have stuck his head in the sand and ignored financial realities of today, as you seem to suggest be done.
Dave, your old blogger description used to say something to the effect that "my opinions may change over time, I consider that to be the outcome of an open mind"... too bad you never seem to extend the same courtesy to members of gov't.
This chronology is a very helpful post to give people a sense of how the royalty process has developed.
ReplyDeleteI am not so sure of your conclusion about Saudi Arabia being more economically certain than Alberta. They have not updates there reserves estimates since the mid 70's.
Perhaps the ruling family in Saudi Arabia has more assurance of certainty than the indifference to democracy we see from Alberta's citizens.
Reply to Ken Chapman's Nov 21 "Perhaps the ruling family in Saudi Arabia has more assurance of certainty than the indifference to democracy we see from Alberta's citizens."
ReplyDeleteCould you rephrase that, please? I don't understand it. It seems to me that the one thing we may be certain of in Alberta is its citizens' striking indifference to attacks on the democratic ideals they claim to hold dear.
Marnie Tunay
Fakirs Canada
Anonymous, I support anyone who demonstrates clear common sense. Morons are a big no-no, which is why Stelmach has to go and return to his pig farm.
ReplyDelete