Problem is, Herman, is it diversity or servitude? A meeting of equals or a forum to exalt specail interest? The pandering to Quebec has got out of hand. I think Alberta should rethink what it wants from confederation and present some choices to its electorate.
Should the western provinces seperate from the rest of the country?
- Thread starter china
- Start date
I have an opinion to give which isn't mine, but my husbands. He would like to see B.C. join the U.S. and have a nice continuous land wich would run right up to Alaska.
He has been very disgruntled for years, as Ottawa has not given one iota of interest in our softwood
lumber situation, and now, there is hundreds and hundreds of closed sawmills, and just the other day
another one on north vancouver island, is shutting down for 3 weeks because of, NO LOGS. American
companies have been buying out many of our sawmills, then they ship RAW LOGS into the U.S. to be
processed at their mills there.
The Canadian companies are logging enough logs, but there are not enough for our mills to process,
so it doesn't take a rocket scientist to figure that one out. Our province is being raped of RAW LOGS.
and Ottawa is "just" letting it happen.
HE WANTS OUT, aside from the medical system in the U.S.which he agrees isn't good, he would like to be part of their
country, as our province would thrive much better than it does as part of Canada.
He said he is fed up and feels very disconnected.
So, there you are, very strong feelings, not sure where I stand on this one, have to give it more thought.
He has been very disgruntled for years, as Ottawa has not given one iota of interest in our softwood
lumber situation, and now, there is hundreds and hundreds of closed sawmills, and just the other day
another one on north vancouver island, is shutting down for 3 weeks because of, NO LOGS. American
companies have been buying out many of our sawmills, then they ship RAW LOGS into the U.S. to be
processed at their mills there.
The Canadian companies are logging enough logs, but there are not enough for our mills to process,
so it doesn't take a rocket scientist to figure that one out. Our province is being raped of RAW LOGS.
and Ottawa is "just" letting it happen.
HE WANTS OUT, aside from the medical system in the U.S.which he agrees isn't good, he would like to be part of their
country, as our province would thrive much better than it does as part of Canada.
He said he is fed up and feels very disconnected.
So, there you are, very strong feelings, not sure where I stand on this one, have to give it more thought.
It would be impractical in my opinion...
there's lots of talk about Alberta and what alberta says..
Since when did this country and its People put so much stock into the ramblings of big oil and those who are influenced by it..
I personally am a person of the Wood., protected by the Wood...so are most Canadians whether they know it or not.....Been that way since the start...Why would we get the notion to follow oil???
it seems to me to be more logical to sort out the problems of "pandering" rather than break up and weaken the country as a whole. The same is true of the problem talloola's husband speaks of. It's better to deal with some toughness now than to make an irreparable decision to separate.
Think of it in personal terms. the timescales are shorter but the results are similar:
If i were to buy a car and drive to las vegas and eatand drink and gamble my life would be better in the short term, but soon i'd run out of money and i'd end up stranded in a country I don't want to be in for the rest of my life. short term good long term bad. I think the same applies to separation of ANY of the provinces... although I admit to not knowing much about quebec
Think of it in personal terms. the timescales are shorter but the results are similar:
If i were to buy a car and drive to las vegas and eatand drink and gamble my life would be better in the short term, but soon i'd run out of money and i'd end up stranded in a country I don't want to be in for the rest of my life. short term good long term bad. I think the same applies to separation of ANY of the provinces... although I admit to not knowing much about quebec
SNFU 73
You do realize that Ralph has made it so that a good majority of the money generated by oil in alberta goes out of the country...we should be getting far higher returns on each barrel of oil that goes out.
No , I sill don,t know anything about any money going outside of the country and I,m still waiting for an explanation to the statement you made .Is it that hard?
You do realize that Ralph has made it so that a good majority of the money generated by oil in alberta goes out of the country...we should be getting far higher returns on each barrel of oil that goes out.
No , I sill don,t know anything about any money going outside of the country and I,m still waiting for an explanation to the statement you made .Is it that hard?
Wasn't one of the argument behind the west seperating based on trainloads of goods could come west but sending them back full was not something encouraged. Even shipping wheat was more difficult than it should have been. Cash only was what was preferred.
Even though ever Province and Territory can iniate a reforendum by the people to vote if Canada should exist at any time there are advantages to being as large as we are. Some services can blanket all the land much more ecenomically that 12 seperate agencies. What would change is that each of the 12 different areas should have the same say, not based on who has the most people in one area. Ontario shouldn't be able to influence policy in a Province that have a lesser population simply by that little detail. If the Fed was made up of 12 equal sized parties that answered to the Provincial and Territorial powers the salaries and such that are in place today should be able to be almost elininated completely. The Provinces would have to deal with inter-provincal issues.
Any idea how fast the US would pay off our polititions so we would be assimilated, or at least our resourses. In typical fashion they would take 75% off the top and still make us pay for the infrastructure they use to steal those resourses. Then sell it to the East at a huge mark-up.
How would we ever decide who won on the Plains of Abraham?
Even though ever Province and Territory can iniate a reforendum by the people to vote if Canada should exist at any time there are advantages to being as large as we are. Some services can blanket all the land much more ecenomically that 12 seperate agencies. What would change is that each of the 12 different areas should have the same say, not based on who has the most people in one area. Ontario shouldn't be able to influence policy in a Province that have a lesser population simply by that little detail. If the Fed was made up of 12 equal sized parties that answered to the Provincial and Territorial powers the salaries and such that are in place today should be able to be almost elininated completely. The Provinces would have to deal with inter-provincal issues.
Any idea how fast the US would pay off our polititions so we would be assimilated, or at least our resourses. In typical fashion they would take 75% off the top and still make us pay for the infrastructure they use to steal those resourses. Then sell it to the East at a huge mark-up.
How would we ever decide who won on the Plains of Abraham?
Nope, not hard at all....
Has the Klein government been "giving away" Alberta's oil wealth?
Citizens living in other petroleum-rich jurisdictions enjoy a much bigger share of the pie, says report
EDMONTON - The Alberta government - and by extension all Albertans - has forgone billions of dollars in potential resource revenue over the past decade - revenue that could have been used to finance important public services like health care and education, says a report released by the Parkland Institute today.
The study, entitled Giving Away the Alberta Advantage, shows that the Alberta government now takes in less than half of the revenue per unit of oil and gas produced in the province than the Lougheed government did 15 years ago. Albertans also enjoy a much smaller share of their province's resource wealth than citizens living in other major oil and gas producing regions. For example, the Alaska government collects about 1.6 times as much in royalties and other fees from each barrel of oil and gas produced and the Norwegian government collects 2.7 times as much.
The Parkland study estimates that if the current Alberta government had collected revenue from oil and gas companies at the same rate as the Lougheed government, resource revenue would have been about $3.78 billion higher per year between 1992 and 1997. If royalties and other fees had been assessed at the same rate as Alaska, the Alberta government would have brought in an extra $2.0 billion per year and if they followed the lead of Norway, they would have brought in $5.7 billion more per year.
"If this extra revenue had been collected, the debate over cuts to public services like health care and education would probably been radically different," says Gord Laxer, Executive Director of the Parkland Institute and a professor of political economy at the University of Alberta. "It would appear that the current Alberta government has not been a particularly effective steward of our collectively-owned oil and gas resources."
The report shows that the disparity between resource revenue earned by the government during the Lougheed era and today can be explained by policy decisions made by the government of former premier Don Getty and perpetuated by the current government. During the oil bust of the mid-to-late 80s, the Getty government deliberately reduced royalty rates, taxes and related fees for companies in the oil patch in an effort to encourage investment and job creation.
But even after the market for oil and gas improved in the mid-90s, the Klein government did not return royalties and other fees to the Lougheed-era levels. Instead, the public share of Alberta's oil wealth has continued to decline - even while prices and industry profits soared. The result is that Albertans are now enjoying a much smaller share of their collectively-owned oil and gas wealth than they did 15 years ago - and a much smaller share than citizens living in other oil-rich jurisdictions.
One of the study's most disturbing findings is that the trend towards lower oil and gas revenue in Alberta is expected to continue into the future. In fact, the public share of the province's oil and gas wealth is expected to fall to historic lows - despite the fact that oil prices are strong and production costs are falling.
The biggest threat to future petroleum revenues comes from the current government's approach to collecting royalties from the oilsands - which are fast becoming the engine of Alberta's oil industry. The Parkland study shows that under the recently introduced Generic Royalty Regime, oil sands companies are being allowed to write-off 100 per cent of their capital costs and they won't have to pay any royalties to the government until they have achieved a guaranteed rate of return on their investment. This means that the government and the people of Alberta are assuming most of the risk (in the form of forgone revenues) when it come to the development and operation of oil sands projects while the companies involved reap a healthy guaranteed profit.
As a result of the generic royalty regime, the Parkland study shows that government revenue from the oil sands has already plummeted - from $512 million in 1996 to $63 million in 1998 - and it's expected to fall even further by 2001. In fact, the amount of government revenue generated by the oil sands is expected to drop to $22 million in 2001, despite vast increases in production. To put it another way, the study shows that the public earned an average of $2.93 for every barrel of oil produced from the oil sands in 1996/97 - before the introduction of the new royalty regime. But by 2001 - as a result of the Generic Royalty Regime - government revenue generated by the oil sands is projected to plummet to a meager 8 cents per barrel.
The Parkland study concludes with a call for more transparency and public debate in the setting of royalty rates, taxes and other fees in the oil and gas sector.
"Just as investors receive annual reports from corporations that provide information on their return-on-investment, so should Albertans, as shareholders in natural resource assets, receive an annual account of the returns received from their development," says the report
Here ya go...more for you, China...
n Depth
Robert Sheppard
Reality Check
Is Alberta going broke?
CBC News Online | July 5, 2006
Yes, I know, no one is going to organize a penny drive for a province that just rang up an $8.7-billion surplus, is debt free and is contemplating a second batch of $400 prosperity cheques for every eligible citizen. By most forecasts, Alberta will still lead the country in economic growth this year. Calgary is bulging at the seams, and phenomenal growth in the oilsands and service industries is luring the young and the mobile to Wild Rose Country by the tens of thousands every few months.
Still, there is a problem in the oil patch — in the heavy-oil patch to be precise — and it is big enough that the Alberta government is starting to wonder, when it's not electioneering or trying to choose a new leader, how it's going to pay its bills in the future.
In a nutshell, 2005 was a freak year for government revenues in Alberta. A series of Gulf Coast hurricanes and a hot muggy summer pushed gas and especially oil prices unusually high ($71 US a barrel). But this was, in all likelihood, a last gasp.
Prices are moderating and should continue that downward trend, most analysts say. But that's the least of Alberta's worries. What's more important is that production from so-called conventional oil and gas reserves is dwindling noticeably, and has been for a few years — and with that comes a similar reduction in the up to 40 per cent take the province pockets from royalties on these conventional resources. Resource revenue alone totalled a record $14.3 billion last year, slightly more than half of all government spending.
Alberta Premier Ralph Klein walks by a rear tire of a Caterpillar 777F Off Highway Truck on The National Mall in Washington on June 30, 2006. The truck was part of the Alberta section of the Smithsonian Folklife Festival.(Nick Wass/ Associated Press)
Stepping into the gap, and buoying the current boom, are the many oilsands projects finally kicking into gear, which now account for about a quarter of Alberta's energy production. But from a government revenue perspective, these resources are substantially less valuable. To spur the massive amount of investment needed to dredge tar-like bitumen out of the often frozen earth and transform it into usable fuel, the Ralph Klein government negotiated a new royalty regime in 1996 with the heavy-oil industry, or any producer of unconventional energy resources, requiring only a one per cent royalty on revenues until their capital costs (which tend to continue) are accounted for.
The bottom line: Of the big bundle of resource money that landed in the Klein government's lap last year, only $905 million came from the oilsands and is, as Alberta Liberal Leader Kevin Taft had the temerity to observe, less than the province took in from lotteries.
A structural hitch
Alberta, of course, has stashed some rainy-day money in its Heritage Trust Fund and other accounts, so it is not in immediate danger of running out of cash. (Over the last dozen years it's put away a whopping $26 billion, though looked at another way, that's not quite one year's spending.)
But down the road, the province's revenue picture becomes murkier, because there are three structural components to the box it finds itself in, none of which is easy to change.
The first of these is the oilsands royalty regime, which the province entered into in good faith and doesn't want to be seen as changing in midstream, now that it's lured all this investment (in excess of $45 billion in the oilsands sector alone since 1996).
Under the royalty scheme negotiated in 1996, oilsands operators pay one per cent on any revenue they earn until profits exceed their capital costs. After that, the royalty is supposed to rise to 25 per cent of net revenues, which is more in keeping with traditional royalties, but there is a hitch: Operators can choose, within limits, to pay royalties on either the raw bitumen — which most do because it sells for substantially less — or the upgraded synthetic crude.
A barrel of $50 bitumen earns the province only about a quarter, the Globe and Mail calculated recently. And this looks to be a real concern over the next several years, because as the Canadian Association of Petroleum Producers points out, the oilsands are expected to account for 90 per cent of Alberta's oil production within the next 10 years. (Similar royalty breaks were also extended in the 1990s to what's called unconventional oil and gas production, which is now quickly becoming the norm.)
The oilsands are clearly the engine of economic growth in the province. But (structural obstacle No. 2), Alberta prides itself on not having a provincial sales tax — indeed it's almost an article of faith — so it's only the feds who are collecting GST revenue from those 41,000 new houses being built (and probably distributing it to all those have-not provinces).
Alberta also has (No. 3) the lowest tax regime by far of any province — a flat 10 per cent — something it calls "the Alberta advantage." This is great for luring people to the province and turning them into instant Albertans. But total income tax revenue is expected to rise by only a modest 1.7 per cent this year, despite the huge number of arrivals. Little wonder the province has been trying all these years to keep the lid on health-care and education spending.
What to do?
Klein has ruled out any major revamping of oilsands royalties, a position he seemed to underline when he went to the U.S. capital last week, where a gargantuan oilsands dump truck was parked at the Washington Mall for good measure. But Klein will be leaving by the end of the year and his energy minister, Greg Melchin, has been hinting about trying to do something on the bitumen front, to firm up markets and royalties.
So far, the question of Alberta's revenue future and how to sustain services in an era of declining resource royalties does not seem to have grabbed the spotlight among those running for the Conservative leadership. They have some fiscal breathing room, of course, and they can always pray for another big spike in prices. But for the foreseeable future, the province's share of the resource pie is shrinking.
In the past, Alberta has expected to reap roughly 25 per cent as the province's share of oil and gas revenues. But according to the Calgary Herald, even Alberta Energy has acknowledged that rate has slipped to 19 per cent as of 2004, while other analysts have put it closer to 15 per cent.
With all that's going on, someone is getting rich in the Alberta oil patch these days. Contrary to popular opinion, and last year possibly excepted, it ain't really the provincial treasury.
n Depth
Robert Sheppard
Reality Check
Is Alberta going broke?
CBC News Online | July 5, 2006
Yes, I know, no one is going to organize a penny drive for a province that just rang up an $8.7-billion surplus, is debt free and is contemplating a second batch of $400 prosperity cheques for every eligible citizen. By most forecasts, Alberta will still lead the country in economic growth this year. Calgary is bulging at the seams, and phenomenal growth in the oilsands and service industries is luring the young and the mobile to Wild Rose Country by the tens of thousands every few months.
Still, there is a problem in the oil patch — in the heavy-oil patch to be precise — and it is big enough that the Alberta government is starting to wonder, when it's not electioneering or trying to choose a new leader, how it's going to pay its bills in the future.
In a nutshell, 2005 was a freak year for government revenues in Alberta. A series of Gulf Coast hurricanes and a hot muggy summer pushed gas and especially oil prices unusually high ($71 US a barrel). But this was, in all likelihood, a last gasp.
Prices are moderating and should continue that downward trend, most analysts say. But that's the least of Alberta's worries. What's more important is that production from so-called conventional oil and gas reserves is dwindling noticeably, and has been for a few years — and with that comes a similar reduction in the up to 40 per cent take the province pockets from royalties on these conventional resources. Resource revenue alone totalled a record $14.3 billion last year, slightly more than half of all government spending.
Stepping into the gap, and buoying the current boom, are the many oilsands projects finally kicking into gear, which now account for about a quarter of Alberta's energy production. But from a government revenue perspective, these resources are substantially less valuable. To spur the massive amount of investment needed to dredge tar-like bitumen out of the often frozen earth and transform it into usable fuel, the Ralph Klein government negotiated a new royalty regime in 1996 with the heavy-oil industry, or any producer of unconventional energy resources, requiring only a one per cent royalty on revenues until their capital costs (which tend to continue) are accounted for.
The bottom line: Of the big bundle of resource money that landed in the Klein government's lap last year, only $905 million came from the oilsands and is, as Alberta Liberal Leader Kevin Taft had the temerity to observe, less than the province took in from lotteries.
A structural hitch
Alberta, of course, has stashed some rainy-day money in its Heritage Trust Fund and other accounts, so it is not in immediate danger of running out of cash. (Over the last dozen years it's put away a whopping $26 billion, though looked at another way, that's not quite one year's spending.)
But down the road, the province's revenue picture becomes murkier, because there are three structural components to the box it finds itself in, none of which is easy to change.
The first of these is the oilsands royalty regime, which the province entered into in good faith and doesn't want to be seen as changing in midstream, now that it's lured all this investment (in excess of $45 billion in the oilsands sector alone since 1996).
Under the royalty scheme negotiated in 1996, oilsands operators pay one per cent on any revenue they earn until profits exceed their capital costs. After that, the royalty is supposed to rise to 25 per cent of net revenues, which is more in keeping with traditional royalties, but there is a hitch: Operators can choose, within limits, to pay royalties on either the raw bitumen — which most do because it sells for substantially less — or the upgraded synthetic crude.
A barrel of $50 bitumen earns the province only about a quarter, the Globe and Mail calculated recently. And this looks to be a real concern over the next several years, because as the Canadian Association of Petroleum Producers points out, the oilsands are expected to account for 90 per cent of Alberta's oil production within the next 10 years. (Similar royalty breaks were also extended in the 1990s to what's called unconventional oil and gas production, which is now quickly becoming the norm.)
The oilsands are clearly the engine of economic growth in the province. But (structural obstacle No. 2), Alberta prides itself on not having a provincial sales tax — indeed it's almost an article of faith — so it's only the feds who are collecting GST revenue from those 41,000 new houses being built (and probably distributing it to all those have-not provinces).
Alberta also has (No. 3) the lowest tax regime by far of any province — a flat 10 per cent — something it calls "the Alberta advantage." This is great for luring people to the province and turning them into instant Albertans. But total income tax revenue is expected to rise by only a modest 1.7 per cent this year, despite the huge number of arrivals. Little wonder the province has been trying all these years to keep the lid on health-care and education spending.
What to do?
Klein has ruled out any major revamping of oilsands royalties, a position he seemed to underline when he went to the U.S. capital last week, where a gargantuan oilsands dump truck was parked at the Washington Mall for good measure. But Klein will be leaving by the end of the year and his energy minister, Greg Melchin, has been hinting about trying to do something on the bitumen front, to firm up markets and royalties.
So far, the question of Alberta's revenue future and how to sustain services in an era of declining resource royalties does not seem to have grabbed the spotlight among those running for the Conservative leadership. They have some fiscal breathing room, of course, and they can always pray for another big spike in prices. But for the foreseeable future, the province's share of the resource pie is shrinking.
In the past, Alberta has expected to reap roughly 25 per cent as the province's share of oil and gas revenues. But according to the Calgary Herald, even Alberta Energy has acknowledged that rate has slipped to 19 per cent as of 2004, while other analysts have put it closer to 15 per cent.
With all that's going on, someone is getting rich in the Alberta oil patch these days. Contrary to popular opinion, and last year possibly excepted, it ain't really the provincial treasury.
More reading for China...
HORUS OF VOICES CALLING ROYALTIES REGIME A RIP-OFF GROW LOUDER
Shannon Phillips / shannon@vueweekly.com
Eighty-four per cent of Albertans think the province isn’t collecting enough royalties from our non-renewable resources, according to a May 2006 poll. But the government says their review of the system—which they won’t release to the public—concluded that we’re getting “our fair share” from multinational corporations reaping unprecedented profits.
.
Alberta energy minister Greg Melchin says his department finished a review of the province’s oil royalties last week, but controversy erupted when Conservative leadership candidates Ted Morton and Ed Stelmach told reporters the review was discussed at neither caucus nor cabinet. Morton told the Canadian Press that the exercise had not even begun, saying his understanding was that the review had been shelved pending the expected election.
The energy ministry did not return repeated requests from Vue for information on the review.
NDP leader Brian Mason has since written to the energy minister requesting the parameters of the review, its timeline and its participants.
“Basically, the government is saying that their dog ate the royalty review,” quipped Mason.
“During the last election, the NDP was out on its own, asking for changes to the royalty system. None of the other parties would touch it, as both the Liberals and the Tories depend so heavily on money from the oil and gas sector.
“But now, there seems to be a growing awareness that we’re not getting a fair return on our resources—that’s why the province agreed to this phantom review. Given all the fog around it, we’re simply renewing our call for a public, transparent process.” Alberta’s last royalty review was in 1992, but no significant changes were made. 1997 saw some changes for oil sands producers, but conventional oil and natural gas calculations were designed in the mid-1980s, when oil prices dipped to $10/barrel and the undiversified Alberta economy suffered, with thousands of job losses and a mini-recession.
Oil and gas royalties are not just another form of corporate tax—they’re less like tax deductions on a paycheque and more like the cash paid to a landlord. Policy wonks call the concept economic rent: by law, non-renewable resources belong to Albertans, not to the companies that exploit them. Economic rent is the difference between the value of the resource and the cost of producing the resource, including an allowance for a normal rate of return on investment (profit).
Royalties are calculated in many different ways, so comparisons between different countries, states and provinces are difficult. But the Pembina Institute, an Alberta-based environmental economics think-tank, has demonstrated that Albertans are being grossly shortchanged compared to other jurisdictions.
In 2004, Pembina found that Alaska charged $11.60 per barrel oil royalty, and Norway charged $14.10 per barrel. Alberta charged $4.30 per barrel.
Between 1995 and 2002, Alaska captured almost 100 per cent of the economic rent of the resource, and Norway captured almost 90 per cent. Alberta captured just 50 per cent.
Calgary-based EnCana—one of Canada’s most prolific natural gas producers—is one of the few companies that disclose their average royalty rates. In 2003, EnCana paid an average of 12.9 per cent on the Canadian (mostly Alberta) natural gas they produced. They paid 20 per cent on their US-produced gas.
Low royalties means that Alberta collects the same amount of money from gambling as we do from conventional crude oil ($1.4 billion). Liquor and tobacco taxes significantly outpace oil sands royalty revenue ($1.3 billion on booze and smokes last year compared to $950 million from the tar sands). Add low royalties to the lowest corporate taxes in Canada (reduced this year by another $365 million) and Alberta is by far the most lucrative place in the hemisphere for American oil and gas companies to do business.
The Canadian Association of Petroleum Producers says increasing royalties discourages investment. But that’s not what has happened in countries that have made recent changes to their royalties. Venezuela’s leftist President Hugo Chavez boosted royalties from one per cent to a whopping 30 per cent over the past two years, even charging back-royalties to make up for years of uncollected rent. Foreign investments from Asia—particularly China—have increased. Only Texas-based Exxon-Mobil has refused to play ball.
Mason says a thorough public review of royalties would take the oil and gas industry’s disinvestment claims into careful consideration.
“If the oil and gas industry is saying we’re not going to invest if you raise royalties, and if you look back and see that they were making investments with a third of the profits they are making now, then we need to scrutinize those claims very closely and decide what’s in the public interest,” says Mason.
Tar sands royalties are an entirely different Pandora’s box of complicated calculations. But the basic concept is simple: oil sands developers pay only one per cent royalty until they recover their capital costs—a scheme developed in the early 1980s and reworked in 1997.
The one per cent rule was meant to give oil sands producers a helping hand with big-ticket technology and equipment required to strip mine and refine viscous, sandy tar into a usable final product.
As production costs have declined and profits gone skyward, many observers are saying it’s time for a change—including former Premier Peter Lougheed. The man who first negotiated what the Pembina Institute calls a “sweet deal for companies” called for a moratorium on tar sands development and a renegotiation of royalty rates in early July.
“[Albertans got] $2.85 from a barrel of oil from the oil sands in 1997. They got $1.74 in 2005,” says Amy Taylor, director of ecological fiscal reform at the Pembina Institute.
“Keeping the decade-old royalty regime, designed to jumpstart oil sands production, when [the economy] is overheated, is irresponsible,” says Taylor.
“At the end of the day,” concludes Mason, “the most important thing to remember is that Albertans own these resources, not the oil and gas companies. The smartest thing to do would be to capture an appropriate return on our non-renewable resources so that we can build an economy based on renewables.” V
HORUS OF VOICES CALLING ROYALTIES REGIME A RIP-OFF GROW LOUDER
Shannon Phillips / shannon@vueweekly.com
Eighty-four per cent of Albertans think the province isn’t collecting enough royalties from our non-renewable resources, according to a May 2006 poll. But the government says their review of the system—which they won’t release to the public—concluded that we’re getting “our fair share” from multinational corporations reaping unprecedented profits.
.
Alberta energy minister Greg Melchin says his department finished a review of the province’s oil royalties last week, but controversy erupted when Conservative leadership candidates Ted Morton and Ed Stelmach told reporters the review was discussed at neither caucus nor cabinet. Morton told the Canadian Press that the exercise had not even begun, saying his understanding was that the review had been shelved pending the expected election.
The energy ministry did not return repeated requests from Vue for information on the review.
NDP leader Brian Mason has since written to the energy minister requesting the parameters of the review, its timeline and its participants.
“Basically, the government is saying that their dog ate the royalty review,” quipped Mason.
“During the last election, the NDP was out on its own, asking for changes to the royalty system. None of the other parties would touch it, as both the Liberals and the Tories depend so heavily on money from the oil and gas sector.
“But now, there seems to be a growing awareness that we’re not getting a fair return on our resources—that’s why the province agreed to this phantom review. Given all the fog around it, we’re simply renewing our call for a public, transparent process.” Alberta’s last royalty review was in 1992, but no significant changes were made. 1997 saw some changes for oil sands producers, but conventional oil and natural gas calculations were designed in the mid-1980s, when oil prices dipped to $10/barrel and the undiversified Alberta economy suffered, with thousands of job losses and a mini-recession.
Oil and gas royalties are not just another form of corporate tax—they’re less like tax deductions on a paycheque and more like the cash paid to a landlord. Policy wonks call the concept economic rent: by law, non-renewable resources belong to Albertans, not to the companies that exploit them. Economic rent is the difference between the value of the resource and the cost of producing the resource, including an allowance for a normal rate of return on investment (profit).
Royalties are calculated in many different ways, so comparisons between different countries, states and provinces are difficult. But the Pembina Institute, an Alberta-based environmental economics think-tank, has demonstrated that Albertans are being grossly shortchanged compared to other jurisdictions.
In 2004, Pembina found that Alaska charged $11.60 per barrel oil royalty, and Norway charged $14.10 per barrel. Alberta charged $4.30 per barrel.
Between 1995 and 2002, Alaska captured almost 100 per cent of the economic rent of the resource, and Norway captured almost 90 per cent. Alberta captured just 50 per cent.
Calgary-based EnCana—one of Canada’s most prolific natural gas producers—is one of the few companies that disclose their average royalty rates. In 2003, EnCana paid an average of 12.9 per cent on the Canadian (mostly Alberta) natural gas they produced. They paid 20 per cent on their US-produced gas.
Low royalties means that Alberta collects the same amount of money from gambling as we do from conventional crude oil ($1.4 billion). Liquor and tobacco taxes significantly outpace oil sands royalty revenue ($1.3 billion on booze and smokes last year compared to $950 million from the tar sands). Add low royalties to the lowest corporate taxes in Canada (reduced this year by another $365 million) and Alberta is by far the most lucrative place in the hemisphere for American oil and gas companies to do business.
The Canadian Association of Petroleum Producers says increasing royalties discourages investment. But that’s not what has happened in countries that have made recent changes to their royalties. Venezuela’s leftist President Hugo Chavez boosted royalties from one per cent to a whopping 30 per cent over the past two years, even charging back-royalties to make up for years of uncollected rent. Foreign investments from Asia—particularly China—have increased. Only Texas-based Exxon-Mobil has refused to play ball.
Mason says a thorough public review of royalties would take the oil and gas industry’s disinvestment claims into careful consideration.
“If the oil and gas industry is saying we’re not going to invest if you raise royalties, and if you look back and see that they were making investments with a third of the profits they are making now, then we need to scrutinize those claims very closely and decide what’s in the public interest,” says Mason.
Tar sands royalties are an entirely different Pandora’s box of complicated calculations. But the basic concept is simple: oil sands developers pay only one per cent royalty until they recover their capital costs—a scheme developed in the early 1980s and reworked in 1997.
The one per cent rule was meant to give oil sands producers a helping hand with big-ticket technology and equipment required to strip mine and refine viscous, sandy tar into a usable final product.
As production costs have declined and profits gone skyward, many observers are saying it’s time for a change—including former Premier Peter Lougheed. The man who first negotiated what the Pembina Institute calls a “sweet deal for companies” called for a moratorium on tar sands development and a renegotiation of royalty rates in early July.
“[Albertans got] $2.85 from a barrel of oil from the oil sands in 1997. They got $1.74 in 2005,” says Amy Taylor, director of ecological fiscal reform at the Pembina Institute.
“Keeping the decade-old royalty regime, designed to jumpstart oil sands production, when [the economy] is overheated, is irresponsible,” says Taylor.
“At the end of the day,” concludes Mason, “the most important thing to remember is that Albertans own these resources, not the oil and gas companies. The smartest thing to do would be to capture an appropriate return on our non-renewable resources so that we can build an economy based on renewables.” V
If you would like anymore to read, China, be sure to let me know...I'm happy to provide...there is PLENTY of information out there on this subject if one looks.
Is Hudson's Bay the only body of the world that doesn't have some proven reserves under the waves?
That may or may not be true. The comparison is not an apples to apples comparison though. If royalties are 60% less then what they are in Alaska but costs are 60% more; then both investments are approximately equally competitive. We must remember though that royalties are only low until the capital cost is paid off. This encourages industry to keep investing so that can remain in the lower royalty regime.
snfu 73 ,
If you would like anymore to read, China, be sure to let me know...I'm happy to provide...there is PLENTY of information out there on this subject if one looks.________________________________
Thank You ,I will .
If you would like anymore to read, China, be sure to let me know...I'm happy to provide...there is PLENTY of information out there on this subject if one looks.________________________________
Thank You ,I will .
Quite right Tamarin...
Canadians from the border of Ontario/Manitoba...west have been abused by the Canadian government for generations. The Maritime provinces have been ignored and dumped on by the Canadian government for generations.....
The government of Canada isn't the government of Canada...it's the government of Canada according to the recipie for blackmail and corruption that passes for the government of Quebec...
I think the west should go their own way, and I think Quebec should go their own way too. If high and mighty Ontario is happy with its ridiculous out-of-touch government...and it seems we Ontarians are...we should have the McGuinty Magical Mystery Tour opt for nationhood...independent of all the other provinces...
Canada is a joke that's been sustained by the wealthy to ensure that trade agreements with their American counterparts is honored so that the wealthy can continue to subjugate the rest...
Our government is the instrument of subjugation and when Quebec can call the tune to Ottawa and our elected "representatives" dance to that tune...there isn't really a Canada to speak of in any respect....
Pull the plug and let's hope sanity will return before all the newly created banana republics would be consumed by America...
Mikey, I'm an eastern Ontarian who's spitting angry with Ottawa. I am tired of the special status bestowed on Quebec by the federal government. With the ascension of Mario Dumont to the official opposition in Quebec, we can be sure the province's demands will only increase. Dumont, the grand autonomist, knows there are many purse strings yet to be pulled in Ottawa and he will make sure his province is served first. Harper made sure the resolution on Quebec nationhood passed and the province given the go ahead to act independently at international conferences. Talk about having your cake and eating it too. If the western provinces have any self-respect they will attempt to protect the proceeds of their purse from the blackmail implicit in the Ottawa-Quebec accord.
Well put Mikey
Could'nt agree more on this topic.
Canada is not and never will be a country that treats each province in a fair and equitable manner.
The game is rigged in favour of the "old originals" or the "forefathers" of this confederation.
The western provinces are the "hewers of wood and drawers of water" and they will stay that way just as long as the eastern mandarins can swing it.
Who in there right mind would believe that a province that has clout and power above and beyond its population base (read Quebec) would voluntarily surrender that power and influence?
Hence the west will always pay a little more and get a little less, except for maybe a fond pat on the head from the folks who, after all, really do know what's best for us.
Having said that I really believe that the sum of the parts is greater together than ripped apart.
Alberta of course could be an enormously wealthy little country.
BC would always have a great port and be a tourist destination, it too would be a wealthy little country.
We could possibly join the USA and they probably would love to take us. That thought sends shivers of horror up many a Canadian spine. In the long haul people in Alberta and BC would probably benefit from a slightly higher standard of living if we joined the states.
Cascadia could work as well, but the Cascadian ex-americans would run it and then it would be a kind of rich mini america without the slums.
I dont think western Canadians cars to go down this road.
I think the western provinces should play the seperation card hard and often. It really is there only chance to at least try for an equitable deal with eastern Canada. Perhaps if Quebec really believed there was a risk of the gravy train(Alberta) leaving they would agree to a country that treats each province fairly ,like equitable seats in Ottowa or an elected senate.
Holy crap...that's pretty strong rhetoric. I dunno...I don't think things are as bad as that, however, there does seem to be some issues that need to be resolved with federal and provincial relations. Again though, I don't think Ottawa is really screwing anyone. I think it tries to be fair. I think the bulk of news items cover what goes on between Ottawa and Quebec more because it is a hot topic. There is plenty of federal development elsewhere...again, going back to Alberta, this province would not be in the position it is now in without federal monies. Alberta has not been kicked around or ignored. Alberta has got it's fair share and it has paid off.
Collective wisdom is always better, but we need to be true to ourselves...
We are Canadian, the whole of it, and God made us that way....