The Canadian Federal Election will probably be October 14th

[Flubber]

Coalition government? It seems that what Wezil is contemplating is far less than a coalition but prhaps much more than a second place party taking the reins of power and merely hoping to have the support of the thrid place party.

Either way, I am not sure how likely the result is.


As for the conservatives, NYE made the point that I think has been around for three elections now. While Conseratives might have far-right elements, they only get elected with support from the centre and that means electing centrist former PCs from those places wheren polituics are a bit left of where they are in Alberta. With that reality Harper will NOT (even in majority situation) have much reason to push a far-right social agenda. I don't even know that he would want to . .. outside any need to placate certain elements of his conservative base. He WOULD NOT want a a high profile defection/desertion from his party over social policy and that would be a quite likely result if he ever tried anything "scary".

Harper's best case seems to be a narrow majority. He knows to govern in the long haul he has to maintain support from centrists. So thats the political realyity IMHO.

Oh ya and add to that the fact that I don't think he would be scary anyway. he's a conservative. To me thats not a dirty word. I might disagree with the Conservatives approach on some issues buit don't see how their opinions are any scarier than those held on the far left-- (or in this electioon by the supposedly centrist Liberals-- but enough about the Green Shaft)

[Fake Boris]

Originally posted by Asher
Anyone want to discuss Layton's shot-in-the-foot policy?

Just as he was starting to make gains at the expense of the centre-left Liberal party, he reminds people he's a died-in-the-wool socialist.

Free money for everyone, $51.6B in more spending to ensure that poverty magically doesn't exist in 2020. Where will all of this money come from? Simple -- he's gonna raise corporate income tax.

Because that won't hurt taxpayers. Corporations will just shrug it and pay it. They won't re-evaluate their operations in Canada, lay people off to deal with the new taxes, curb expansion, and they certainly won't pass on these expenses to consumers. Taxes to corporations are free money in Jack's world.

Indeed, I truly expect oil companies to move away if their taxes are increased to the level of small businesses.

[Asher]

Originally posted by Oncle Boris
Indeed, I truly expect oil companies to move away if their taxes are increased to the level of small businesses.

While you are trying to make a joke, it's not too funny.

Some of them already find the cost of business in Canada too much. Chevron has started divesting itself from development in Alberta to focus on other countries, for instance.

While there's lots of oil here, there's lots of oil elsewhere too. Alberta's government didn't help by raising royalties, it's primarily what drove Chevron away from new projects...higher taxes would be the nail in the coffin.

[Flubber]

Originally posted by Asher

While you are trying to make a joke, it's not too funny.

Some of them already find the cost of business in Canada too much. Chevron has started divesting itself from development in Alberta to focus on other countries, for instance.

While there's lots of oil here, there's lots of oil elsewhere too. Alberta's government didn't help by raising royalties, it's primarily what drove Chevron away from new projects...higher taxes would be the nail in the coffin.

Asher-- as you would likely know- Chevron isn't starting their divesture-- they completed the sale of all of their conventional Canadian assets about 3 years ago-- All they have left in Canada is oilsands, Arctic and offshore and with offshore they just gave up the idea of running the Hebron project, handing off to ExxonMobil, as Chevron felt they could deploy their people to better effect elsewhere.

Heck -- I work for a Canadian based oil company and we are seeing capital being sent elsewhere because we cannot compete effectively

[Flubber]

Originally posted by Oncle Boris


Indeed, I truly expect oil companies to move away if their taxes are increased to the level of small businesses.

Boris-- are you trying to be flippant because tax policy and investment are more complicated. Canada faces a number of challenges as many of the new areas being explored/expoited are far more remote and challenging than new opportunities in other places.

Investment decisions are based on weighted expected rates of return. Into that calculation go a number of factors and contingencies of which taxation is a major one.

Right now these oil companies are the engine of a Alberta economy that is a large part of Canada's reasonalbly good fiscal situation. I think any government should take care before taking any action that could jeapordize this industry

[Asher]

Originally posted by Flubber


Asher-- as you would likely know- Chevron isn't starting their divesture-- they completed the sale of all of their conventional Canadian assets about 3 years ago-- All they have left in Canada is oilsands, Arctic and offshore and with offshore they just gave up the idea of running the Hebron project, handing off to ExxonMobil, as Chevron felt they could deploy their people to better effect elsewhere.

Heck -- I work for a Canadian based oil company and we are seeing capital being sent elsewhere because we cannot compete effectively

Yes, I know they have sold the conventional stuff (which, to be honest, was small beans anyway). They're also exploring getting out of the oilsands as well by selling their interest in projects.

I don't expect Boris to know this, or most of Canada, but they seem to assume you can tax the **** out of oil companies and they'll just have to take it. That's not even close to being the case. Getting oil out of Alberta is ridiculously expensive as it is, upping taxes and royalties is enough to drive them away. And when the drivers of the economy leave, it's not a pretty picture...look at Alberta in the early 80s.

[Victor Galis]

Originally posted by Asher


Yes, I know they have sold the conventional stuff (which, to be honest, was small beans anyway). They're also exploring getting out of the oilsands as well by selling their interest in projects.

I don't expect Boris to know this, or most of Canada, but they seem to assume you can tax the **** out of oil companies and they'll just have to take it. That's not even close to being the case. Getting oil out of Alberta is ridiculously expensive as it is, upping taxes and royalties is enough to drive them away. And when the drivers of the economy leave, it's not a pretty picture...look at Alberta in the early 80s.

Well, you'd probably not have to worry about transfers to other provinces then

But on a more serious note, aren't the tax increases comming from the provincial government which is conservative?

[Asher]

Originally posted by Victor Galis


Well, you'd probably not have to worry about transfers to other provinces then

But on a more serious note, aren't the tax increases comming from the provincial government which is conservative?

No, Alberta increased royalties which caused a lot of controversy at the time. It's not explicitly a tax, but in reality it kind of is.

Harper cut the corporate tax federally, the NDP wants to repeal it then increase it.

[Flubber]

Originally posted by Victor Galis


Well, you'd probably not have to worry about transfers to other provinces then

But on a more serious note, aren't the tax increases comming from the provincial government which is conservative?

AS asher mentioned it was the royalty rates which is the economic rent that oil companies pay to government as the owner of the resource (as a share of the value produced). These rates are due to go up in January of 2009 but the local market has already responded. Some companies are focusing more on Sask and BC and the result has been that the land sales (where companies purchase the rights to explore and exploit hydrocarbons through a bid process) have seen Alberta taking in LESS cash than BC and Sask.

The braniacs who did the royalty report in Alberta seemed to make the same mistake that many do-- They assume that government can take a larger share of the "pie" without materially impacting the overall size of that pie. THis is fundametally untrue.

AS an attempt to increase government revenues, I believe the royalty increase will fail. It will succeed in that government will take a larger proportion of the hydrocarbons that are produced but it will also likely slow activity in the province somewhat. Many might actually applaud a little bit of a slow down.

Time will tell but when Alberta takes an extra percentage off the top compared to a similar well in BC or Saskatchewan, its not hard to tel what it does to the competitive balance


Oh and yes this stuff was all done by a conservative-- Stelmach made the mistake of promising to review royalties and then the further mistake of appointing a high-profile panel. When they reported back with recommendations that would have been a disaster (totally assumed the size of the pie was fixed) he was in a political conumdrum. He eventually agreed to implement "some" of the royalty reforms and satisfied no one. Many thought he sold out to BIGOIL while many more thought he was giving the shaft to the oil industry-- NO matter though as Albertans will still elect him anyway

[notyoueither]

Originally posted by Flubber

AS asher mentioned it was the royalty rates which is the economic rent that oil companies pay to government as the owner of the resource (as a share of the value produced). These rates are due to go up in January of 2009 but the local market has already responded. Some companies are focusing more on Sask and BC and the result has been that the land sales (where companies purchase the rights to explore and exploit hydrocarbons through a bid process) have seen Alberta taking in LESS cash than BC and Sask.

Fine. The Province already sold leases to far more development than the people and existing infrastructure of the province can support anyway.

The braniacs who did the royalty report in Alberta seemed to make the same mistake that many do-- They assume that government can take a larger share of the "pie" without materially impacting the overall size of that pie. THis is fundametally untrue.

What's also untrue is that Albertans were getting anywhere close to a fair share of the wealth as compared to many, or maybe even any, other significant juridictions.

We were getting shafted. Point blank. Royally.

If it takes a state owned, arms length development company to get the development going again when it is needed and there are actually people available to work at building it, fine in my books.

AS an attempt to increase government revenues, I believe the royalty increase will fail. It will succeed in that government will take a larger proportion of the hydrocarbons that are produced but it will also likely slow activity in the province somewhat. Many might actually applaud a little bit of a slow down.

When Timmies and the local super markets are having a hard time getting staff at $13 to $15 an hour, a bit less gold rush is certainly in order.

It's not just the companies that need to hire that have been screwed over by the unrestrained development without a plan unleashed on us by a clueless administration, it's our cities and towns as well. An interchange in Edmonton to fix traffic problems at the intersection of the ring road and the QE2 is costing north of $250 million dollars. To pour concrete and make a couple overpasses in an area less than a square kilometer. A quarter of a billion dollars. These are real dollars now, not northern pesos. 25 followed by seven zeros. Not six zeros. Seven. That's enough to buy the land, and build 1000 nicish single family, detached, dwellings at pre gold rush prices. 1_0_0_0 homes, with land. That's homes to fill up 40 or 50 city blocks, including buying the land. 5_0. City blocks. That's several square kilometers of land, and the buildings. Mutiply by 2 in Regina prior to the boom moving over there. With land.

Have I made the point?

Time will tell but when Alberta takes an extra percentage off the top compared to a similar well in BC or Saskatchewan, its not hard to tel what it does to the competitive balance

Now compare our royalty rates, even increased, to other jurisdictions around the world with oil where the private companies are allowed to play.

As I said, if the oil companies want to play hard ball, threaten to take there balls and go home, **** 'em. Let's see if they all actually do it.

It would not be difficult at all to form and staff the Western Canadian Oil Corporation if and when the pace of development calls for it. Build it, and then privatise it. We would make a killing on the sale, and that's after we set the royalties where they should be compared to Norway, Venezuala, Russia, etc, etc, etc.

Oh and yes this stuff was all done by a conservative-- Stelmach made the mistake of promising to review royalties and then the further mistake of appointing a high-profile panel. When they reported back with recommendations that would have been a disaster (totally assumed the size of the pie was fixed) he was in a political conumdrum. He eventually agreed to implement "some" of the royalty reforms and satisfied no one. Many thought he sold out to BIGOIL while many more thought he was giving the shaft to the oil industry-- NO matter though as Albertans will still elect him anyway

I wouldn't be so sure about that. People in some Calgary office towers may have some ideas. The next election could be very interesting.

[notyoueither]

Come back, Wezil. It's about to get really interesting.

[Fake Boris]

Originally posted by Flubber
Boris-- are you trying to be flippant because tax policy and investment are more complicated. Canada faces a number of challenges as many of the new areas being explored/expoited are far more remote and challenging than new opportunities in other places.

I just don't see the point of giving them a specific tax break. Tax them like normal business.

[notyoueither]

How do you mean 'like normal business?'

[Asher]

Originally posted by Oncle Boris


I just don't see the point of giving them a specific tax break. Tax them like normal business.

WTF are you talking about -- who is talking about specific tax breaks?

I agree with you that industry specific tax breaks as outlined in the Green Shift are unacceptable.

[Flubber]

Originally posted by notyoueither

When Timmies and the local super markets are having a hard time getting staff at $13 to $15 an hour, a bit less gold rush is certainly in order..

I actually don't mind if the government was intentionally trying to slow the pace of development and would actually work . The examples you cite are good reason to attempt just that.

But I read the royalty report and that wasn't mentioned. . Instead the writers seemed to assume that development would be substantially the same regardless of the royalty rate and the result would be more for the coffers of Alberta. This was not true. There are wells and plays that were uneconomic at the new rates.

People forget that regardless of the price of oil, it does remain a competitive business. Oil companies are able or willing to do a finite number of projects at a time.

At my company it is VERY competitive. The guys with a downtown Alberta business unit very much want their projects to go ahead ( and get noticed and earn promotions etc etc) but so do the leads of the business units in BC and Sask. Companies don't make some announcement that they are taking their balls and leaving . . . Instead the math is done and with no great fanfare, some Alberta projects get shelved.At my company I know a number of people that switched business units because they "wanted to be where the action is" etc.

Its actually pretty simple. A company might have the ability to do 600 wells and which get done are just a matetr of how they compete. But don't expect a big cool-down in the Alberta economy as a result of more wells being drilled in BC or Saskatchewan. All the Alberta based service companies will still be every bit as busy and the labour pool will remain as tight as ever. In fact, it might even strain the economy further since a lot of the new plays outside Alberta are in more remote areas so there will be much greater need for construction of roads and infrastructure.

So my bottom line from the royalty changes

1. Less revenues for Alberta in the immediate future
2. probably no slow-down of the Alberta economy if Sask and BC remain hot
3. it does mean that there are more prospective Alberta areas for later that won't be developed now