CanPol - Alberta edition

[Wezil]

A simple question about the Wild Rose people has led to 6 pages of oil debate.

[Asher]

I can't accept that.

The industry has a dog in the fight and it isn't beyond them to play politics, such as claim that the royalties are why they slowwed drilling when drilling was already slowing due to price.

You won't accept it. It's not politics, it's just dinner table conversation. I'm not a politician, I'm not even living in ****ing Alberta currently. He was telling it like it is.

Anyone who crunches the numbers can see the same conclusion anyway.

[Asher]

A simple question about the Wild Rose people has led to 6 pages of oil debate.

It's still relevant, too.

The royalty debacle was the start Stelmach's demise, at least in Calgary where people are actually aware of how the oil industry works. The good folks in Edmonton are still in ignorance-is-bliss mode, which is why the Tories poll higher there.

[KrazyHorse]

Suck my chocolate starfish.

I am saying that risk has been there since day one, and will always be there.

Any oil company that invested billions on the assumption that the politicians would always be freindly is an idiot.

Right. The assessed future risk of a government "renegotiating" doesn't go up once it's actually done it.

[Wezil]

I can certainly see this debate as on topic for the thread. I'm just surprised.

I should have probed this Edmonton vs Calgary thing earlier...

[notyoueither]

This squirming is bull****, nye.

You responded to my post explaining how expensive and difficult it is to get oil out of Alberta with a comment about how Norway seems to do a good job with getting "difficult to get resources".

You said this.
If you think Norway and Alberta's resources are remotely comparable in terms of cost of recovery, then it just cements my impression that the only thing you know about the oil industry in Alberta is it is the reason why you don't pay any provincial sales tax.

I never said they were the same cost to recover. I don't know exactly what the costs of North Sea oil are

They weren't equal when private industry thought it wise to spend billions on oilsands projects either. Were they flushing money?

[notyoueither]

Logic fail, holy ****.

We wouldn't have gotten a single ****ing dime from royalties without the project. You think taking a reduced amount of royalties while the risky projects invest hundreds of billions of dollars into capital is the province PAYING?

Why yes, yes I do.

The companies took a risk. The risk was the projects would fail. If the risk paid off they would have their plant paid for.

If they didn't want to do the project, in time someone else would have and those people would have enjoyed the payoff.

Alberta would have far less money without Syncrude and Suncor, so the notion that we PAID for their development is patently absurd.

The second does not follow from the first.

[Jon Miller]

Jon, this is seriously a really dumb idea. The timescale on which these projects become profitable is decades. Whoever signs a lease doesn't have the right incentives to develop the resource fully.

You can honestly do better than this. Answer my question about competitive bidding and why there would be a large amount of money left on the table by the government.

Sometimes it isn't the time to sell an asset, because there is no buyers. Or few buyers.

I am getting first hand experience with that now, I have given away a lot of things, and for my major assets will be glad to get 500-1000 less than they are worth. This is because I have to sell now, because I leave the country next week. If I had 2-3 months to sell my stuff, I would get thousands more dollars...

There are many reasons why the government may sell when it isn't an advantageous time to sell:
1. Politicians are commonly short sighted, particularly in democracies. They are looking at what will keep them in power now.
2. Politics are often crooked. They are looking at what can provide advantage to their backers, not to the people who elect them.
3. Ideology, many groups think that the government shouldn't be holding property/companies/etc. As such they will sell, because they think they are suppose to sell, and not necessarily wait until it is an advantageous time to sell.

All three points make the government often much more likely to sell, even when it isn't an advantageous time for them to sell.

So yes, in a perfect market there are few issues. However, in the real world there are rarely perfect markets when you get to a few number of players or the government.

If the profit is expected after 50 years, than there would be a large penalty if the government doesn't renew the lease.

I actually think that all asset buying from the government should be in terms of proposals. Companies submit what they want, what they plan to use it for, and what profits they think they will see when in the proposal. At times when the proposal/lease is renewed, the current situation is compared to the proposal. If much greater profits than the expected are being realized, then that serves as a basis for renegotiation. If fewer profits are being realized, than that can also serve as a basis for renegotiation.

JM

[Flubber]

If Albertans are going to pay the costs of development, why not own the whole show?

Not getting paid a royalty on resource revenues (or getting a small royalty) is not equal to expwending those sums yourself

Do you seriously want a crown corp trying to run an oil business?? Do you find that Canadian crown cops are generally well run businesses

Conceptually I always find the idea to be plausible but in reality crown corps far too often become total cluster****s run by cronies of government and they end up doing all sorts of things for political reasons (ahh- cannot lay off now, an election's coming)-- They tend to become bloated bureacracies encumbered by freedom of information requests, bound up by government red tape and rarely run by business folks.

Hell I already see it in NL where they created a crown corp just to own a piece of equity in their offshore projects. There's more political bullcrap than you can imagine and the copr cannot take a crap without the ok from the premier

[Flubber]

How about this:

Deals are setup for a long term by a government, but they are a lease which are set to be renegotiated every ~10 years. If the negotiations fall through, and the lease is not extended, the government pays a fee (assuming the property has been well cared for/etc).

This eliminates both problems:
1. where a particular government has sold out and not considered future people (or at times even current people) when deciding on the sell price/etc
2. where a company invests a lot into the property and expects at some (much) later time to make a profit, and the government takes away the property after the investment occurs

JM

Wow -- talk about mission impossible-- what fee does the company get for say 15 billion invested in infrastructure that only makes sense if you look at 25 to 30 years for returns

[Flubber]

My father is an exec with one of the oil companies pulling out. One of the last remaining employees winding things down. He managed his company's portion of one of the largest oil sands projects in Alberta, including the financial models.

I don't care if you don't believe me. I think Flubber may be able to back me up, at least with verifying my dad does do what I say he does. He's seen my dad's name on org charts.

yes I worked at Asher's fathers company for about a year so he would have some personal knowledge gleaned from that source. I can also add as someone that works in the industry myself that most of what he is saying is a very accurate assessment of what the oil companies are doing-- They are NOT all flocking to Canada

[Flubber]

Through reduced royalties?

So you pay for a 10 billion dollar development by foregoing 2.4 billion in royalties?

[Asher]

yes I worked at Asher's fathers company for about a year

I had no idea you actually worked there, just thought you were in the industry.

Small world.

[Flubber]

I can't accept that.

The industry has a dog in the fight and it isn't beyond them to play politics, such as claim that the royalties are why they slowed drilling when drilling was already slowing due to price.

Oil companies will play politics no doubt.

But as I said repeatedly. royalty change is the reason there has been a larger impact in Alberta than in BC and sask. You have never addressed that. Do you disbelieve the statement?

Oh and money got moved more into the US as well but that must have been price and recession too since the States of course had neither

[Flubber]

A simple question about the Wild Rose people has led to 6 pages of oil debate.

back to the politicians. Word is that ALL of the PC heavyweights (Dinning,Morton whoever) got up and said that regardless of any concerns "we have to show ourselves as a strong united party"-- Basically it was a direction to vote in support of Stelmach regardless of how you feel. The feeling was that without those shows of support, his vote would have failed to crack 50%