CanPol - Alberta edition

[notyoueither]

That's why there's ****ing percentages. It's not like they were charging fixed prices per barrel. The fact is the province got greedy when they noticed the prices going up. That's all there is to it, don't pretend otherwise.



The government is asking for 25% to 40%. Don't lie or mislead any more. This is pathetic enough as it is.

They are demanding a fair price for the oil when compared to other jurisdictions around the world where oil is open to private development.

The focus on gross is due to you claiming how screwed the companies were on getting to payout on investment earlier.

I am not the one misleading. You are the one who did not know how it worked until I dragged it in front of your nose.

[Asher]

They are demanding a fair price for the oil when compared to other jurisdictions around the world where oil is open to private development.

25% is a fair royalty and competitive internationally, as I've already discussed in this thread. It was you that claimed Alberta had the lowest royalty rates in the world. I readily found many rates lower than Alberta's.

I am not the one misleading.

Yes, you are.

The maximum royalty rate is 40%. You tried to imply it was 31%.

40%, by the way, is one of the highest in the world. On top of being THE most expensive place to get oil from.

You are the one who did not know how it worked until I dragged it in front of your nose.

If you go back in this ****ing thread, I'd already explained what you quoted months ago.

[notyoueither]

25% is a fair royalty and competitive internationally, as I've already discussed in this thread. It was you that claimed Alberta had the lowest royalty rates in the world. I readily found many rates lower than Alberta's.

Please share.

I've looked for information on government take. It is not easy to find.

[notyoueither]

Yes, you are.

The maximum royalty rate is 40%. You tried to imply it was 31%.

40%, by the way, is one of the highest in the world. On top of being THE most expensive place to get oil from.

My words

The government is asking for 26% to 31% after project payoff under then realistic oil prices.

Please stop trying to mislead.

[Asher]

You have to be kidding me. WTF are realistic oil prices? What a load of ****. 120 is realistic. It happened!
I'm done. This is futile.

Search this thread for other royalty rates. I already cited some long ago. If you didn't know of the international rates you shouldn't have claimed Alberta had the lowest in the world...

[notyoueither]

How dishonest are you?

Are you seriously claiming that $120 was a realistic projection for the cost of oil in 1990? 1995? 2000? When?

You are *****ing about tax rates set when $60 was a reasonable number being increased when $120 became a possibility, and the rate is scaled with the price.

[notyoueither]

As for how much is fair, who owns it?

[Asher]

How dishonest are you?

$120 is and always was a realistic oil price. The fact that it actually HAPPENED (and went ABOVE $120) really demonstrates this.

Anyone who thought it was impossible should be out of a job. The rapid pace of development of many nations, combined with increased appetite for it out West, and throw in the always-present risk of conflict in the Middle East, etc...there's far too many variables for anyone intelligent to say oil prices will never hit X dollars.

I would agree that $120 would've been improbable over the next "X" decades when viewed from the late 1960s, but to rule it out completely or not take into account very expensive oil was retarded. Don't defend it.

FWIW, this is why oil companies spend so much time doing financial models and risk analysis. They take into account ALL of these possibilities, evaluate likelihood, etc. It really should be easy to see how this sliding-royalty rate system and the increases of up to 900% from the old royalties could really do a number on a lot of the numerical projections...

[Asher]

As for how much is fair, who owns it?

Nice to see you espousing an opinion that markets should be completely unregulated. The owner/merchant will decide what a fair price is and if you want it, you will always pay that price for it.

As for your question: you know what fair would be? The Alberta Government not reneging on their agreement early to try to capitalize on rapidly rising oil prices. It's the only fair thing that could have happened.

If they had waited til the agreement expired and then raised rates for developments, I'd have less qualms about the whole issue. But don't even pretend to be all about fairness here while you are cheerleading the Alberta Government unilaterally changing the terms of an agreement when they had no legal recourse to do so. That's not fair.

[Flubber]

In other words, what you, Flubber, and KH have been on about is a non-event.

.

Two points.

1. What I have been "on about" differs in content and degree from much of what Asher says

2. The royalty change F-up was not a non-event. On the natural gas side, most of the worst of it was rolled back through a series of "temporary incentive" type programs. But even this was mishandled and as you may be aware, the government is now in the midst of a royalty review Again . See quoted bit for some of the incentive stuff

June 25, 2009
Province extends energy incentive programs; moves forward on competitiveness review

Extension timed to support increased drilling activity

Edmonton... The Alberta government will extend two programs announced last March to help keep Albertans working in the province’s energy sector during the current global economic slowdown. Eligibility for the programs will be extended by one year to March 2011.

“Producers need to begin setting budgets for the upcoming drilling season, and we need to provide timely assurance that these programs will be extended,” said Energy Minister Mel Knight. Both programs were originally set to expire in March 2010. This one-year extension provides the certainty needed for oil and gas producers to plan new drilling programs. “Additional drilling results in new, on-going royalty revenues for the province, keeps businesses going and people employed.”

The one-year extension affects the following two previously announced programs:

The drilling royalty credit for qualifying wells. This program provides a $200-per-metre-drilled royalty credit to companies on a sliding scale based on their production levels from 2008.
The new well incentive program. This program offers a maximum five-per-cent royalty rate for the first year of production from new oil or gas wells.
“In these tough economic times and low-price environment, government needs to ensure the industry remains healthy and robust,” Knight added. “When we introduced these programs we said that we would make adjustments if needed. That is what we are doing today. This extension responds to market challenges facing oil and gas exploration in Alberta.”

The province's review of overall competitiveness is expected to be complete by fall of 2009 and will look at all components of conventional operations including regulatory efficiency, fiscal aspects, all aspects of taxation, availability of labour, and other costs. As part of the review government will consult with industry.

An updated list of frequently asked questions about these programs is available on the Alberta Energy website at Energy.Alberta.Ca by clicking on the icon for Alberta’s Royalty Framework and browsing the March 2009 Incentive Program links.

This "competitiveness review" is actually doing the work that SHOULD have been done BEFORE they tinkered with the royalties in the first place. AS for the incentives. They are ok as they did increase drilling a bit (although they give the biggest help to conventional drilling ( with prolific production and rapid decline curves) For things like cbm or shale gas , the production is longer term so much more would come later under higher royalties. (a short term incentive has less impact on overall economics)


I actually fundamentally don't like changing the rules of the game that much during an economic downturn. A short term, date based royalty reduction incentivizes people to bring on their production NOW regardless of the price and favors sharp decline plays. I laugh when I see that a one year extension of an incentive program provides "certainty needed for oil and gas producers to plan new drilling programs." How short -term do they think oil companies plan ?


ON oilsands I think a deal should be a deal. Higher prices mean that everyone shares. For newer projects if the government wants a bigger take, thats their right but as I repeatedly said, it will slow down or kill some projects and government should be honest about this. NYE you will find I said this a few times if you care to look back.

In the original government announcements about Alberta getting "its fair share" the Panel and then the government talked as if royalties existed in a vacuum and that government would simply take a bigger slice of the same size pie. Anyone saying the pie might shrink was "fearmongering' or "threatening" (although the size of the pie is NEVER static) . Well the royalty changes coincided with an economic downturn and the pie shrunk a LOT. BUt in ANY economic conditions, the pie always is larger with lower royalties and smaller with higher royalties . There are always those marginal projects that one negative change in economics can kill. That is fact. It might overall even be good for Alberta if activity levels are relatively high. But for government to SEEM surprised that raising royalty rates will cause some work to go to lower royalty jurisdictions and that Alberta land sale revenues will drop . . . well thats just astonishing. They simply cannot have been so stupid that they were actually shocked but they certainly put on a good show of being befuddled when things slowed down as much as they did.

Thats what I am on about

[Asher]

Terrific article:

http://www.theglobeandmail.com/news/opinions/albertas-one-shot-wonders/article1441308/

Alberta's one-shot wonders

If Wildrose were to knock off the Conservatives, it would join a venerable list of dynasties CP, Glenvow Archives

Its winning parties last a long time, then are lost to oblivion. The Wildrose Alliance must have the Tories shaking in their boots

You get one time around, one roll of the dice, one walk through the garden, one quick look at life. –Michelle Wright

The words of Michelle Wright's love song apply to the unique pattern of Alberta politics. No political party in the province, once turned out of office, has ever come back for a second time around. The Liberals won the first election in 1905 and governed until defeated by the United Farmers of Alberta in 1921. Then Social Credit defeated the United Farmers in 1935. The Progressive Conservatives, who had completely disappeared before being reborn under Peter Lougheed, defeated Social Credit in 1971. And that's all she wrote – at least until recently, when it's started to look as if the Conservatives may be replaced by the upstart Wildrose Alliance Party.

There has never been alternation in office in Alberta, unlike in several other provinces where the Liberals and Conservatives take turns governing. In Alberta, one party governs for a long stretch (36 years for Social Credit, 39 and counting for the Conservatives), then is obliterated by a new party without governing experience.

Explaining this unusual pattern is a cottage industry in Canadian political science. The redoubtable C.B. Macpherson propounded a Marxist theory, but it didn't work because it failed to explain the differences between Alberta and Saskatchewan. My view is that Alberta's singularity is best explained through reference to settlement patterns and political culture, combined with historical accident and path dependency (political science jargon meaning that “one thing leads to another”).

THE AMERICAN INFLUENCE

From the very first settlement, Alberta has been unique in the extent of American influence, especially in the southern part of the province. The early white settlers were ranchers from Montana. Their numbers were later augmented by Mormon farmers and still later by oil-industry workers from across the western states, an influence that continues to this day.

These American immigrants were numerous enough to create a political culture with no particular reverence for the standard Canadian political brands – Liberal and Conservative – inherited from Britain. On the dry and windy plains of southern Alberta, few cared about Gilbert and Sullivan's theory: That every boy and every gal/ That's born into the world alive/ Is either a little Liberal/ Or else a little Conservative!

The strong American influence in southern Alberta furnished ideal soil for the growth of new political options, neither Liberal nor Conservative: Progressivism, whose Alberta provincial wing was the United Farmers; the Co-operative Commonwealth Federation, founded in Calgary in 1932 as an outgrowth of Progressivism; Alberta Social Credit, established by the Calgary radio evangelist William Aberhart; the various parties of Alberta separatism; Preston Manning's Reform Party of Canada; Mel Hurtig's National Party; the Wildrose Alliance. And that is by no means a complete list.

There was a moment when Alberta almost broke with its past to adopt the more common Canadian norm of Liberal-Conservative competition. That was in the early 1990s, when Don Getty's Conservatives got into deep trouble over spiralling budget deficits. Liberal leader Laurence Decore, a former mayor of Edmonton, repositioned his party to the right of Mr. Getty's Conservatives, promising brutal budget cuts to banish the deficit.

Mr. Decore and the Liberals would have won the 1993 election, had the Conservatives not dumped Mr. Getty and chosen former Calgary mayor Ralph Klein to lead them. As it was, the election was close, and it seemed that a new era of Conservative-Liberal competition had arrived. But the Liberals, disappointed at not winning, forced out Mr. Decore. He was followed by a series of Liberal leaders with no idea of how to win.

Today, the Liberals are a niche party in Alberta. They can get 20 per cent to 25 per cent of the vote, but they're not seen as an alternative government. The New Democrats also aren't going to win in this politically conservative province. Ergo, when voters are unhappy with the government, they seek a new alternative.

WHY WILDROSE? WHY NOW?

Actually, the Wildrose Alliance is not entirely new; it has existed in one form or another since 2002. Until recently, it was a further-right niche party, afflicted with the factionalism that so often plagues small parties with no chance of winning. But, suddenly, Wildrose is polling at 39 per cent, compared with 25 per cent for the Conservatives and 24 per cent for the Liberals. Only in Alberta could a party climb so quickly to the top of the polls.

Why now? One explanation is that Wildrose Leader Danielle Smith is photogenic and articulate, and has mainstream appeal (full disclosure: she is also my former student, but that's not where she got her good qualities). Even more important is the mess that Premier Ed Stelmach has made.

Mr. Stelmach likes to say, and it's true, that he has never lost a campaign. He shrewdly figured out how to make the complicated rules of the Conservative leadership race work for him, then went on to win a huge victory in the 2008 general election.

But his performance in government has not matched his campaign achievements: appointing a first cabinet that underrepresented the cities, especially Calgary; awarding MLAs and cabinet ministers a huge salary increase in a secret vote the day before the legislature closed; passing a small reduction while putting out a misleading press release to make the cut seem larger (it worked for only a day); destroying the fabled Alberta Advantage by tearing up contracts and raising royalties, thereby driving oil and gas companies to spend their land-acquisition and drilling budgets elsewhere; trying to pick business winners with government investments, thus reversing another of Ralph Klein's wise policies; merging local health districts into one provincial organization, ostensibly to reduce deficits but actually increasing them; rolling out swine-flu vaccinations without setting priorities, thus leading healthy young men to trample women and children on their way to the needle; failing to curb runaway government spending that had begun in Mr. Klein's latter years. The list goes on and on and on ...

STELMACH FIGHTS BACK

In a recent national poll, Mr. Stelmach received the lowest ranking of all premiers: Only 14 per cent of Alberta respondents viewed him favourably. The public's assessment of his performance has driven a series of highly visible Tory reverses: losing the previously safe riding of Calgary-Glenmore to Wildrose in a by-election; falling precipitously in the polls; and two caucus members crossing the floor to join Wildrose.

Mr. Stelmach and his advisers have come up with a three-step plan to stanch the bleeding. The first was the cabinet shuffle announced last week. The second is a “competitiveness review” to repair the oil and gas royalty structure, although so many patches have already been applied that the perception of instability has become as big a problem as the original revenue grab. The third is the 2010-11 budget, to be brought down in February and rumoured to contain about $2-billion in expenditure cuts, in the hope of setting the province on the path toward balanced budgets.

It's not a bad plan, due largely to political pressure from Wildrose (the prospect of hanging concentrates the mind). But it's an open question whether it will work. It has to be well executed, and this government has not executed very well since taking office. And Mr. Stelmach may simply have lost too much esteem in public opinion to recover.

If the winter recovery plan doesn't work, look for bloody civil war on the right. Wildrose has a leader who performs well in public. She lacks management experience, but she's acquiring that in building her party. Wildrose can probably raise the money it needs, and is rapidly building an organization to challenge the Tories.

Unlike what happened at the federal level, the “fight on the right” will not allow the Liberals to win; they will probably stay confined to their 20-per-cent to 25-per-cent niche, where they wait patiently for patronage when and if their federal cousins return to power. But it could produce a minority legislature, with all the instability that implies.

In a utopian fantasy world, none of this would have to happen. Almost all Wildrose supporters used to vote Conservative. Most Conservatives have no quarrel with Wildrose principles (New Minister of Finance and Enterprise Ted Morton said recently that he's in 90-per-cent agreement with Wildrose). There is, at least for now, far less philosophical disagreement between Alberta Conservatives and Wildrose than existed between the federal Progressive Conservatives and the Canadian Alliance before those two parties engineered their merger.

Conceivably, the Tories could make peace with Wildrose, merging the organizations and holding a new leadership contest. But the Tories affirmed Mr. Stelmach's leadership at last fall's provincial convention, so now what? In the looming battle, the Conservatives have all the advantages of money, personnel, experience and incumbency. But maybe their time is up. Ask Michelle Wright.

Tom Flanagan is professor of political science at the University of Calgary and a former federal Conservative campaign manager.

[notyoueither]

That article is crap. More tomorrow.

[Asher]

So when the media doesn't mention it, it's cause it's not an issue. When they do mention it, it's crap.

[notyoueither]

That article sure analyses the issue, or not.

[Asher]

It doesn't have to analyze the issue. When it gets to be obvious common sense, people just state it as a fact and move on. There's no reason to fixate on stating the obvious.