CanPol - Alberta edition

[notyoueither]

For any ideological proponent of privatization there's one of "government development". ****, look at NYE, an Albertan Tory voter, claiming that the government could just develop the oilsands itself.

Why not?

[Asher]

Not sure if that's a joke or you are referring to natural gas?

My dad's company's not leaving Canada...just Alberta. They have operations in BC and are betting huge on NFLD (Hebron, Orphan Basin, Labrador)

[Flubber]

I do not disbelieve either your or Asher's father's credentials.

I do not accept what is said as the gospel though. It's one point of view, and one with a lot of self interest.

My self-interest in the industry is obvious but I am also a taxpayer and citizen so I never forget the realities of needed government revenue, environmental stewardship etc etc.

I actually don't care which industry we are talking about . . . If government is not going to develop a resource itself, it should have clear rules so business can assess the opportunity. Obviously business does not expect that "nothing changes" but things like royalties where there is an obvious business arrangement (set out in contract or legislation) shouldn't be tinkered with lightly-- Obviously governments can change income taxation (but thats a lessor impact since it comes off profits
as opposed to royalties which usually don't care about your op costs or environmental legislation or impose carbon taxes-- There are all sorts of things that governments can and probably should change from time to time to address various issues. Thats life.

But royalties are a fundamental deal between the resource owner and the party that proposes to develop it it. That is all they are -- a business deal--In such a situation my belief is government should stick by its bargain.

It may interest you to know that in conventional plays, freehold mineral owners have typically undercut government with lower rates. Now with sliding scale volume dependent rates they are again being undercut. So private owners of the same resource are willing to take a lower price --hmmmm

[Flubber]

If it had been a proper review -- which it was not -- they would have forseen this. The review, if you actually read it (it's in PDF form online somewhere), essentially said raising the royalty would result in nothing but free money for the province. It was a joke.

It actually was a joke. Right now goverment in Alberta is asking industry to reveal its production profiles and costing for a variety of types of plays with a view to revising the royalty structure. This was the work that should have been done by that first panel (ie understanding the economics of the industry before you tinker with royalties). Maybe this time they will get it right. last time there were whole sections of industry that would have become uneconomic with the new rules. Thats why you are seeing so many ad hoc programs and things like the drilling royalty credits and all sorts of other temporary measures. THose are incentivizing some drilling that would never happen under the new royalty scheme but people are still hesitant since there is yet another review underway (more uncertainty)


Oh and Asher characterizes the report correctly. It is implicit in it that the people assumed the amount of drilling and production would be unaffected by royalty cahnages and that it would be a simple matter of scooping additional revenue for the province

[notyoueither]

They are shopping their share of the project. They're getting out. Totally.

The 2nd expansion of the AOSP was also cancelled as the company refused to invest more in the province. That alone was going to be $15-20B injected into the economy beginning in 2012.

Edit: In July of this year they put the Ells River in situ operation on hold as they couldn't find a buyer for their share of the project, too.

Did someone miss a memo?

http://www.oilweek.com/articles.asp?ID=675

Royal Dutch Shell plc, which was already about halfway into the first 100,000-barrel-per-day expansion of its Athabasca Oil Sands Project (AOSP) when last fall´s credit crisis hit, is the other operator still busy in the sector.

The AOSP expansion, which will take production to about 250,000 barrels per day, includes both a bitumen mine and an upgrader, and is on track for completion by early 2011.

There are a total of about 12,000 workers at the two sites that comprise the AOSP expansion, including about 6,000 at the Jackpine Mine, about 80 kilometres north of Fort McMurray (and 10 kilometres south of Shell´s existing Muskeg River Mine). In addition, there are about 6,000 workers at its upgrader, located adjacent to the existing Scotford refinery near Edmonton.

Shell doesn´t disclose costs, but it too has indicated experiencing substantial cost savings which will reduce the price tag for the expansion, once set at more than $12 billion.

Last year, Shell announced it was postponing AOSP Expansion 2, which would have added another 100,000 barrels per day of production at the Jackpine site.

But it´s still pursuing regulatory approval for that expansion, as well as for another 100,000-barrel-per-day phase, which would take total production to about 470,000 barrels per day.

[Flubber]

Sorry, I was thinking of a different company.

The one involved in gas.

Gas companies obvioulsy have huge plays elsewhere in North America. The discovery of the shales in Texas would have caused a flight of some natural gas capital as most Alberta natural gas plays cannot compete with the economics of such plays. So then you throw a higher royalty burden on the Alberta plays . . . For 100 points NYE what do you think that did to the economics of the Alberta plays?

Oh and for everyone, recession or good times, royalty increases will always have an impact. Companies that are in a jurisdiction make decisions on a project by project basis and either a project (whether a 50 well commitment or a single additional well) meet the hurdles or they do not. Even if natural gas were 12 bucks, there would still be the marginal projects that WILL get done with royalty scheme x but WILL NOT get done with new royalty scheme y. The available capital and people are never unlimited so projects are ranked and capital goes to the best projects.

Again, if your goal is to slow an industry or discourage development until you get a better return (ie higher proces), a royalty increase will do that. But be honest if thats the intent.


Its an interesting thought though-- If capital is fleeing Alberta for more lucrative projects elsewhere, why is it that one would INCREASE the royalty burden in Alberta without thinking that would cause the exit of even more capital??

[Wezil]

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%

I read somewhere that the party wanted to send a message to Stelmach but didn't want to accidentally send too strong a message (as some argue happened to Klein) and torpedo the leader.

[Flubber]

Why not?

Really ???? Thats a whole different thread on whether government should be involved in business. The first fight would be political when they go to give this corp 10 billion dollars to go use-- or would they have to look for a budget allocation each year??

Sorry NYE-- I just don't believe that much in state enterprise-- With my taxpayer hat on , I would much prefer government stay out of the way and rake in those risk-free royalties

[Flubber]

I read somewhere that the party wanted to send a message to Stelmach but didn't want to accidentally send too strong a message (as some argue happened to Klein) and torpedo the leader.

Sounds about right. The Tories are very unhappy. But they don't want to shoot themselves in the foot by admitting publicly (through torpedoing) that steady Ed was a huge mistake.

[Asher]

Did someone miss a memo?

http://www.oilweek.com/articles.asp?ID=675

Royal Dutch Shell plc, which was already about halfway into the first 100,000-barrel-per-day expansion of its Athabasca Oil Sands Project (AOSP) when last fall´s credit crisis hit, is the other operator still busy in the sector.

The AOSP expansion, which will take production to about 250,000 barrels per day, includes both a bitumen mine and an upgrader, and is on track for completion by early 2011.

There are a total of about 12,000 workers at the two sites that comprise the AOSP expansion, including about 6,000 at the Jackpine Mine, about 80 kilometres north of Fort McMurray (and 10 kilometres south of Shell´s existing Muskeg River Mine). In addition, there are about 6,000 workers at its upgrader, located adjacent to the existing Scotford refinery near Edmonton.

Shell doesn´t disclose costs, but it too has indicated experiencing substantial cost savings which will reduce the price tag for the expansion, once set at more than $12 billion.

Last year, Shell announced it was postponing AOSP Expansion 2, which would have added another 100,000 barrels per day of production at the Jackpine site.

But it´s still pursuing regulatory approval for that expansion, as well as for another 100,000-barrel-per-day phase, which would take total production to about 470,000 barrels per day.

Yes, you did. I'm not talking about Shell.

And the 2nd expansion was cancelled. They're still going through the regulatory thing because it doesn't hurt and it's just paperwork and takes time, but that project is dead unless something changes in a big way. The company I'm talking about has pulled out completely, which is the main reason it's shelved (Shell doesn't want to take on the liability...or RISK...all by itself).

[Asher]

http://communities.canada.com/calgaryherald/blogs/insidealberta/default.aspx

Janet Brown, a public opinion research consultant who's carved a reputation for her accurate seat projections, has tabulated a projected seat count in Alberta based on the recent Environics polling numbers that showed the Wildrose Alliance are challenging the Tories provincewide as the favoured party among decided voters.
Her projection found the Progressive Conservatives would hold on to a majority government by a razor-thin margin.
The Environics numbers from the late-October poll found that 34 per cent of decided voters would cast a ballot for Premier Ed Stelmach and his Conservatives if an election were held today, compared to 28 per cent for the fledgling Wildrose Alliance and new leader Danielle Smith.

David Swann's Liberals are in third, with the backing of 20 per cent of voters, followed by Brian Mason's NDP at nine per cent and the recently delisted Green party at eight per cent.

In Calgary, the Wildrose party has surged to first, with 34 per cent backing, followed by the PCs at 30 per cent, Liberals at 20 per cent, and NDP and Greens at eight per cent.

Based on the polling numbers, here's Brown's seat projections:
(click the link for the table, too lazy to format)

[Ben Kenobi]

Thanks Asher.

[Flubber]

I am often suspicious regarding the methodology for translating % of vote into seat numbers. The PCs would have a huge incumbency advantage and (at least at present) a strong part organization in every riding . There are still lots of people that vote for the candidate rather than the party so I would be interested how they translated the vote into seats. I hope/suspect she didn't simply tabulate the poll results on a seat by seat basis sicne they probably wouldn't have enough respondents for statistically sig. results in individual ridings.

So I am am left with the question as to how she does the conversion

[Ben Kenobi]

It depends on methodology. There are all kinds of ways to do it, some better than others.

I would like to see the hard numbers. I was thinking I might do this projections myself and see what I come up with, but I'll have to create the spreadsheet.

What you tend to do is one of two, or some combination of both. 1, rising tide lifts all boats, or 2. vote filling, ie, seats fill according to their voting preferences.

Any interest in a projection?

[Asher]

TheStar.com comment of the day, depicting why, exactly, Alberta hates Toronto.

http://www.thestar.com/news/sciencetech/environment/article/729836--oil-sands-threaten-our-survival-al-gore-warns?bn=1#comments

Buried in the 8+ pages of comments in reply to Al Gore's comments that the Alberta Oil Sands are threatening the existence of our species:

The new deal is to expel Alberta from Canada. The new deal provides benefits for Alberta as well as Canada. Albert no longer needs to worry to share its oil wealth with rest of the Canada. Rest of Canada can get on to tackle the greenhouse gas problem without the obstructions from Alberta. It's like a tough love for a drug addict in the house, you have to send the drug addict away to rehab for cure. Albert is like a drug addict, world community is the rehab, Canadian must have the courage to give the tough love to Alberta and send it to the rehab for cure of drug addict on tar sand

Wow.