De-socialize Alberta's oil and gas business?

KC · 08-04-2012, 07:39 PM

Over the years the Alberta government has gotten out of a number of businesses; Alberta Energy, AGT, etc. I believe the view is/was that the government has no business being in business.

So, if you were / are similarly 'right' leaning in your politics, would you agree that Alberta's biggest social program, public ownership of the provinces' vast mineral resources, should be sold off to the highest bidders to take Alberta back to its pioneering roots where these resources were privately owned?

This would immediately put billions of dollars into provincial coffers and eliminate the whole royalty rate setting corporation/jobs subsidy vs. fair market value debate. Just as with AGT, Alberta Energy, etc. sale proceeds could be invested in a diversified portfolio to offset Alberta's boom bust economic swings, spent on infrastructure, education, health care, used to cut taxes, assigned to citizens or any number of other things.

Your thoughts?

Transplanted_Edm · 08-04-2012, 09:13 PM

The model we have in place now is essentially as "free market" as exists in the world.

I think what you are describing really would only have the effect of having a whole bunch of future royalty payments all compressed into a one-time huge payment to the gov't and then nothing at all in the future, with any future costs/profits to the new owner of the resource.

KC · 08-04-2012, 10:19 PM

Yes exactly. There are pockets of free enterprise ownership of mineral rights usually due to ownership before nationalization/socialization took place. It's an academic debate but I like it because it challenges people's preconcieved notions about our economy and the role governments play. I'm tempted to ask those on the hard right if we should privatize our road system. New technologies could soon fully enable user pay billing. It might be a good idea.

As for subsurface resources, in the end you'd have something much like non state-owned surface rights (farms, commercial, industrial properties, etc). Except with pooling, development, extracting and other rights and obligations much as now exists.

Decent discussion here:
http://geology.com/articles/mineral-rights.shtml

moahunter · 09-04-2012, 07:56 AM

Intersting idea, removes the "risk and reward" and puts it in corporpate hands. I see a couple of problems though:

- what happens if the resource is underestimated? For example, if it had been sold 20 years ago before all the new extraction techniques like SAGD became economic.
- what is to stop a government then imposing a tax just as high as the old royalties? I wouldn't risk it if I was a private investor.

Interestingly, I understand some rights are owned in Alberta by freehold owners. Its an historical anomaly from when the province was first settled.

Paul Turnbull · 09-04-2012, 12:59 PM

To be able to sell something you need to know what it's worth. We only have rough estimates of what is there and how much it might be worth. Odds are we'd grossly underestimate the worth and end up with far less money than we get selling it as its extracted now. Not to mention all the minerals we don't know are there yet.

Chmilz · 09-04-2012, 01:10 PM

I prefer the way we do it now. Let private industry take the risks to determine potential, and then the risks to extract, refine, and market the product, while we take a healthy cut as the owners of the resource, plus standard business taxes.

It's a future-proof model this way. If the value of the product goes up or down, our take adjusts automatically. Same thing if new technologies arise, new resources are discovered, or the industry fails; we don't stand to "lose" anything, we keep the remaining resources but don't get any revenue off them, while the company that takes the risk will have taken the real fall.

armin · 09-04-2012, 02:53 PM

I'd rather re socialize it and use the money to make our province actually progressive.

KC · 09-04-2012, 06:57 PM

In the UK
http://www.bgs.ac.uk/mineralsuk/plan...Ownership.html

Paul Turnbull · 09-04-2012, 09:01 PM

So in the UK it appears that mineral ownership is private except for oil/gas, gold, silver, and coal.

KC · 10-04-2012, 12:50 PM

Yeah in the UK I'd guess that the state grabbed anything of any known value at the time.

Blueline · 10-04-2012, 12:59 PM

yeah sorta like Chavez in Venezuela right ........... ?

armin · 10-04-2012, 03:02 PM

Quote:

Originally Posted by Blueline

yeah sorta like Chavez in Venezuela right ........... ?

Chavez's biggest problem is that he wouldn't give his resources up to the oil companies so they made him an enemy, even though he offered to supply poor Americans with cheap oil.

Paul Turnbull · 10-04-2012, 03:28 PM

Quote:

Originally Posted by Blueline

yeah sorta like Chavez in Venezuela right ........... ?

Venezuela's oil industry was nationalized long before Chavez. I think it was in the 70's under an earlier President.

moahunter · 10-04-2012, 03:35 PM

^^Oil companies don't care about him, they just know not to invest on any scale for he will steal the profits and technology. So, he doesn't get the technology to develop his resouces on the type of scale we are. Tough, he can sit on it and let his people suffer, there is plenty of oil in the world today to develop. The places where most development happens aside from locations where it just spills out of the earth, is where the politics are stable and the royalties / taxes reasonable.

Paul Turnbull · 10-04-2012, 03:43 PM

Quote:

Originally Posted by moahunter

^^Oil companies don't care about him, they just know not to invest on any scale for he will steal the profits and technology. So, he doesn't get the technology to develop his resouces on the type of scale we are. Tough, he can sit on it and let his people suffer, there is plenty of oil in the world today to develop. The places where most development happens aside from locations where it just spills out of the earth, is where the politics are stable and the royalties / taxes reasonable.

There are a large number of oil companies partnered with PdVSA to develop the Orinoco Belt. Oil companies follow the money.

moahunter · 10-04-2012, 03:45 PM

^agreed, but they are more careful in Venezuela than in Alberta about the capital they put in.

Paul Turnbull · 10-04-2012, 03:54 PM

Quote:

Originally Posted by moahunter

^agreed, but they are more careful in Venezuela than in Alberta about the capital they put in.

Wise of them.

armin · 10-04-2012, 05:42 PM

They just didn't give up their resources to the economic hitmen. Same as Norway which kept their industry fairly nationalized and is sitting with like 400 billion in the bank.

whynow99 · 10-04-2012, 07:51 PM

IF socializing is in the cards we better make sure these Alberta CONS are not coordinating any of it...........how much money did we Albertans' make off of AGT? It was renamed TELUS and they snuck off leaving us Albertans' with a BILLION dollar AGT debt!! But the CONS just smoothed that over......where are Investigative Reporters at times like this?......oh ya, The Journal would never publish a Reporters column relating to this topic! NOVA got out of NovaTel before TELUS snuck off with our money, AND a luxury Motorhome I understand was never sought after or found........similar to the Pocklington money the CONS gave him for opening a Packing Plant in Southern Alberta.....$15 million dollars he probably just sent down to his US bank account.......then every few years we hear something about how the CONS are chasing after him to collect! NO WONDER OUR PETROLEUM SURPLUSES JUST SEEM TO EVAPORATE.

KC · 12-04-2012, 06:29 AM

Quote:

Originally Posted by armin

They just didn't give up their resources to the economic hitmen. Same as Norway which kept their industry fairly nationalized and is sitting with like 400 billion in the bank.

...and Alaska Too.

Norway's fund is about $600 billion now.

So if it can just earn 10%, that's $60 billion a year. I think that's what Peter Lougheed originally visioned for Alberta.

Norway’s different approach to oil and gas development
http://www.arcticgas.gov/norway’s-di...as-development

Excerpt:
..."About one-third of Alaska's oil and gas revenues come from its royalty slice of production by private companies on state lands and waters. Norway doesn't take a royalty share of its oil and gas production. Instead, Norway makes all of its money by taxing the producers' profit - plus taking a substantial equity share in many projects, plus earning stock dividends from a government-controlled oil and gas company.

In another difference from Alaska, Norway doesn't award its oil and gas leases to the highest bidder. Rather, it awards leases to what the government determines is the best bidder, based on the company's experience, expertise and work plan to develop the field.

And unlike Alaska, which saves only a portion of its oil and gas revenues in its nearly $40 billion Permanent Fund and does nothing with the fund's investment profits but pay dividends to individual Alaskans, Norway deposits 100 percent of its oil and gas revenues into its sovereign wealth fund - worth about $540 billion as of late last month. It then withdraws an average of 4 percent a year to help pay for public services.

Almost three dozen Alaskans - legislators, state and municipal officials and private-sector representatives - learned the differences between Alaska's and Norway's fiscal regimes during a week-long Norway tour and meetings with government and oil industry officials Aug. 28 - Sept. 3. The Anchorage-based Institute of the North organized the sessions.

Norway, a nation of just under 5 million people, once used a royalty system to take a share of oil and gas wealth but phased it out because the government decided a profits-based tax would work better than a gross-based royalty at aligning the state's interests and the companies' interests, said a tax official with the Ministry of Finance..."

.

ajs · 12-04-2012, 10:17 AM

Norway also benefits because their sovereign fund is not available to the political party in power to use as needed for government spending when political fortunes begin to wane.

whynow99 · 12-04-2012, 10:42 AM

You get what you pay for in journalism now.

You barely even looked into what his claims are. For example did you know that legislation in Canada needs to created to protect people that live outside of our country? Because mining companies are affecting their environment? Labour rights are being violated? Indigenous people that live off the land are being pushed around and even murdered? Just google (before Harper puts restrictions on YOUR internet) Canadian mining companies in Latin America.

Harper is giving industry a free game... and Castro is embarrassing him. Note he says: HARPER's ILLUSIONS not CANADA'S.

08-04-2012, 07:39 PM	#1
KC Addicted to C2E Join Date: Mar 2006	De-socialize Alberta's oil and gas business? Over the years the Alberta government has gotten out of a number of businesses; Alberta Energy, AGT, etc. I believe the view is/was that the government has no business being in business. So, if you were / are similarly 'right' leaning in your politics, would you agree that Alberta's biggest social program, public ownership of the provinces' vast mineral resources, should be sold off to the highest bidders to take Alberta back to its pioneering roots where these resources were privately owned? This would immediately put billions of dollars into provincial coffers and eliminate the whole royalty rate setting corporation/jobs subsidy vs. fair market value debate. Just as with AGT, Alberta Energy, etc. sale proceeds could be invested in a diversified portfolio to offset Alberta's boom bust economic swings, spent on infrastructure, education, health care, used to cut taxes, assigned to citizens or any number of other things. Your thoughts?

08-04-2012, 10:19 PM	#3
KC Addicted to C2E Join Date: Mar 2006	Yes exactly. There are pockets of free enterprise ownership of mineral rights usually due to ownership before nationalization/socialization took place. It's an academic debate but I like it because it challenges people's preconcieved notions about our economy and the role governments play. I'm tempted to ask those on the hard right if we should privatize our road system. New technologies could soon fully enable user pay billing. It might be a good idea. As for subsurface resources, in the end you'd have something much like non state-owned surface rights (farms, commercial, industrial properties, etc). Except with pooling, development, extracting and other rights and obligations much as now exists. Decent discussion here: http://geology.com/articles/mineral-rights.shtml Last edited by KC; 08-04-2012 at 10:39 PM..

09-04-2012, 12:59 PM	#5
Paul Turnbull Addicted to C2E Join Date: Feb 2009 Location: Westmount, Edmonton	To be able to sell something you need to know what it's worth. We only have rough estimates of what is there and how much it might be worth. Odds are we'd grossly underestimate the worth and end up with far less money than we get selling it as its extracted now. Not to mention all the minerals we don't know are there yet. __________________ twitter.com/chigaze

09-04-2012, 01:10 PM	#6
Chmilz Addicted to C2E Join Date: Jan 2009	I prefer the way we do it now. Let private industry take the risks to determine potential, and then the risks to extract, refine, and market the product, while we take a healthy cut as the owners of the resource, plus standard business taxes. It's a future-proof model this way. If the value of the product goes up or down, our take adjusts automatically. Same thing if new technologies arise, new resources are discovered, or the industry fails; we don't stand to "lose" anything, we keep the remaining resources but don't get any revenue off them, while the company that takes the risk will have taken the real fall. __________________ "Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal

09-04-2012, 09:01 PM	#9
Paul Turnbull Addicted to C2E Join Date: Feb 2009 Location: Westmount, Edmonton	So in the UK it appears that mineral ownership is private except for oil/gas, gold, silver, and coal. __________________ twitter.com/chigaze

08-04-2012, 09:13 PM	#2
Transplanted_Edm Addicted to C2E Join Date: May 2008	The model we have in place now is essentially as "free market" as exists in the world. I think what you are describing really would only have the effect of having a whole bunch of future royalty payments all compressed into a one-time huge payment to the gov't and then nothing at all in the future, with any future costs/profits to the new owner of the resource.

09-04-2012, 07:56 AM	#4
moahunter Addicted to C2E Join Date: May 2007 Location: Edmonton, Alberta	Intersting idea, removes the "risk and reward" and puts it in corporpate hands. I see a couple of problems though: - what happens if the resource is underestimated? For example, if it had been sold 20 years ago before all the new extraction techniques like SAGD became economic. - what is to stop a government then imposing a tax just as high as the old royalties? I wouldn't risk it if I was a private investor. Interestingly, I understand some rights are owned in Alberta by freehold owners. Its an historical anomaly from when the province was first settled.

09-04-2012, 02:53 PM	#7
armin Addicted to C2E Join Date: Oct 2008	I'd rather re socialize it and use the money to make our province actually progressive.

09-04-2012, 06:57 PM	#8
KC Addicted to C2E Join Date: Mar 2006	In the UK http://www.bgs.ac.uk/mineralsuk/plan...Ownership.html

10-04-2012, 12:50 PM	#10
KC Addicted to C2E Join Date: Mar 2006	Yeah in the UK I'd guess that the state grabbed anything of any known value at the time.

10-04-2012, 12:59 PM	#11
Blueline Addicted to C2E Join Date: Jan 2007 Location: Edmonton	yeah sorta like Chavez in Venezuela right ........... ? __________________ Still waiting for the Arlington site to be reborn .......

10-04-2012, 03:35 PM	#14
moahunter Addicted to C2E Join Date: May 2007 Location: Edmonton, Alberta	^^Oil companies don't care about him, they just know not to invest on any scale for he will steal the profits and technology. So, he doesn't get the technology to develop his resouces on the type of scale we are. Tough, he can sit on it and let his people suffer, there is plenty of oil in the world today to develop. The places where most development happens aside from locations where it just spills out of the earth, is where the politics are stable and the royalties / taxes reasonable. Last edited by moahunter; 10-04-2012 at 03:37 PM..

10-04-2012, 03:45 PM	#16
moahunter Addicted to C2E Join Date: May 2007 Location: Edmonton, Alberta	^agreed, but they are more careful in Venezuela than in Alberta about the capital they put in.

10-04-2012, 05:42 PM	#18
armin Addicted to C2E Join Date: Oct 2008	They just didn't give up their resources to the economic hitmen. Same as Norway which kept their industry fairly nationalized and is sitting with like 400 billion in the bank.

10-04-2012, 07:51 PM	#19
whynow99 Partially Addicted to C2E Join Date: Apr 2009	IF socializing is in the cards we better make sure these Alberta CONS are not coordinating any of it...........how much money did we Albertans' make off of AGT? It was renamed TELUS and they snuck off leaving us Albertans' with a BILLION dollar AGT debt!! But the CONS just smoothed that over......where are Investigative Reporters at times like this?......oh ya, The Journal would never publish a Reporters column relating to this topic! NOVA got out of NovaTel before TELUS snuck off with our money, AND a luxury Motorhome I understand was never sought after or found........similar to the Pocklington money the CONS gave him for opening a Packing Plant in Southern Alberta.....$15 million dollars he probably just sent down to his US bank account.......then every few years we hear something about how the CONS are chasing after him to collect! NO WONDER OUR PETROLEUM SURPLUSES JUST SEEM TO EVAPORATE. __________________ Dave Rutherford is a small, small person....sucking up to get a Government appointment obviously.

12-04-2012, 10:17 AM	#21
ajs Addicted to C2E Join Date: Nov 2009	Norway also benefits because their sovereign fund is not available to the political party in power to use as needed for government spending when political fortunes begin to wane.

12-04-2012, 10:42 AM	#22
whynow99 Partially Addicted to C2E Join Date: Apr 2009	You get what you pay for in journalism now. You barely even looked into what his claims are. For example did you know that legislation in Canada needs to created to protect people that live outside of our country? Because mining companies are affecting their environment? Labour rights are being violated? Indigenous people that live off the land are being pushed around and even murdered? Just google (before Harper puts restrictions on YOUR internet) Canadian mining companies in Latin America. Harper is giving industry a free game... and Castro is embarrassing him. Note he says: HARPER's ILLUSIONS not CANADA'S. __________________ Dave Rutherford is a small, small person....sucking up to get a Government appointment obviously.