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Thread: Royalty review - NDP

  1. #1

    Default Royalty review - NDP

    This is a complicated issue, I don't fully understand how the royalties work, but here is an interesting article that sheds some light:

    http://calgaryherald.com/opinion/col...ergy-royalties

    Basically, if the province jacks up royalties, companies pay less at auction for rights to land, so the province loses cash up front by about the amount of the extra royalties it will collect. It's a negative wash, a cash flow hit for government, lose money up front so can collect more in the future. This implies (?) that if there were no royalties, our government would get just as much money, but sooner, as the prices would increase at auction for those sub surface extraction rights.

    I hope NDP don't take too long with their review, because if they do, those land rights at the next auction will sell for a pittance, nobody is going to invest a large sum of money without certainty of what royalty taxes they will pay. I guess the good news re current timing, is nobody is investing much right now anyway, thanks to the low oil prices. But capital decisions today are not so much about production now, rather, production in 5 or 10 years.
    Last edited by moahunter; 30-05-2015 at 09:25 AM.

  2. #2
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    Royalty review is not necessary due to low oil prices.
    Last edited by jagators63; 31-05-2015 at 08:09 AM.
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    I think the western provinces are bonkers for not working together more closely on setting rates. Maybe they do, and someone here can correct me, but just seeing how it went when Stelmach was asjusting rates, and as alluded to the in the article, if a province wants to adjust rates up and collect more revenue, the oil companies will just play the provinces against each other and take their business else where (in the short term). It seems easily preventable.

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    The review is a good idea as it seems we're collecting quite a bit less than other jurisdictions. We've further complicated it for ourselves by having a sliding scale that means we're collecting almost nothing right now since the price dropped.

    "For every complex problem there is an answer that is clear, simple, and wrong"

  5. #5

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    Can Bonus Bids Capture Economic Rent?
    Should Governments Opt for Increased Reliance on Bonus Bids Over Royalties?

    http://www.bgrodgers.com/wp-content/...Royalties1.pdf

    FACTORS AFFECTING BONUS BIDS FOR OIL AND GAS LEASES IN THE WILLISTON BASIN

    https://repository.library.georgetow...=1&isAllowed=y
    Last edited by KC; 30-05-2015 at 11:03 PM.

  6. #6

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    Quote Originally Posted by KevinW View Post
    I think the western provinces are bonkers for not working together more closely on setting rates..
    Per that article, it doesn't really matter. A company thinking of investing in Alberta, will look at a block of rights, and bid to purchase it. The most they will pay, will be the price that gets them a return of their cost of capital - the amount they owe debtors and shareholders. When they do that up front analysis, they factor in a PV of the royalties they will have to pay over the life of the project. If the royalties go up, it just means the price they are willing to pay up front goes down.

    You can see why companies are upset at a royalty increase though. They bought the rights expecting a royalty rate, that would let them achieve the return they need for their shareholders, if the royalties now go up, they paid too much for those rights from the Alberta Government, their shareholders (eg pension plans) are essentially being ripped off. Problem is, that makes everyone reluctant to invest here again, versus some other place, be it the U.S., another province, or whatever. Because of this auction system, the key is not how high the rate is, it's how stable.
    Last edited by moahunter; 31-05-2015 at 12:47 AM.

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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by KevinW View Post
    I think the western provinces are bonkers for not working together more closely on setting rates..
    Per that article, it doesn't really matter. A company thinking of investing in Alberta, will look at a block of rights, and bid to purchase it. The most they will pay, will be the price that gets them a return of their cost of capital - the amount they owe debtors and shareholders. When they do that up front analysis, they factor in a PV of the royalties they will have to pay over the life of the project. If the royalties go up, it just means the price they are willing to pay up front goes down.

    You can see why companies are upset at a royalty increase though. They bought the rights expecting a royalty rate, that would let them achieve the return they need for their shareholders, if the royalties now go up, they paid too much for those rights from the Alberta Government, their shareholders (eg pension plans) are essentially being ripped off. Problem is, that makes everyone reluctant to invest here again, versus some other place, be it the U.S., another province, or whatever. Because of this auction system, the key is not how high the rate is, it's how stable.
    Right, but when they do their analysis, they are essentially looking for a certain level of profit. I.e, If we spend 10 bucks on rights, 10 bucks on royalty's and $10 bucks extracting then we will make $20 profit on a $50 barrel (numbers are simplified obviously).
    If the rights and/or royalties go up, that company can currently threaten to take their developments elsewhere where they can still maintain their profit margins. If that threat is taken away by cooperating on rates and royalties, the company can then choose to a) stop producing oil or b) accept reduced profit margins.
    It may affect share price and return for shareholders if their expected long-term profit margins on O&G in western Canada is reduced, doesn't necessarily make it a bad decision for the government. If we are talking about a royalty adjustment so drastic that it affects the viability of projects (the actual viability, not the opportunity cost determined viability) then that is a different matter entirely, obviously.

  8. #8

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    It's interesting. Aren't the bids are on unknown quantities and qualities even when its on oilsands leases? Don't bidders generally face many unknowns from exploration to discovery to production.

    I'd say that ideally each process would earn a fair market rate of return associated with that process. Playing a shell game between rates and bidding processes may make sense but to me it confuses the issue and the values obtained under each process and makes things rather opaque.

    Fr instance, say you sold a rental house worth $300,000 on the market but you sold the asset for $200,000 because you worked some deal with the financing. (Maybe you sold it to a friend or family member.) With all things considered, you may not have sold your asset at a fire sale price (as we may not be selling our oil at fire sale royalty rates) but I'd guess that the tax department might eventually want to see a disclosure of the transaction to assess your capital gains taxes and that the deal was equivalent to an "arms length" transaction..
    Last edited by KC; 31-05-2015 at 01:08 PM.

  9. #9

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    It’s uncertainty writ large. Everything from the low oil price and a lack of access to new markets, now compounded by the prospect of a royalty review alongside a corporate tax hike, likely changes to Alberta’s carbon policy and the possibility of an increased regulatory burden are making it difficult for companies to make long-term decisions that involve significant capital commitments.

    http://calgaryherald.com/business/en...-energy-sector

    Pretty easy to go next door (Sask or BC) and invest there where the only unknown is price of oil.

  10. #10

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    ^I think the money the province collects from auctions is going to be absolutley brutal. No doubt that will get blamed "on the PCs'", "our revenues aren't as good as they claimed" or similar. The sad thing is we don't just lose out on cash up front, all of that money and all of the jobs and taxes that go with that, just goes elsewhere. The NDP need to act ASAP to bring some certainty, if its a long drawn out academic process, we are going to have a long drawn out recession, and Edmonton/Nisku, being the oil and gas service center / capital, is going to be the hardest place hit. If they must jack up the rates, just do it, so business can move on knowing the new scene. No amount of "study" will create a perfect royalty rate, because there is no such thing.
    Last edited by moahunter; 01-06-2015 at 09:59 AM.

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    The lease prices should be low. You want to encourage exploration. and if it hits, then pay up. I'd much rather get less for leases and more on royalties. Helps companies' capex too.
    Zero down and monthly payments in perpetuity.

  12. #12

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    ^if you want to get the "maximun" revenue possible though over time, logically an auction will give you that, because companies will bid up the price to the max they can manage. An auction and no royalty might be a better way, although perhaps not as stable in terms of cash flows.

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    ^ Except that the companies will factor in that they are taking all of the risk regarding how much oil will be recoverable from the property and what future prices will be and adjust their bids accordingly. A dollar less in royalties won't translate into a dollar more in exploration rights revenue.

  14. #14

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    This is something that should be de-politicized. All parties should agree that we need to maximize return.

    Talk to some economists. Get facts, numbers, projections. Make an evidence-based decision.

  15. #15

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    ^I think that's what the PC's did / why we have the auction system. It basically ensures the maximun return over the life, and brings a lot of that in up front.

    ^^Risk is something companies will put a factor in for during any bid. If the government changes royalties often, the risk factor will increase, and the bid price will drop. A dollar more royalties is a dollar less profit (well, perhaps a little less after tax).

    I wonder if at some point NDP is going to realize, there is no pot of gold here - certainly nothing but an illusionary one ("we put the royalty rate up and got the big bad companies!" "Oh, they are paying less up front for the rights now, lets not talk about that"). I wonder if at some point we are going to see an HST announced, or perhaps not, as there is still plenty of borrowing capacity?
    Last edited by moahunter; 01-06-2015 at 02:04 PM.

  16. #16

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    Sounds like the NDP actually listens to people. Even those that they may not agree with.

    Oil execs say Notley more ‘collaborative’ than Conservative government in tackling royalties

    CALGARY – Executives from some of Canada’s largest oil companies say Alberta Premier Rachel Notley is doing a better job engaging with the energy industry ahead of her NDP government’s royalty review than the previous review conducted under the Progressive Conservatives.

    “The door, actually, compared with the last time we looked at a royalty review, seems to be much further open,” Husky Energy Inc. chief operating officer Rob Peabody said at an RBC Capital Markets conference Monday.

    http://www.edmontonjournal.com/busin...160/story.html

  17. #17

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    Alberta oil royalty debate: Notley should copy Norway, which copied Alberta
    A former finance minister for Norway says her country was inspired by Alberta's Heritage Savings Trust Fund

    June 4, 2015
    by Bob Weber, The Canadian Press
    OTTAWA—A former Norwegian finance minister says Alberta’s new government should take inspiration on handling resource revenues from the same place her country found it: Alberta.

    “We were inspired by Alberta when we established our sovereign wealth fund,” said Kristin Halvorsen, who was Norway’s finance minister from 2005 to 2009 and led that country’s Socialist Left party in a coalition government.

    “But there have been many differences in how we established the fund.”

    Alberta’s new NDP government has promised to review how the province’s oil royalties are raised and spent. That includes a look at the Heritage Savings Trust Fund, which was created by former premier Peter Lougheed in 1976 as a nest egg and repository for some of Alberta’s non-renewable resource revenues to prevent them from distorting annual budgets.

    It sounded like a good idea, said Halvorsen, in Canada for a speech at an academic conference in Ottawa.

    “These are revenues from a non-renewable resource and we should take care of those generations after us,” she said. “Both the revenue from the oil and gas sector and the production are volatile, and we need some protection to avoid that affecting the budgets from year to year.”
    MORE
    http://www.canadianmanufacturing.com...CMO-EN06042015
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  18. #18

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    ^or we could copy Norway, become independent of Canada / remove ourselves from any political union (they wisely stayed out of the EU), with the money we lose to Quebec from equalization we would have a fund way bigger than theirs. Yeah, because the rest of Canada is going to happily allow the federal government to keep paying for things in Alberta if we build up a massive fund... Dumb, just dumb. We aren't an independent country, I don't want us to be an independent country, we have no right to build up a massive resource fund while other provinces are in debt, and no Federal government will ever allow that. That's political reality, we are part of Canada and our wealth will always be shared with the rest of Canada, not hoarded under our beds.
    Last edited by moahunter; 04-06-2015 at 03:51 PM.

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    Quote Originally Posted by moahunter
    we have no right to build up a massive resource fund while other provinces are in debt
    Yes, we absolutely do.

    Quote Originally Posted by moahunter
    and no Federal government will ever allow that
    The Federal government has no right or ability to prevent Alberta from establishing a sovereign wealth fund to save non-renewable resource revenues. And in fact, we already have several funds, including the Heritage Fund (as well as several others for pensions that are managed by AIM).

    You make these claims every time this topic comes up, yet have never offered any constitutional reasoning as to why Alberta could not build up a large sovereign wealth fund if it chose to do so.

  20. #20

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    Quote Originally Posted by Marcel Petrin View Post
    The Federal government has no right or ability to prevent Alberta from establishing a sovereign wealth fund to save non-renewable resource revenues. And in fact, we already have several funds, including the Heritage Fund (as well as several others for pensions that are managed by AIM).
    The Federal government has an absolute right to not transfer our Federal taxes back in the form of health transfer payments, or LRT funding, or a wealth of other Federal payments that would reduce if we had a massive nest egg. You really think they will give our cities billions for LRT if we are saving billions ? As it is, Quebec gets way more pie per capita than we do, if we were richer, they will get even more and we will get less. If you think otherwise, all I can say, is you are incredibly naive, Alberta is part of Canada, Norway is not part of anything else, the two will never be comparable -and that's not a bad thing. I don't think it would be right if we did build up some huge fund, while people in Nova Scotia, PEI or New Brunswick, struggle.
    Last edited by moahunter; 04-06-2015 at 04:57 PM.

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    Quote Originally Posted by moahunter
    The Federal government has an absolute right to not transfer our Federal taxes back in the form of health transfer payments, or LRT funding, or a wealth of other Federal payments that would reduce if we had a massive nest egg.
    No, it does not.

    Quote Originally Posted by moahunter
    You really think they will give our cities billions for LRT if we are saving billions ? As it is, Quebec gets way more pie per capita than we do, if we were richer, they will get even more and we will get less.
    Quebec gets more because their income is lower, and therefore less taxes are collected there. That's it. The sovereign wealth fund would not be factored in to the equalization formula. The equalization formula does not take in to account provincial assets or liabilities/debts, as far as I understand it.

    Quote Originally Posted by moahunter
    I don't think it would be right if we did build up some huge fund, while people in Nova Scotia, PEI or New Brunswick, struggle.
    But it's okay to squander our huge energy revenues, just out of fear that the Federal government might try to re-write Confederation in order to get it's hands on them?

  22. #22

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    Quote Originally Posted by Marcel Petrin View Post
    Quote Originally Posted by moahunter
    The Federal government has an absolute right to not transfer our Federal taxes back in the form of health transfer payments, or LRT funding, or a wealth of other Federal payments that would reduce if we had a massive nest egg.
    No, it does not.
    So you believe the Federal government has to give us LRT funding? Really? You need to learn a lot more about how Canada works if you don't think the Federal government can pick and choose where it spends its money. I guarantee, they will choose us less, we won't get the next military base expansion, we won't get the next museum, we won't get... if they see us saving billions, you don't give welfare to billionares. Every dollar extra we save is an extra reason for the rest of Canada to not give us a dollar more, and IMO that's perfectly fair.
    Last edited by moahunter; 04-06-2015 at 05:15 PM.

  23. #23

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    The Edmonton journal headline today apparently shows that the NDP is mixing agendas and messing with the scope of the royalty review. This is horrible news to me!

    Treat royalties as what they are. Royalties are payments on our ownership of mineral rights. They are not taxes, they are not job creation tools, etc.

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    Quote Originally Posted by KC View Post
    The Edmonton journal headline today apparently shows that the NDP is mixing agendas and messing with the scope of the royalty review. This is horrible news to me!

    Treat royalties as what they are. Royalties are payments on our ownership of mineral rights. They are not taxes, they are not job creation tools, etc.
    Please provide a link to "todays" headline article you refer.

  25. #25

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    Quote Originally Posted by EdmTrekker View Post
    Quote Originally Posted by KC View Post
    The Edmonton journal headline today apparently shows that the NDP is mixing agendas and messing with the scope of the royalty review. This is horrible news to me!

    Treat royalties as what they are. Royalties are payments on our ownership of mineral rights. They are not taxes, they are not job creation tools, etc.
    Please provide a link to "todays" headline article you refer.
    Here it is..



    Royalty review an 'industry review,' energy minister says

    "Minister Marg McCuaig-Boyd says the Alberta government’s royalty review is also an “industry review,” as the province’s oil and gas sector faces mounting layoffs and slumping commodity prices.

    With the panel’s work officially underway, McCuaig-Boyd said the review’s scope will look beyond Alberta’s royalty structure to the overall state of the industry.

    “It’s not just a royalty review, really. It’s an industry review and how can we move forward and add diversification and those things in,” McCuaig-Boyd said in an interview this week."



    http://www.edmontonjournal.com/busin...054/story.html

    I do believe the whole industry needs study but the mixing together of revenue, regulation, subsidies, etc that can then distort the clarity of our governments transactions is loosely comparable to commingling of funds and breaching fiduciary duties.


    Commingling

    Combining things into one body.

    "The term commingling is most often applied to funds or assets. When a fiduciary, a person entrusted with the management of funds other than his or her own in trust, mixes trust money with that of others, the fiduciary is commingling funds and thereby breaching his or her fiduciary duty. ..."

    http://legal-dictionary.thefreedicti...om/Commingling
    Last edited by KC; 05-09-2015 at 06:29 PM.

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    I don't think that is different from what the new Government said prior to the election and in the Press Release on 28 August 2015

    "The work of the panel will be guided by a mandate to identify ways to optimize:

    • returns to Albertans as owners of the resource,
    • industry investment,
    • diversification opportunities, such as value-added processing, and other innovation, and
    • responsible development of Alberta’s resources.
    "

    http://alberta.ca/release.cfm?xID=38...9515545E814EFB

    I should add that I and almost every Albertan would want the very best return on our natural resources and that should include factoring in value added processing in Alberta, diversification and or other innovation etc. Not simply a review with blinders on that only looks at royalty exports of oil and gas shipped out of the Province - that would be VERY short sighted. You may disagree but I won't be debating it with you. I have our new Governments back on this review and the majority of Albertans do as well. Lets get it done.
    Last edited by EdmTrekker; 05-09-2015 at 08:39 PM.

  27. #27

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    Quote Originally Posted by EdmTrekker View Post
    I don't think that is different from what the new Government said prior to the election and in the Press Release on 28 August 2015

    "The work of the panel will be guided by a mandate to identify ways to optimize:

    • returns to Albertans as owners of the resource,
    • industry investment,
    • diversification opportunities, such as value-added processing, and other innovation, and
    • responsible development of Alberta’s resources.
    "

    http://alberta.ca/release.cfm?xID=38...9515545E814EFB

    I should add that I and almost every Albertan would want the very best return on our natural resources and that should include factoring in value added processing in Alberta, diversification and or other innovation etc. Not simply a review with blinders on that only looks at royalty exports of oil and gas shipped out of the Province - that would be VERY short sighted. You may disagree but I won't be debating it with you. I have our new Governments back on this review and the majority of Albertans do as well. Lets get it done.
    I agree that everything should be looked at. However, creating hidden subsidies through lower than fair market value royalty rate setting obfuscates the whole picture for Albertans. Collect as close as possible to FMV rates on the royalties and then provide any subsidies through direct payments or clear regulations that provide Albertans with a clear picture of the degree of subside or other favourable treatment that the energy sector is gaining, or current Albertans are gaining at a cost to their children's' expected benefits.

    To attain this, the royalty issue and potential pricing mechanism(s) must be dealt with separately with some kind of "Chinese wall" / "fire wall" between the commissions (or determined and finalized at the start of the commission). The FMV discussion will of course address investment issues but purely to maximize long term royalty recovery rates (and not to create jobs, business profits, political contributions, etc.) for the maximum benefit of all Albertans over the generations to come.

    From there, other issues towards the greater good of all Albertans, and naturally biased towards current Albertans, could be discussed. Thus any future deals involving discounting of royalties to this or that business or the industry as a whole can be properly costed out so Albertans can understand how much they are trading future potential royalty income to attain current jobs or other development benefits today.


    ~
    Last edited by KC; 06-09-2015 at 10:09 AM.

  28. #28

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    ^have a look at the OP article. People can talk about all these noble goals, and how great the board is or isn't, all they like. The current system though, over the long term, already maximizes the return to government, because companies bid for the right to resources. Any increase in royalty just means they offer less when they bid. It's easy to keep saying "we need to maximize" "we have been ripped off" or similar, but if you actually study the mechanisim, government is getting the most possible over the long term. If royalties are jacked up now, it just means even less money when the next rights go to auction, and we will have basically sold something in the past that we are trying to change the rules on. Not a way to win investment, it's like selling a car then unfairly jacking up the price of parts a few years later. I wouldn't go back to that dealer for my next new car, and big oil and gas companies won't either, they will take those billions of future capital investment, that have created our great lifestyle / high salaries in the past, elsewhere. We might maximize government money for what we have, but the price is giving up all the revenues from that future investment that will occur elsewhere when oil prices rise again.
    Last edited by moahunter; 06-09-2015 at 12:55 PM.

  29. #29

    Default Oilsand Boom Dries Up

    This doesn't look good:

    One executive and investor, who did not want to be named while the province is reviewing his industry, said growing sentiment that the industry does not pay Alberta enough in royalties and lags on environmental protections will kill new investments, even if prices start to rise.

    “There’s never been a time when I’ve been less optimistic,” he said. “The general public doesn’t know how bad it is. It just hasn’t hit yet.”

    He did, however, acknowledge that environmentalists had won the debate on Keystone XL as well as various other pipeline plans.

    “I don’t know how the issue got away, but it’s obvious now that it did,” he said.

    The workers who have benefited from the boom are now realizing that their stretch of good luck might be over, permanently.
    http://business.financialpost.com/ne...f-jobs-with-it

    The trickle down is not just blue collar workers who do the work to expand these projects, but all the engineering firms who are designing / building them. Without oil and gas projects expanding, a lot of engineering work is going to go, along with all the finance, IT and regulatory jobs behind them.
    Last edited by moahunter; 13-10-2015 at 09:50 AM.

  30. #30

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    Quote Originally Posted by moahunter View Post
    This doesn't look good:

    One executive and investor, who did not want to be named while the province is reviewing his industry, said growing sentiment that the industry does not pay Alberta enough in royalties and lags on environmental protections will kill new investments, even if prices start to rise.

    “There’s never been a time when I’ve been less optimistic,” he said. “The general public doesn’t know how bad it is. It just hasn’t hit yet.”

    He did, however, acknowledge that environmentalists had won the debate on Keystone XL as well as various other pipeline plans.

    “I don’t know how the issue got away, but it’s obvious now that it did,” he said.

    The workers who have benefited from the boom are now realizing that their stretch of good luck might be over, permanently.
    http://business.financialpost.com/ne...f-jobs-with-it

    The trickle down is not just blue collar workers who do the work to expand these projects, but all the engineering firms who are designing / building them. Without oil and gas projects expanding, a lot of engineering work is going to go, along with all the finance, IT and regulatory jobs behind them.
    Apparently on the pipeline he don't know how bad it was and it just hadn't hit.

    Love the sense of doom and gloom and desperation. He must not be a native Albertan. Also, what he's saying about a further slide may be true - or maybe not. A native Albertan would know that much.

    So we know we can't predict the future, though we also know from experience, that we could somewhat predict that booming oil prices would or could be volatile and could sooner or later collapse - as they did. So, why wasn't he out there hammering home the point that the good times may not always roll and we needed to prepare for the possibility of just this scenario?


    Oh, and one last point - doesn't he realize that we had rising environmental concerns in the 80s, 90s, 00s - and investors adjusted. Investors can handle volatility - they always have.
    Last edited by KC; 13-10-2015 at 12:50 PM.

  31. #31

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    Quote Originally Posted by KC View Post
    Investors can handle volatility - they always have.
    I know, they have adjusted. They are investing in the Baken where they have certainty, and the costs are lower (even before any coming environmental changes / royalty increases). Our industry is basically going into a sunset phase, you might think that's great, but when the reality hits home and our salaries instead of being higher than the rest of Canada, are lower, and the provincial government can no longer spend 50b on 4m people, then you might feel differently.

  32. #32

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    Yeah, because build, build, build, boom, boom, boom has always worked so well for us in the past.

    There's still a couple of projects to come on stream and they'll help keep the prices low. Got to ship out the raw material at the lowest possible cost.

    It's time to look at something more sustainable.

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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by KC View Post
    Investors can handle volatility - they always have.
    I know, they have adjusted. They are investing in the Baken where they have certainty, and the costs are lower (even before any coming environmental changes / royalty increases). Our industry is basically going into a sunset phase, you might think that's great, but when the reality hits home and our salaries instead of being higher than the rest of Canada, are lower, and the provincial government can no longer spend 50b on 4m people, then you might feel differently.
    Investment has been severely curtailed in US shale plays as well. Because the price of oil is down. Go figure. Let's see what happens if/when it goes back up to the $60-80 range.

    http://www.economist.com/news/busine...tured-finances


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    The claims of massive effect due to the oilsands review are solely because we have been negligent in continually reviewing them over the years. Just as Peter Lougheed warned, our system created a fat and complacent industry. They have learned exactly how to manipulate people into giving them better deals every time this talk comes up.

    We should have followed Lougheed's lead and instituted regular, fixed date royalty reviews with the core principle always in mind: Alberta is the owner.

  35. #35

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    Quote Originally Posted by Jaerdo View Post
    We should have followed Lougheed's lead and instituted regular, fixed date royalty reviews with the core principle always in mind: Alberta is the owner.
    Without some certainty, nobody is going to bid fair market value to pay for the exploration and production rights. What you supposedly gain at the back end, you just lose in cash up front.

    First, companies buy the right to explore and produce deposits from the government through an auction. The government holds the auction every two weeks, and winning companies pay what is called a bonus bid. As companies think of new ways to produce oil and natural gas, otherwise forgotten deposits come back in play and companies compete for production rights.

    Second, once companies start producing oil or natural gas, they pay the government a percentage of the value of production. That’s the royalty rate. The royalty rate that applies to any given well depends on how much it produces in a month and the market price of its product.

    Companies know they have to pay twice. So when the government increases one tax, that’s going to have a consequence on the other amount that companies are willing to pay.
    http://calgaryherald.com/opinion/col...ergy-royalties

  36. #36

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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by KC View Post
    Investors can handle volatility - they always have.
    I know, they have adjusted. They are investing in the Baken where they have certainty, and the costs are lower (even before any coming environmental changes / royalty increases). Our industry is basically going into a sunset phase, you might think that's great, but when the reality hits home and our salaries instead of being higher than the rest of Canada, are lower, and the provincial government can no longer spend 50b on 4m people, then you might feel differently.
    In many ways we've been here before. Fearmongering doesn't do much anymore. We're boom and bust and that's not only on oil prices but also salaries and government spending. We love and embrace the volatility.

    Whether our oil sands are a sunset industry or not only time will tell. Suncor among others are placing their bets via buyouts. Shale has very different economics, environmental impacts and reserve lives and so it may persist for a long time but also may face a lot of volatility. If shale is wonderful beyond belief then we can expect a total collapse here no matter what our royalty scheme might be. Maybe if we give away the oil plus finance and build the plants we'll be able to unload the damned stuff.

    A bankruptcy of a major oil sands producer will also lower the cost for the next owner to pick up the liquidating assets. Capitalism is wonderful that way.
    Last edited by KC; 13-10-2015 at 07:58 PM.

  37. #37

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    Quote Originally Posted by Jaerdo View Post
    The claims of massive effect due to the oilsands review are solely because we have been negligent in continually reviewing them over the years. Just as Peter Lougheed warned, our system created a fat and complacent industry. They have learned exactly how to manipulate people into giving them better deals every time this talk comes up.

    We should have followed Lougheed's lead and instituted regular, fixed date royalty reviews with the core principle always in mind: Alberta is the owner.
    Just like Quebec separatists.

  38. #38
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    Quote Originally Posted by moahunter View Post
    Without some certainty, nobody is going to bid fair market value to pay for the exploration and production rights. What you supposedly gain at the back end, you just lose in cash up front.
    One word: BS.

    That is a complete invention by lazy, rent-seeking business interests.

    All regulations in every other industry are regularly reviewed. We review construction cost reporting. We review well drilling equipment taxes. We review road use agreements. We have yearly reviews of property tax rates and business license fees. We have constant reviews of corporate and personal income tax rates. Etc, etc, etc.

    You have been misled into forgetting the origin of the oilsands. We, Albertans, are the owners. We own the oilsands, and we deserve a fair price for our product.
    Last edited by Jaerdo; 14-10-2015 at 07:07 AM.

  39. #39

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    Quote Originally Posted by Jaerdo View Post
    You have been misled into forgetting the origin of the oilsands. We, Albertans, are the owners. We own the oilsands, and we deserve a fair price for our product.
    There are two choices:

    1. Auction the rights, then charge royalties on production from those rights. That's what Alberta does. If you increase the royalty, corporations pay less for the rights, the market sets what they cost, so the revenue to government is maximized.
    2. Don't auction the rights, then charge royalties. That's not what Alberta does, and it would mean the government won't receive its money as quickly, and may not get fair market value for the resource.

    But heck, its easier to just scream stupidly "we are being ripeed off", than actually look at how the system has been designed. Like it or not, business is paying squat for the rights at auction right now, and that will remain the case until Alberta provides some certainty on the royalties. So, our government is in a huge deficit hole.

  40. #40

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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by Jaerdo View Post
    You have been misled into forgetting the origin of the oilsands. We, Albertans, are the owners. We own the oilsands, and we deserve a fair price for our product.
    There are two choices:

    1. Auction the rights, then charge royalties on production from those rights. That's what Alberta does. If you increase the royalty, corporations pay less for the rights, the market sets what they cost, so the revenue to government is maximized.
    2. Don't auction the rights, then charge royalties. That's not what Alberta does, and it would mean the government won't receive its money as quickly, and may not get fair market value for the resource.

    But heck, its easier to just scream stupidly "we are being ripeed off", than actually look at how the system has been designed. Like it or not, business is paying squat for the rights at auction right now, and that will remain the case until Alberta provides some certainty on the royalties. So, our government is in a huge deficit hole.
    When market pricing is not profitable, don't sell any rights. Why give away the resource? In the 1908s and 1990s, ideally from a resource benefit maximizing perspective we should have shut in the conventional reserves and waited until margins and hence 'profitability'/capital gains potential increased. Instead we continued to pump and deplete the resource at $15-20/bbl and less - because it maintained cash flow and kept businesses alive and Albertans working. Same thing happens with gas.

    Unfortunately, in terms of profit maximization, the government is also mandated to create good will and thus jobs so it can justify its anti-business-minded thinking as it acts contrary to what a rational private owner would do. I don't a any great personal issues with this subsidizing of the private sector. Though it's irritating that the private sector takes and takes and then fights the subsidization of the poor and weak in our province.

    Similarly, governments have justified partial privatization of various business entities by initially putting them under independent boards in order to maximize profits and distance the operations from the political considerations. Think Edmonton Power/Epcor, Alberta Treasury/AIMCo, EdTel, Alberta Energy.

    Maybe our resources should be put under a private board with a mandate to maximize the long-term profits flowing to Alberta. Remove any pressure to develop any of our non-renewable resources in the short-run.


    Some words from Warren Buffett on another commodity business.
    (Note that oil has anywhere from low to very high invested capital, and somewhat fixed distribution and delivery contracting and infrastructure, through rail seems to have changed that. Still maybe some insights are to be learned.)


    " the insurance industry is cursed with a set of dismal
    economic characteristics that make for a poor long-term outlook:
    hundreds of competitors, ease of entry, and a product that cannot
    be differentiated in any meaningful way. In such a commodity-
    like business, only a very low-cost operator or someone operating
    in a protected, and usually small, niche can sustain high
    profitability levels.

    When shortages exist, however, even commodity businesses
    flourish. The insurance industry enjoyed that kind of climate
    for a while but it is now gone. One of the ironies of capitalism
    is that most managers in commodity industries abhor shortage
    conditions - even though those are the only circumstances
    permitting them good returns. Whenever shortages appear, the
    typical manager simply can't wait to expand capacity and thereby
    plug the hole through which money is showering upon him. This is
    precisely what insurance managers did in 1985-87, confirming
    again Disraeli's observation: "What we learn from history is that
    we do not learn from history."

    ...

    Our second method of differentiating ourselves is the total
    indifference to volume that we maintain. In 1989, we will be
    perfectly willing to write five times as much business as we
    write in 1988 - or only one-fifth as much. We hope, of course,
    that conditions will allow us large volume. But we cannot
    control market prices. If they are unsatisfactory, we will
    simply do very little business. No other major insurer acts with
    equal restraint.

    Three conditions that prevail in insurance, but not in most
    businesses, allow us our flexibility. First, market share is not
    an important determinant of profitability: In this business, in
    contrast to the newspaper or grocery businesses, the economic
    rule is not survival of the fattest. Second, in many sectors of
    insurance, including most of those in which we operate,
    distribution channels are not proprietary and can be easily
    entered: Small volume this year does not preclude huge volume
    next year. Third, idle capacity - which in this industry largely
    means people - does not result in intolerable costs. In a way
    that industries such as printing or steel cannot, we can operate
    at quarter-speed much of the time and still enjoy long-term
    prosperity.

    We follow a price-based-on-exposure, not-on-competition ..."

    -Warren Buffett 1897 Shareholder letter

    http://www.berkshirehathaway.com/letters/1987.html
    Last edited by KC; 14-10-2015 at 09:20 AM.

  41. #41

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    Quote Originally Posted by KC View Post
    When market pricing is not profitable, don't sell any rights. Why give away the resource?
    Becuase its hard enough for people in the marketplace to "time" when to sell, and when to buy, let alone for a government to. That's why they consistently make resources available each year. If you think NDP is going to give up that cash flow and cut off all oil sands investment this year, you are kidding yourself.

  42. #42

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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by KC View Post
    When market pricing is not profitable, don't sell any rights. Why give away the resource?
    Becuase its hard enough for people in the marketplace to "time" when to sell, and when to buy, let alone for a government to. That's why they consistently make resources available each year. If you think NDP is going to give up that cash flow and cut off all oil sands investment this year, you are kidding yourself.
    No they won't. That's the problem, we've made our system near completely dependent on the luck of higher oil prices. No one wants to pay more taxes and/or cut spending in order to get us to a position where royalty monies generate long term economically stabilizing cash flows from those 'asset' sales. The AHSTF was supposed to do that but obviously we coiling stick to the plan and so we run a banana republic style of economy.

  43. #43

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    Quote Originally Posted by KC View Post
    No they won't. That's the problem, we've made our system near completely dependent on the luck of higher oil prices.
    No its not, its based on market prices over time. One year might be higher, next year might be lower. The good years average out the bad, so makes sense to consistently sell rights each year. By auctioning the rights, the government is getting the maximun amount it possibly could, because companeis compete for them. If the royalties are now hiked, it just means those companies were ripped off re what they paid for existing rights (in many cases in high oil prices years), and that will be reflected re their level of trust when purchasing new rights. They will invest elsewhere, and they are - that's not a "win" for us, having oil sit in the ground achieves squat. Sure, it might be there for a future generation, but it probably won't have the same value then given how technology is going.
    Last edited by moahunter; 14-10-2015 at 11:22 AM.

  44. #44

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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by KC View Post
    No they won't. That's the problem, we've made our system near completely dependent on the luck of higher oil prices.
    No its not, its based on market prices over time. One year might be higher, next year might be lower. The good years average out the bad, so makes sense to consistently sell rights each year. By auctioning the rights, the government is getting the maximun amount it possibly could, because companeis compete for them. If the royalties are now hiked, it just means those companies were ripped off re what they paid for existing rights (in many cases in high oil prices years), and that will be reflected re their level of trust when purchasing new rights. They will invest elsewhere, and they are - that's not a "win" for us, having oil sit in the ground achieves squat. Sure, it might be there for a future generation, but it probably won't have the same value then given how technology is going.
    Good points but I don't know if the good year's average out the bad. It depends on the amount being leased. Businesses aren't stupid. They should be maximizing their attempts to capture low cost oil when rates are below their 'intrinsic' worth, and minimizing their acquisitions when they are in their view, over valued. Similarly, we know when oil is selling for a lot less than it has in the past but we don't know what the price will be in the future. We can't predict the future, but I'd say that when the price falls dramatically, we shouldn't give up or encourage a lot of oil developments out of desperation. Yet we make ourselves, through government spending of resource money, dependent on continual oil development 'fixes'.


    And the there's issues such as this that need to be addressed...


    Royalty Miscalculation Cost Alberta Billions, Expert Says | The Tyee

    The Alberta government has failed to collect nearly $2.5 billion per year in resource royalties since 2009 due to a major calculation blunder, according to Jim Roy, a private royalty expert who advises governments around the world.
    ...

    The royalty expert also argues that the province has failed to control the pace of bitumen development. As a result, industry has put too much bitumen on the market and that glut, in turn, has played a role in driving down global prices.

    'The oil sold at low price is gone. The money is lost. The world has given Alberta a clear price signal. Alberta would be foolish to continue increasing bitumen production for sale at low price,'' Roy said.



    http://thetyee.ca/News/2015/05/02/Ro...erta-Billions/


    Last edited by KC; 15-10-2015 at 06:18 AM.

  45. #45

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    And the there's issues such as this that need to be addressed... (Same article, different issue)



    "Nobody talks much about the government gifting the petroleum industry $13 billion.''




    Royalty Miscalculation Cost Alberta Billions, Expert Says | The Tyee

    The Alberta government has failed to collect nearly $2.5 billion per year in resource royalties since 2009 due to a major calculation blunder, according to Jim Roy, a private royalty expert who advises governments around the world.
    ...


    At the time Jim Prentice, then federal industry minister, supported the changes proposed by Stelmach.
    ...


    ''Announcing a royalty increase and delivering a royalty decrease is difficult to explain to voters,'' Roy said. ''The Tories chose to pretend the big blunder did not happen. Nobody talks much about the government gifting the petroleum industry $13 billion.''



    http://thetyee.ca/News/2015/05/02/Ro...erta-Billions/


    Last edited by KC; 15-10-2015 at 06:20 AM.

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    I'm all in support of the royalty rates to encourage value added manufacturing in Alberta. Why should Alberta crude go to Texas (New Jersey, Chicago...) to be turned into plastic or other chemicals when the work can be done here.
    http://edmontonjournal.com/business/...lty-tax-credit

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    ^ Can we add an exception: any reduced rates given to value added manufacturing should also be given to equal investment in renewable resource/green tech R&D or production in Alberta. Give the energy giants a big incentive to diversify in this province.

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    The problem with most renewable technologies is that they rarely make money (solar cells, wind turbines), it's nice to say we need to encourage certain industries but do you as an Albertan want to invest in one?

  49. #49

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    Oil and gas industry seeks lower royalties to enhance competitiveness

    DAN HEALING, CALGARY HERALD, October 26, 2015

    http://calgaryherald.com/business/en...ompetitiveness

  50. #50

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    I thought this article provides some neat context for Alberta's royalty review, hopefully outside our political inclinations.

    The Wall Street Journal
    Oil’s Plunge Puts Alaska Budget in Deep Hole
    Nov. 1, 2015
    http://www.wsj.com/articles/alaska-w...erk-1446427016
    Last edited by FamilyMan; 02-11-2015 at 04:34 PM.

  51. #51

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    ^unfortunatley subscription (at least for me). I think Alaska and Newfoundland, and even the Gulf of Mexico, and are in a similar problem to us, because deep sea drilling, and isolated location drilling, is a lot more expensive up front, than shale.

  52. #52

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    Take the title, push it into Google & click the story it finds & there you go, WSJ for free.
    Giving less of a damn than ever… Can't laugh at the ignorant if you ignore them!

  53. #53

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    Sorry, initially didn't post quotes because the entire article is worth reading. A few quotes:

    ...Alaskan leaders want to scale back subsidies designed to spur production by oil companies that have ballooned beyond expectations. Alaska is giving back more than $1 billion annually in tax credits and rebates to oil companies and Wall Street lenders, wiping out what had often been its largest source of income. In all, Alaska likely lost $263 million on its oil production tax program in the past year, state estimates show....


    While the subsidies have succeeded in drawing in exploration-and-production work, their costs began skyrocketing just before oil prices started plunging in mid-2014....

    “We have increased credits because there’s been increased investments—and that’s exactly what the state wanted,” said Kara Moriarty, leader of the Alaska Oil and Gas Association. Smaller subsidies would likely lead to smaller investments from oil companies, industry officials said.

    That could create a conundrum for the state. Unlike other states, Alaska owns its oil reserves, entitling it to royalties on production.

    That likely totaled $947 million in the last year, more than half the state’s oil income, according to state estimates. Even if it cuts back subsidies and increases oil tax revenue, it could lose money in the long run if that discourages drillers from tapping Alaska’s reserves....

  54. #54

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    Beyond percentages, price sensitive variable rates seem like something that could provide economic relief during crises.

    However I wonder if deferral accounts or escalating sinking fund style royalty payments couldn't be used to provide relief either during price dips or early stage developments.

    Then there's the streaming approach where the Government could provide financing for a larger share , or a larger royalty, down the road.

  55. #55
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    Or a progressive royalty.

    Oil above $30, then royalty = $Y
    Oil above $40, then royalty = $Y + 1%
    Oil above $50, then royalty = $Y + 2%
    Oil above $70, then royalty = $Y + 3%
    Oil above $90, then royalty = $Y + 5%
    ...and so on...

    ...or something similar.

  56. #56

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    Quote Originally Posted by GranaryMan View Post
    Or a progressive royalty.

    Oil above $30, then royalty = $Y
    Oil above $40, then royalty = $Y + 1%
    Oil above $50, then royalty = $Y + 2%
    Oil above $70, then royalty = $Y + 3%
    Oil above $90, then royalty = $Y + 5%
    ...and so on...

    ...or something similar.
    Oil below a certain price and forced shutdowns. We conserve rather than dump our depleting resources at money losing prices.

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    Default Royalty Review Announcement - Today 11:00 a.m.

    As expected, the NDP are releasing the royalty review today. CBC is advertising a live stream starting at 11:00 mountain time, so stay tuned.

    http://www.cbc.ca/news/canada/calgar...nges-1.3424556

  58. #58

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    Quote Originally Posted by KC
    Oil below a certain price and forced shutdowns. We conserve rather than dump our depleting resources at money losing prices.
    That's ridiculous, why would not want royalties in a given year? Aside from the fact you would be forcing tens of thousands of Albertans out of work, and in some case with SAGD, permanently damage that particular reserve. It's not like the oil sands are going to run out of supply in the next couple of hundred years, but stopping extraction could damage a producers particular field they paid for the right to.

    Hopefully we see a royalty reduction today to offset the increased corporate tax and carbon tax.
    Last edited by moahunter; 29-01-2016 at 09:09 AM.

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    ^ A royalty is not a tax and it should not be adjusted based on tax regimes.

    A royalty is a fee to buy a product. Producers are literally purchasing the oil from us, just like you purchase products at a store. The "royalty" is just the price to purchase it.

    Personally, I think royalties should be set at market rate. The same rate that a private property owner would charge a firm to exploit resources on their land. It is absurd that we have such obscene government manipulation in the oil market. If we want to have a free market, we need to set the price at market rates.

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    Quote Originally Posted by moahunter View Post
    That's ridiculous, why would not want royalties in a given year? Aside from the fact you would be forcing tens of thousands of Albertans out of work, and in some case with SAGD, permanently damage that particular reserve. It's not like the oil sands are going to run out of supply in the next couple of hundred years, but stopping extraction could damage a producers particular field they paid for the right to.
    I dont believe shutting down the SAGD process causes damage to the reservoir. You will certainly lose the steam chamber with temperatures returning to normal reservoir temperatures, and it can take months to build up the steam chamber once they restart and steam again, but there would be no damage to the reservoir.

  61. #61

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    Quote Originally Posted by Jaerdo View Post
    ^ A royalty is not a tax and it should not be adjusted based on tax regimes.

    A royalty is a fee to buy a product. Producers are literally purchasing the oil from us, just like you purchase products at a store. The "royalty" is just the price to purchase it.

    Personally, I think royalties should be set at market rate. The same rate that a private property owner would charge a firm to exploit resources on their land. It is absurd that we have such obscene government manipulation in the oil market. If we want to have a free market, we need to set the price at market rates.
    And we need mechanisms to shut in oil when the market prices fall too low. If you had your house for sale, didn't need to sell it, and tomorrow the prices dropped 50-75% overnight would you drop your price with the market? Not likely! You'd take it off the market saying to yourself that it's worth a lot more and you could afford to wait a month or two for prices to move back to sane levels. It's simple common sense. So why not build common sense into our resource regulations, contracts, etc.?



    I'm recycling a post I just put on the mass layoff thread to this thread. I think it somewhat applies to how we set royalty rates and auction rights.


    Quote Originally Posted by KC View Post
    The results of the "balancing interest" discussion below seems like common sense but this concept escapes those that one, figure the private sector should work unfettered and what's good for one is good for all, and two, the concept escapes those who figure top down, socialistic control will maximize the benefit for those at the bottom end of the socio-economic spectrum.

    Here in Alberta we now face an issue of depressed prices for our resource because of a lack of pipeline capacity to export it. Should everyone suffer as a result of over capacity development? Similarly so for booming wage rates, booming infrastructure requirements, booming debt development... To me, the same "balancing interests" concept should apply because inviting in, or allowing in massive multinational interests and their development dollars creates a ripple effect that flows through the economy and can leave lasting unwanted legacies when those companies add to an over-production situation, and maybe even bail on their projects and write off or write down their losses, liquidate inefficient assets and leave, - the latter being something the society can't easily do.

    Eg. If we built infrastructure, schools etc for two neighbourhoods where only one will be needed, we may end up supporting two underutilized schools, roads, etc. for decades.






    http://www.oilandgaslawreport.com/fi...-Division1.jpg


    Historical Background: Balancing Interests

    The picture above is from the Spindletop oil field, outside of Beaumont, Texas, where the discovery of oil in 1901 sparked the first Texas oil boom. Because the nascent industry had little to no regulation, speculators and oilmen (including an Ohioan, W. Scott Heywood) rushed to sink their own wells, creating a forest of oil derricks.

    Spindletop was not only ugly, it was also inefficient. The sheer density of wells stifled the productivity of the underground oil reservoir. Oil, like other natural resources, is capable of being overproduced, and it was a serious problem in the early days of the oil industry. Each well depends on natural pressure from the underground reservoir pushing the oil upwards, and every additional well reduces that pressure.
    ...

    Compelled participation reconciles the competing interests of consenting landowners, nonconsenting landowners and the public. Nonconsenting landowners who refuse to lease or otherwise join a unit can be compelled to join the unit so that they cannot stand in the way of the efficient production of oil and gas from a reservoir. Then, the costs, expenses and revenues of that well are divided among the landowners within the unit and the operator of the well. Under this method, everyone gets their fair share of the revenue, all property owners’ rights to enjoy the common natural resource are preserved, and the oil and gas is produced efficiently.
    "


    http://www.oilandgaslawreport.com/20...titutionality/




    Last edited by KC; 29-01-2016 at 10:36 AM.

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    Quote Originally Posted by KC View Post
    And we need mechanisms to shut in oil when the market prices fall too low. If you had your house for sale, didn't need to sell it, and tomorrow the prices dropped 50-75% overnight would you drop your price with the market? Not likely! You'd take it off the market saying to yourself that it's worth a lot more and you could afford to wait a month or two for prices to move back to sane levels. It's simple common sense. So why not build common sense into our resource regulations, contracts, etc.?
    Currenlty, and likely in the future, the govt relies on some or all of the royalty revenue for operations. Shutting in oil when prices are low might mean shutting up schools. Let the market decide whether they should shut production in.

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    Quote Originally Posted by KC View Post

    And we need mechanisms to shut in oil when the market prices fall too low. If you had your house for sale, didn't need to sell it, and tomorrow the prices dropped 50-75% overnight would you drop your price with the market? Not likely! You'd take it off the market saying to yourself that it's worth a lot more and you could afford to wait a month or two for prices to move back to sane levels. It's simple common sense. So why not build common sense into our resource regulations, contracts, etc.?



    That mechanism exists. It is called supply and demand, and if we sold oil (i.e. "set royalties") at free market rates, industry would be a lot more responsive to market conditions.

    The other side of this is that the more important thing than forcing shut-ins is to slow down the initial development of resources during a boom to levels that are sustainable with regard to servicing costs.

  64. #64

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    Quote Originally Posted by nobleea View Post
    Quote Originally Posted by KC View Post
    And we need mechanisms to shut in oil when the market prices fall too low. If you had your house for sale, didn't need to sell it, and tomorrow the prices dropped 50-75% overnight would you drop your price with the market? Not likely! You'd take it off the market saying to yourself that it's worth a lot more and you could afford to wait a month or two for prices to move back to sane levels. It's simple common sense. So why not build common sense into our resource regulations, contracts, etc.?
    Currenlty, and likely in the future, the govt relies on some or all of the royalty revenue for operations. Shutting in oil when prices are low might mean shutting up schools. Let the market decide whether they should shut production in.
    We as owners of the resource are part of the market. For government to assign all control to others seems like a deliberate creation of a moral hazard on par with the securitization boom that led up to the global financial crisis we just went through.

  65. #65

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    Quote Originally Posted by Jaerdo View Post
    Quote Originally Posted by KC View Post

    And we need mechanisms to shut in oil when the market prices fall too low. If you had your house for sale, didn't need to sell it, and tomorrow the prices dropped 50-75% overnight would you drop your price with the market? Not likely! You'd take it off the market saying to yourself that it's worth a lot more and you could afford to wait a month or two for prices to move back to sane levels. It's simple common sense. So why not build common sense into our resource regulations, contracts, etc.?



    That mechanism exists. It is called supply and demand, and if we sold oil (i.e. "set royalties") at free market rates, industry would be a lot more responsive to market conditions.

    The other side of this is that the more important thing than forcing shut-ins is to slow down the initial development of resources during a boom to levels that are sustainable with regard to servicing costs.
    Supply and demand blows up regularly in commodity markets.

    I'd suggest everyone read Benjamin Graham's 1930s book: On Storage and Stability". It came out in reprint back in the 1990s so cheap copies should still be available. Now for those that believe in letting market forces rule, realize that Graham created the world's first hedge fund, coauthored Security Analysis, was behind the creation of the CFA designation, was a professor of finance, was Warren Buffett's mentor, was a genius in many ways.

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    Default Royalty Review Released

    Key findings:

    • Albertans are receiving their fair share
    • There will be new rates calibrated to match industry returns
    • No change to oilsands royalties
    • Conventional oil and gas wells will pay a minimum royalty of 5 per cent of revenue until they have recovered costs.
    • System will reward the most efficient drillers
    • Develop Alberta markets for the use of natural gas


    "Our new system will gradually deliver greater revenue to Albertans while building a more competitive energy sector enhanced by greater transparency and performance measurements to allow Albertans to hold government and industry to our commitments," said premier Rachel Notley in a statement.
    http://www.cbc.ca/news/canada/calgar...nges-1.3424556
    Last edited by Jaerdo; 29-01-2016 at 12:21 PM.

  67. #67

    Default

    Well, so how are the markets reacting? Share prices are doubling I expect since they ostensibly halved when the NDP said they were going to review rates.

    Oh, and with the uncertainty gone, billions in new investment dollars are now going to come rushing back in, now, as we speak. Right.

    At least 2016 capital spending budgets won't be cut now by any of our energy and related businesses already in Alberta.

  68. #68
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    Additional comments from Notley:

    • Current system was causing unpredictability (as shared by industry reps), new system will fix that
    • New system will encourage innovation and efficiency
    • Goal is to improve returns by removing "distortions and disincentives" in current system
    • Current framework will apply to existing wells for next 10 years
    • New system will be calibrated to ensure "industry makes same rate of returns"
    • Current system distorts based on the rate of hydrocarbon found - this will fix that to the benefit of producers
    • Current royalty rates are appropriate, the system will not adjust them. Instead, it will streamline and address distortions in allowable deductions.
    • Producers will in the long term give "a lot more" to Albertans, but also will be rewarded
    • "We will throw open the doors and let the sun shine in" on developments, the cost of drilling (new drilling cost index to be developed), and how rates are determined
    • Results will be benchmarked and shared openly online for all citizens to view - include levels of job creation, comparisons to other jurisdictions
    • Government to focus on value-added diversification. New opportunities to promote diversification and jobs identified - new initiatives to be announced shortly.
    • Working group to be created on energy diversification to "pick up where panel left off"



    So to sum up - this will increase the rate the public takes in for the long term, but not through higher rates. Instead, they are planning on removing what they see as obsolete deductions and "disincentives". Claim is that firms will maintain the same rate of return.

    Other main goal appears to be transparency. All data will be compiled and provided to citizens online.

    The claims about "unpredictability" and Notley being "anti-oilsands" will hopefully die now. This is a very balanced and pro-industry/pro-transparency result.
    Last edited by Jaerdo; 29-01-2016 at 12:32 PM.

  69. #69

    Default

    Well, I see that Suncor spiked dramatically on the news. SU (-0.76%) on the day.

    Lets check a few others:

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)


    Wow!!! Investors must be so incredibly relived that the evil that is the NDP unleashed was "no significant change". You can see how big an issue this was in the massive price movements we're already seeing in share prices. The massive uncertainty the royalty review created was so clearly holding share prices down until now.
    Last edited by KC; 29-01-2016 at 12:39 PM.

  70. #70
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    ^ Clearly and directly illustrates that these changes are NOT caused by the royalty review. The results of this were pro-industry.

  71. #71

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    What a waste of time, no real change. So the NDP now admit that they were totally wrong in their election campaign, and that the royalties were fully competitive and middle of the pack on a global basis. Oh well, at least they have finally figured out what most people in the industry already new. Good result, and proves Stelmac was wrong to try hike them. Hopefully we won't have to read anymore nonesensical comments about how Norway supposedly gets more.
    Last edited by moahunter; 29-01-2016 at 12:47 PM.

  72. #72
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    ^ There will be "significant changes", they just wont be changes that change the rate of return for industry.

    - There will be a new incentive/deduction framework that promotes efficiency, lowered cost of production, and innovation.

    - There will be a new strategy to promote value added industry.

    - There will be a completely new system that delivers transparent benchmarking results to industry and citizens.

    - Old deductions and incentive programs that were not assisting positive returns will be changed or removed.

    Etc, etc. Big changes, just not the ones that your fearmongering leaders like Brian Jean and Kevin O'Leary falsely claimed would happen.

    End result: fearmongering from ignorant pundits probably caused far more instability than the process itself. I think the classic Jim Prentice line applies to you here, moahunter: "look in the mirror".

  73. #73

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    Quote Originally Posted by moahunter View Post
    What a waste of time, no real change. So the NDP now admit that they were totally wrong in their election campaign, and that the royalties were fully competitive and middle of the pack on a global basis. Oh well, at least they have finally figured out what most people in the industry already new. Good result.
    Oh, so that's the spin. The PC's saw fit to do a royalty review a few years ago and then had to back peddle on their expertly determined changes, so there was no reason to question the rates we get now?

    The thing to keep in mind on all these things is that the reality of the day colours the decision making process. The NDP muddied the waters by taking into account the whole jobs and growth issue, so it's still questionable whether or not we are getting FMV for our royalties. Holistically, it appears that Albertans as a group are achieving the full benefits, but holistically means that energy workers may be getting a piece of my rightful share of the royalties and they are deciding where to vote with their dollars, whereas I only get my share indirectly via economic growth and not through my vote on where the full and transparent collection of a fairly valued market price on a royalty stream and where that money should then go - either back to the energy industry as a clear and transparent subsidy to job creation or in some other direction.
    Last edited by KC; 29-01-2016 at 12:52 PM.

  74. #74

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    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    "Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal

  75. #75
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    Watching the press conference I am much more impressed with Notley than I have been in a long while. Wish she could have come out and calmed the waters a couple months ago, because this is demonstrating that she definitely has the ability.

  76. #76

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    Quote Originally Posted by Chmilz View Post
    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    You missed my sarcasm. The spin had been that the royalty review itself, was driving Alberta into a deeper hole. That even looking at royalties was a bone-headed supremely damaging move that by itself impaired Alberta's economy and was keeping investors from building businesses in the province. yada, yada, yada...

  77. #77
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    Quote Originally Posted by Chmilz View Post
    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    You missed his point. He was playing on the pro oil crowd that suggested that a portion of the drop in share prices for CAD producers was due to this uncertainty. Since the uncertainty has been removed (status quo), the share price should rebound.
    Of course, most people realize that the share price is affected by the price of oil which is a geo-political and economic function. And has nothing to do with our little province.

  78. #78

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    Quote Originally Posted by Paul Turnbull View Post
    The review is a good idea as it seems we're collecting quite a bit less than other jurisdictions. We've further complicated it for ourselves by having a sliding scale that means we're collecting almost nothing right now since the price dropped.
    Seems you were wrong here, and Stelmac was wrong when he tried to hike the rates, and the NDP was wrong during the election campaign. Our royalties are middle of the pack, which is very reasonable for Albertans given that we are a high cost producer. Oh well, at least everyone can agree with that now, we aren't being ripped off compared to Norway Credit where credit is due, the NDP is learning. Hopefully when oil prices return, we will get some investment now, and hopefully some transactions can finally occur to bail out struggling companies.
    Last edited by moahunter; 29-01-2016 at 01:02 PM.

  79. #79
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    ^ Watch the press conference, moa. Your comments have been directly addressed in it several times.

    To sum it up: it is exactly what industry said to us. The environment has changed. The US market is now attempting to sell to Canada, not the other way around. The global price of oil has collapsed. We need a stable global price and access to markets.

    That doesn't change the fact that the royalty rate should have been far higher during Stelmach and Redford's terms. It should have been. It was criminally low at that point. However, the world has changed since then.

  80. #80

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    Quote Originally Posted by nobleea View Post
    Quote Originally Posted by Chmilz View Post
    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    You missed his point. He was playing on the pro oil crowd that suggested that a portion of the drop in share prices for CAD producers was due to this uncertainty. Since the uncertainty has been removed (status quo), the share price should rebound.
    Of course, most people realize that the share price is affected by the price of oil which is a geo-political and economic function. And has nothing to do with our little province.
    As I said elsewhere, the industry faces immense change from everything from changes in fx rates, federal/provincial corporate tax rates, input costs, changing oil prices, massive new discoveries, changing politics and wars in the middles east, changing technologies, you name it.

    That said, only a total 'wuss' in the oil business would have flipped out, had an emotional breakdown and cried like a baby when the NDP suggested royalties rates might change. Yet that appears to be how the industry was acting when you read some of the media reports over the last few months. I would suggest that a lot of columnists totally embarrassed a lot of Alberta executives and investors in the business by suggesting that they were such wimps in the face of a review of their payments. My own family and me personally have been directly and indirectly invested in the energy business for decades (the NEP alone hit my family's financial position massively) and I saw this review as just a matter of course. All this heightened emotional response to a review is just plain embarrassing to me as a multigenerational, lifelong Albertan.

  81. #81

    Smile Panel concludes Albertans Already get their Fair Share

    No real changes industry, just calculation tweaks, will continue to pay about the same:

    http://www.cbc.ca/news/canada/calgar...nges-1.3424556
    Last edited by moahunter; 29-01-2016 at 01:23 PM.

  82. #82

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    Quote Originally Posted by KC View Post
    Quote Originally Posted by Chmilz View Post
    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    You missed my sarcasm. The spin had been that the royalty review itself, was driving Alberta into a deeper hole. That even looking at royalties was a bone-headed supremely damaging move that by itself impaired Alberta's economy and was keeping investors from building businesses in the province. yada, yada, yada...
    Sarcasm aside, I hope you do realize that IF a meaningful increase in royalties were announced today, You would see a sharper sell off of Canadian producers compared to others in the market. So it was not about upside risk, but downside.

    That said, I agree people these days are abnormally impatient. If we leave our political biases aside, I think NDP so far has served Alberta energy sector very well. They brought in a reasonable environmental framework which was supported by the industry that proved to be instrumental in securing the backing of Ontario government to support Energy East pipeline.

    Similarly, federally. I think Treadue is also doing some positive work that can potentially change the image of "dirty" Canadian oil, that was all but officially adopted by Europe and helped Obama in refusing KXL. Also Treadue's better rappor with First Nations should allow that pipeline to progress more smoothly than before. Not claiming Liberals don't make mistakes or Conservatives didn't have our national interest at heart, but saying we are on a positive track, if we have patience and objectivity.

  83. #83

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    Quote Originally Posted by KC View Post
    Quote Originally Posted by Chmilz View Post
    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    You missed my sarcasm. The spin had been that the royalty review itself, was driving Alberta into a deeper hole. That even looking at royalties was a bone-headed supremely damaging move that by itself impaired Alberta's economy and was keeping investors from building businesses in the province. yada, yada, yada...
    Haha my bad. Comprehension fail
    "Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal

  84. #84

    Default

    Quote Originally Posted by FamilyMan View Post
    Quote Originally Posted by KC View Post
    Quote Originally Posted by Chmilz View Post
    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    You missed my sarcasm. The spin had been that the royalty review itself, was driving Alberta into a deeper hole. That even looking at royalties was a bone-headed supremely damaging move that by itself impaired Alberta's economy and was keeping investors from building businesses in the province. yada, yada, yada...
    Sarcasm aside, I hope you do realize that IF a meaningful increase in royalties were announced today, You would see a sharper sell off of Canadian producers compared to others in the market. So it was not about upside risk, but downside.

    That said, I agree people these days are abnormally impatient. If we leave our political biases aside, I think NDP so far has served Alberta energy sector very well. They brought in a reasonable environmental framework which was supported by the industry that proved to be instrumental in securing the backing of Ontario government to support Energy East pipeline.

    Similarly, federally. I think Treadue is also doing some positive work that can potentially change the image of "dirty" Canadian oil, that was all but officially adopted by Europe and helped Obama in refusing KXL. Also Treadue's better rappor with First Nations should allow that pipeline to progress more smoothly than before. Not claiming Liberals don't make mistakes or Conservatives didn't have our national interest at heart, but saying we are on a positive track, if we have patience and objectivity.
    I think if Notely takes some meaningful steps to reign in spending, she can win me, and a lot Albertans, over. She is very clever.

  85. #85

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    Quote Originally Posted by FamilyMan View Post
    Quote Originally Posted by KC View Post
    Quote Originally Posted by Chmilz View Post
    Quote Originally Posted by KC View Post
    Well, I see that Suncor spiked dramatically. Down -0.76% on the day.

    IMO 42.94 -0.02 (-0.05%)
    CNQ 29.55 +0.37 (1.27%)
    CVE 16.86 -0.36 (-2.09%)
    HSE 13.75 -0.42 (-2.96%)
    ECA 6.01 -0.14 (-2.28%)
    Why would you expect immediate share increases? It's not some massive reduction in royalties paid by producers, and it doesn't remove Saudia Arabia from the picture. Were you expecting oil execs to walk into the room and dump bags of money the second she made some sort of industry-favorable announcement?
    You missed my sarcasm. The spin had been that the royalty review itself, was driving Alberta into a deeper hole. That even looking at royalties was a bone-headed supremely damaging move that by itself impaired Alberta's economy and was keeping investors from building businesses in the province. yada, yada, yada...
    Sarcasm aside, I hope you do realize that IF a meaningful increase in royalties were announced today, You would see a sharper sell off of Canadian producers compared to others in the market. So it was not about upside risk, but downside.

    That said, I agree people these days are abnormally impatient. If we leave our political biases aside, I think NDP so far has served Alberta energy sector very well. They brought in a reasonable environmental framework which was supported by the industry that proved to be instrumental in securing the backing of Ontario government to support Energy East pipeline.

    Similarly, federally. I think Treadue is also doing some positive work that can potentially change the image of "dirty" Canadian oil, that was all but officially adopted by Europe and helped Obama in refusing KXL. Also Treadue's better rappor with First Nations should allow that pipeline to progress more smoothly than before. Not claiming Liberals don't make mistakes or Conservatives didn't have our national interest at heart, but saying we are on a positive track, if we have patience and objectivity.
    Of course but "meaningful" though is a mater of degree. As you will know, there's five, and only five, means to increasing earnings: one, more financing, or two, cheaper financing (leverage, WACC and stuff like that - thanks to years of QE/ZIRP it was a dream world up until last year for these guys - today's news is "spreading" the woes), increased turnover (that ratio thingy of sales/total assets employed, and pickup drivers and China sure made life wonderful on a inventory/production/turnover ratio basis), lower taxes (of course) or, number five, wider 'operating' margins. Debatably higher royalties would affect one of the latter two (it's number five actually). Though some people like oil and gas workers that read propaganda can't get it out of their head that royalties aren't income taxes. Receivables, LIFO/FIFO (I've always loved the sound of that), amortized capital, accelerated capital depreciation rates (remember those), etc. and all that, don't really matter on an on-going enterprise basis.

    Bottom line is that earnings just plain suck with higher input costs.





    I must add that I'm no accountant (I once even took accounting coursework off my resume to avoid consideration for anything close to a bean-counting job {should bean counting be hyphenated?} ) so take everything I say with a grain (or two - whose counting) of salt.

    ~
    Last edited by KC; 29-01-2016 at 02:09 PM.

  86. #86
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    I hope that more innovation is encouraged.
    "Talk minus action equals zero." - Joe Keithley, D. O. A.

  87. #87

    Default

    ^ technological advancements in carbon capture

    Maybe Alberta financing a s___-load of rail tanker cars

    Hydro, solar wind power to power oil sands production

    Upgrading here (Parafinic processes, new green solvents, etc)

    We make our money through exports pure be simple. Export more of something else, or create better margins on our resource exports.

  88. #88
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    I like Klein's deal with oil industries better because gov't makes money pretty good then Ed Stemlach change a bit with royalties everything went downhill after that.
    Edmonton Rocks Rocks Rocks

  89. #89

    Default How Notely learned or love, or at least accept, Albertas royalty system

    It took her seven years, but finally, a little learning goes a long way:

    http://news.nationalpost.com/full-co...yalties-system

  90. #90
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    I think royalty reviews should be an ongoing thing
    “You have to dream big. If we want to be a little city, we dream small. If we want to be a big city, we dream big, and this is a big idea.” - Mayor Stephen Mandel, 02/22/2012

  91. #91

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    Quote Originally Posted by Sonic Death Monkey View Post
    I think royalty reviews should be an ongoing thing
    That would achieve at least two things:

    1. Nobody would ever invest billions Alberta again, because it would be impossible to calculate the return on investment will be sufficient to pay for the capital
    2. A lot of needless fees to consultants.

    To put things in perspective, in the last four years, Texas increased its oil production by more than all of Alberta. Without some certainty over the decades required for these projects to make a profit, there are lots of other places in the world to invest, where you don't need to invest as much upfront, where the paybacks are quicker and where access to the coast and international prices, not discounted Canadian prices, are available. If we want businesses to take a long term view which they need to do to invest in Alberta, government needs to take a long term view as well, which is what this royalty report has done.
    Last edited by moahunter; 31-01-2016 at 10:43 AM.

  92. #92

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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by Sonic Death Monkey View Post
    I think royalty reviews should be an ongoing thing
    That would achieve at least two things:

    1. Nobody would ever invest billions Alberta again, because it would be impossible to calculate the return on investment will be sufficient to pay for the capital
    2. A lot of needless fees to consultants.

    To put things in perspective, in the last four years, Texas increased its oil production by more than all of Alberta. Without some certainty over the decades required for these projects to make a profit, there are lots of other places in the world to invest, where you don't need to invest as much upfront, where the paybacks are quicker and where access to the coast and international prices, not discounted Canadian prices, are available. If we want businesses to take a long term view which they need to do to invest in Alberta, government needs to take a long term view as well, which is what this royalty report has done.
    Actually, ongoing periodic reviews might reduce uncertainty. As is, this royalty review apparently had all of Alberta's energy executives nervously pooping in their pants because it was the first one in such a long, long time that they thought they were all going to be out of business. Now, if instead we had reviews every couple years, then any prospective change would be a minor adjustment to rates based on some unaccounted for development.

  93. #93
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    A little light reading:

    http://www.energy.alberta.ca/Org/pdf...ortJan2016.pdf

    Interesting tidbit:

    There are almost 50 fiscal reviews on the go. Countries, states and provinces are all considering their options.
    • Fiscal terms include royalties and taxes of various kinds.
    • “Government take” is a term that is applied to all sources of revenue – royalties, petroleum taxes, carbon taxes, corporate taxes, etc. – taken from the production of a barrel of oil, or cubic foot of natural gas.

    "For every complex problem there is an answer that is clear, simple, and wrong"

  94. #94

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    Quote Originally Posted by Paul Turnbull View Post
    A little light reading:

    http://www.energy.alberta.ca/Org/pdf...ortJan2016.pdf

    Interesting tidbit:

    There are almost 50 fiscal reviews on the go. Countries, states and provinces are all considering their options.
    • Fiscal terms include royalties and taxes of various kinds.
    • “Government take” is a term that is applied to all sources of revenue – royalties, petroleum taxes, carbon taxes, corporate taxes, etc. – taken from the production of a barrel of oil, or cubic foot of natural gas.
    Well, that's most excellent news! If moahunter is right, then we need a halt to the global investment in oil and gas in order to put a stop to as much future production as possible including further investment in oil and gas. That way demand will catch up to production and prices will recover and we'll be back to the good times. Moreover, reduced global production will help fight global warming.

    For the sake of global warming, maybe Canada should stop importing foreign oil, cut our own production and bring oil prices back up where no one would unnecessarily waste the energy.
    Last edited by KC; 31-01-2016 at 02:19 PM.

  95. #95
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    The royalty report is an interesting read.

    The report concludes that the twin US shale revolutions (in natural gas starting about in 2005, and then in oil starting about in 2010) are not only here to stay but threaten to further erode the US market share of Alberta's oil and gas resources for the forseeable future.

    If this is correct, Alberta may not see a return to anywhere close to $100 US per barrel for at least a decade, maybe longer.

    Trying to take a larger share as the resource owner in this price environment would have been reckless.

  96. #96

    Default

    Interesting that this guy takes risks in stride. Our oil executives though are a very different breed. Just talk of change is so dangerous that it decimates their sector according to them.


    Toronto developer preparing for an Alberta real estate boom - The Globe and Mail


    "Real estate markets don't always go up. Look at 2011 in Toronto; it was one of the worst years in history for selling condominiums. I'd say it was almost equal to 2014 and 2015 in Calgary and Edmonton. There was a huge oversupply and we weren't selling anything," he says. "But as a developer, you have to be able to weather the storm and not be derailed by these things because they're inevitable."

    "The timing of the recession has been perfect for us actually," he continues. "Sales have been better in the last four months than they've been in the past two years. Visits to the sales suite are up; we sold four units in Jasper House in February. Things are looking up and it happens to coincide with progress on the development."


    https://beta.theglobeandmail.com/rea...service=mobile


  97. #97
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    Detailed financial and royalty information on all Alberta oil sands projects for 2016 is now available on the Government of Alberta website in a searchable database. Data for 2017 and beyond will be added when it becomes available.

    https://www.alberta.ca/royalties-data-table.aspx

    Making this information public was a recommendation of the Royalty Review report to counter some of the misinformation and misunderstanding about how royalties work and who pays what.

  98. #98

    Default

    Cross referencing this thread to the 2007 thread that’s full of fascinating reading. Examples quoted below.

    This thread would fit well in a “Best of C2E” thread and the excerpts on it as well as those sampled below makes me want to subscribe to the Edmonton Journal again just to be able to access their archives.



    Albertans shortchanged billions in royalties: review

    http://www.connect2edmonton.ca/showt...view&styleid=4


    Post #1
    Quote Originally Posted by DebraW View Post
    Albertans shortchanged billions in royalties: review
    Panel recommends significant hikes and more accountability


    Darcy Henton, Edmonton Journal
    Published: September 18, 2007 3:28 pm


    EDMONTON - Albertans have not been getting their fair share of oil and gas royalties and are entitled to another $2 billion per year, says a new Alberta government-commissioned report released today.

    An expert panel appointed by Premier Ed Stelmach says Albertans have probably been shortchanged a billion dollars a year over the past five or six years.

    The panel recommended hikes in royalties that will boost revenues and called for more accountability to ensure that Albertans know what return they are getting.

    The tersely worded 104-page report says that hasn't been the case to date.

    "Albertans do not receive their fair share from energy development and they have not, in fact, been receiving their fair share for quite some time," said panel chairman Bill Hunter.

    "By recommending an accountability package in the strongest possible terms, the panel intends that both government and industry will be forced to gather and produce data so that statistics and actionable information can be reported to the owners."

    The panel has also called for a price-sensitive severance tax on ...



    ...

    The panel rejected oilpatch claims that its recommendations will damage the industry.

    The panel also offered a suggestion that Alberta should consider a new tax on energy production as well as mining, forestry and agriculture that would be used for environmental protection for future generations.

    [email protected]

    See Wednesday's Journal for full coverage of the royalties review report.

    © Edmonton Journal 2007

    -30-




    Post #27:
    Quote Originally Posted by DebraW View Post
    Scare tactics too predictable
    If royalty review headlines seem hauntingly familiar, it's because they are


    Graham Thomson, The Edmonton Journal
    Published: September 25, 2007 2:23 am


    After carrying it around like a security blanket for the past week, I have finally put down my well-worn copy of the royalty review panel's report.

    Well, it actually put itself down, falling apart at the seams like a $5 suit. I apparently wore the poor thing out rereading the bits about government incompetence and the need to raise energy royalties.

    So, to give it, and me, a break, I picked up some newspaper articles instead.

    One had the headline: Oil industry says Alberta may kill the golden goose.

    Another said, Higher oil tax called 'unjustified.'

    A third article explained how energy companies predict "the government proposal would cripple the oil industry and hobble the provincial economy."

    Old news, you say? You saw all that reaction last week?

    Well, yes, it is old news -- but not from last week. These are all stories from 1972, retrieved from the archives of the legislature library.

    Step into my time machine and we'll take a journey back 35 years to an era when American Pie was the name of an epic song, not a teen movie, and Watergate was the name of a hotel, not a political scandal. Richard Nixon was still godfather of the United States and Marlon Brando was godfather of the movie theatres.

    In Alberta, the rookie Conservative government of Premier Peter Lougheed had deliberately picked a fight with the energy industry over royalties and taxation, saying Albertans as owners of the resources deserved a higher rate of return that would provide about $70 million more a year in revenue to the provincial treasury.

    The oil companies reacted with outrage. The Canadian Petroleum Association said the government's plan was not "practical and equitable." According to the association's brief to the government, Lougheed's proposed tax was "a serious breach of faith with the industry."

    The Calgary Albertan reported on May 24, 1972, Husky Oil had delivered its own presentation against Lougheed's taxation proposal, saying, "the net effect of the plan will be to reduce exploration in the province and to discourage the development of reserves once they are found."

    The Independent Petroleum Association of Canada issued a dire warning that 50,000 jobs would be lost and one colourful oil executive, John Rudolph, threatened to pack up his drilling rigs and move back to the United States rather than pay the new royalties.

    In a retrospective interview last year, Lougheed said he told irate oil executives at the time: "What you don't understand is you don't own the resources."

    Lougheed's comment was echoed in last week's review panel report that said: "Albertans own the resource."

    Any student of history would not be surprised by the energy companies' heated response to the panel's report, just as Lougheed wasn't surprised back in 1972. He had done his homework and understood the kind of fight he had started 35 years ago. Oil companies will initially resist higher royalties, then learn to live with them.

    Lougheed knew, for example, when the previous Social Credit government introduced a new royalty regime in 1962, the oil companies had fought back, warning of a slump in investor confidence.

    Same thing in 1951, when the Socred government introduced a royalty regime energy companies said would shake investor confidence, reduce exploration and cause unemployment.

    The reaction is as foreseeable as the changing seasons. Introduce new royalties and watch the energy companies erupt. Old Faithful isn't this predictable.

    It's not their fault, I suppose. Their first responsibility is to their shareholders, not to the people who own the resources -- which would be us Albertans.

    Now, let's return to September 2007. We're still waiting for Premier Ed Stelmach to decide whether he'll adopt the review panel's recommendations and increase royalties. He'll give his answer the middle of next month -- but an increasing number of government sources say Stelmach will likely adopt the bulk of the report's recommendations.

    So far, the only political voice raised against the report comes from the fledgling Wildrose Party which issued a news release with a less-than-subtle headline that could have been written by an energy company executive: Leave oil royalties alone!

    The Wildrose Party has subsequently ...

    Party founder Link Byfield will argue against new royalties.

    As I write this, ...



    As an editorial in The Journal said: "In the matter of royalties, as with anything else, the first duty of the government and the legislature is to do the best for the people of Alberta."

    The editorial was written in 1972 -- but could have just as easily been written today.

    [email protected]

    © The Edmonton Journal 2007

    -30-


    In the above, this also caught my eye:

    “The panel also offered a suggestion that Alberta should consider a new tax on energy production as well as mining, forestry and agriculture that would be used for environmental protection for future generations.”

    What came of this?







    Will add one more somewhat detailed discussion here:

    Giving Our Oil Away - Alberta Views - The Magazine for Engaged Citizens
    Will the royalty review inspire us to act like owners?
    BY SATYA DAS MARCH 1, 2016
    https://albertaviews.ca/giving-oil-away/
    Last edited by KC; 07-12-2017 at 07:24 AM.

  99. #99

    Default

    Well I just heard two interesting statements. On a news story on the radio this morning:

    First I heard: First Nations are concerned that the production cuts will hit them disproportionately hard. Why? Because FN royalties tend to be higher.

    Then I heard: that if First Nations oil production was excluded, there probably wouldn’t be any cut to production. (I took this to mean tha they have significant production - maybe even the ability to increase production enough to negate the impact of cuts at other production..)


    Higher royalty rates! Now that is something I haven’t heard before. Yet they are in production. Weren’t higher royalty rates a threat to Alberta, all industry would collapse, no oil could be sold at higher rates....
    Last edited by KC; 13-02-2019 at 07:46 AM.

  100. #100

    Default

    Set royality reviews used to be hard baked into our o&g legislative system. Industry knew what to expect and who to lobby. Ralph in his infinite wisdom (sacasim) removed that. We can thank him for now making the process a political one.

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