Sunday, September 30, 2007

EnCana Agrees with Premier Stelmach and Calls for "Cooler Heads"

Isn’t this precious…EnCana is now saying Premier Stelmach is right and “cooler heads” should prevail. Apparently there is room for some royalty increase now and the issue is actually a question of balance. The unmitigated gall and hubris behind the $1B cheap shot intimidation tactics of Encana last week was breathe taking. I am glad to see them reconsidering their attitude and tactics in responding to the “Our Fair Share” report.

Well, I agree, cooler heads and balance are good things and necessary under these circumstances. I suggest they, and the rest of the energy sector, consider that there is already balance in what is being proposed by the Royalty Review Panel for royalty and taxes.

The recommendations in the “Our Fair Share Royalty Report” are also the result of cooler heads…and some pretty competent and experienced head on good people too. They recommended a “balance” that would put Alberta just below the average for all other competitive oil and gas producer markets. How about reconsidering your strategy EnCana and considering that there already is a balance in the “Our Fair Share Report” recommendations?

Consider some other aspects that bring about balance in doing business in Alberta, like the “side benefits” of a stable government that is obviously somewhat incompetent – but it is not corrupt. That governance incompetence has played in your favour in the past too, don’t you think? You can’t ignore the sweetheart relationships the energy sector seems to have had with regulators but that is about to change - big time.

Then there is the minor advantage of an independent judiciary that is there to settle disputes using the Rule of Law. Then we have the helpful facts that Alberta has an abundant, healthy, young and skilled workforce and a pretty stable and strong currency. Those elements provide for some certainty in a risky business.

And the real kicker – we charge a mere 1% royalty until you recover all your cost – regardless of how outrageous they may be – and you even get to unilaterally decide what and who you will pay for such project costs. In fact you can even fix your own prices for bitumen between your producer side and your upgrader operations without any need to worry about how it might impact the owners of the resources.

Where else on the planet can you get that kind of certainty, a positive business environment and risk sharing for the energy sector with a such a vast amount of known deposits all in one place? The Middle East offers you the political benefits of Iraq, Iran and Saudi Arabia. Eastern Europe is a good place – if you don’t mind the political instability and the business “culture.” How about Africa or perhaps Russia is more attractive for you? They are well known entities for how they do business, if you don't mind kidnappings.

Don’t rule out the serious alternative of Hugo Chavez’s Venezuela is your first alternate choice to do business. Apparently some in your industry think Alberta and Venezuela have a lot in common so they must be a legitimate alternative. The USA is more expensive and past its peak and do you think Norway is going to treat you as well as Alberta’s 1% risk share royalty rate? Get serious!

Cooler head are definitely needed coupled with a big dose of realism and a serious focus on the bigger picture. That bigger picture includes all of us Albertans and people all over Canada actually. So when you think about balance don’t just think about benefiting yourselves. Also think about how well you have been meeting your other legally required and oft ignored related duties and responsibilities. That also has to factor into what we define as balance.

A more considered and reflective analysis of what you could and should be doing to meet your obligations for restoration and reclamation of sites, roads and seismic lines in order to continue to justify your social license to operate as tenants in the public realm of Alberta’s non-renewable resources would be in order. Remember, the way you have been doing business means you actually cut down more trees than the entire Alberta forest industry.

Balance those elements into your equation as to balance and fairness too as you cool down and think seriously about how to move forward. It is time to start thinking about how you can adapt to get along better with Albertans as your partner as we work out this complex and critical issue together. Name calling, cheap shots and silly tactics and intimidations and unfounded allegations all must be a thing of the past or else they will backfire on you big time.