Friday, October 26, 2007

The Energy Industry Credibilty in Alberta is in Shreds.

So the polls showed Albertans did not believe Big Oil as to the “sky is falling and we are leaving Alberta rhetoric of the “Our Fair Share” Royalty Review. The Stelmach response on royalties shows the government did not believe Big Oil either.

And today the markets showed they did not believe Big Oil either. The markets were normal in the face of this “catastrophe,” even as of some “analysts” engaged in a pending disaster feeding frenzy to the business media claiming the markets were destined to be a disaster due to a new royalty regime.

So the energy sector has a credibility problem now. Not all of the companies in the sector deserve the growing public disdain that has been brought on the energy sector but tar and feathers are not often discriminating and tend to cover the entire sector.

So now the energy sector in Alberta might be well advised to do some serious soul searching and maybe engage in a bit of real honest communication with their landlords. Not any campaigns based on slick PR exercises or full page media ad-buys based on misinformation and “messaging.” I am talking about a genuine and authentic effort to reach out to Albertans to understand how the industry is perceived. I am talking about the Alberta that is outside of Calgary, and about Calgarians who are outside the industry.

It is time the energy industry started focusing on proving to us that they are appropriate and responsible resource developers and know what sustainable stewardship of this public nonrenewable resource is. For example, if the drilling is down now why are you not focusing on catching up on some long over due well site reclamation and site contamination clean up. There will be rig workers looking for work I hear. Why not use them and start a renewed focus on responsible stewardship fixing your shredded image in this way

The Alberta forestry industry has made that shift in consciousness to responsible, sustainable stewardship already. Surely the mighty energy industry in Alberta is at least as smart and as capable of adapting as the “Lumberjacks.”


  1. Anonymous10:26 am

    You sir, clearly lack any knowledge of the state of the business of "site reclamation and and site contamination clean up" in Alberta.

  2. Anonymous2:25 pm

    Wow...95% of you people just don't see the big's not your fault though because the 'Blue Ribbon' panel Red Ed appointed did not ask the right questions of Albertans. What they should have done in addition to asking if they thought Alberta should be collecting higher royalites, is ask but do you also like your current standard of living? For those who do not understand, there are two oil patches in operation in this province...heavy oil/tar sands & conventional oil & gas. In the tar sand sector there is definitely some latitude for change. On the conventional side, however, once you change the royalty status as Red Ed has done, you will see drastic changes over the next few months and they will not be pretty. Once spending in the convention sector ends, and all the drilling rigs start to flee to the US again, the current economy of this province will be gutted like a fish, and people's quality of life is in for one hell of a big shake up because the trickle down effect from the patch benefits everyone in the province whether they want to admit it or not. Maybe people will start to see the light when the high paying job they enjoy suddenly evaporates and the bank starts forclosure proceedings. I'm sorry, but the average Albertan is ignorant when it comes to the very industry that has supported their high standard of living for such a long time, and they are in for a rude surprise. Me, I'm lucky, I'll do what I did when the NEP was brought in, I simply began to work overseas and didn't miss a beat - and never paid any Canadian taxes either (a bonus).

  3. I agree that several major players in the oil industry have lost credibility as a result of their conduct. Ed Stelmach has responded to the threats and apocalyptic predictions appropriately, for the most part.

    I do not agree with unilaterally altering the contracts of Suncor and Syncrude. If the Alberta government made a bad deal on these two leases, we should just take our lumps, and honor the agreements. When the existing contracts expire in 2016, the new royalties can then be enforced.

    I also don't think Stelmach went far enough to address the industry plans to export raw bitumen - and jobs - from Alberta. The industry prevaricators have been yapping non-stop about all the jobs and positive spin-offs they create in Alberta, and how this somehow justifies the extremely low prices they pay for mineral rights.

    The fact of the matter is the industry hires only those who they are forced to hire. Their real agenda is to push for an expanded foreign worker program (which costs Albertans jobs), and an unlimited right to export raw product (which costs Albertans jobs). Stelmach should have gone after them on both of these issues. At the very least, he should have pointed out their mind-boggling hypocrisy.

  4. Anonymous7:01 pm

    The Dean of the U of A School of Business correctly noted that while they may not be any immediate decrease in stock prices, our reputation among businesses and business leaders will be tarnished for many years to come (via the rewriting of contracts).

    Albertans will decide whether or not Stelmach's decision is good for our province in the next election. I would like to see a poll of whether or not Albertans believe Stelmach made the right decision.

  5. Boy Anon @ 10:26 say something seriously short of insightful, substantial nor anything remotely helpful in his above commentary I must say.

    More trolls are coming out from the far right. They are mimicking Harper and resorting to bullying.

    This may be because they lack character and are now reacting from fear because they are being beaten down. They are rapidly loosing control of power and their electoral base is eroding too.

    Bye Bye!

    BTW - I do know Alberta has been in the oil sands business for 40 years. This year the very first reclamation certificate requested by industry had been made. Media indications are it is insufficient.

    The conventional business has lots of reclamation catch up to do too.

    Contaminated oil and gas sites are all too often being ignored and they need industry attention now too.

  6. Anonymous8:37 am

    One unidentified panelist calls the Premier's royalty framework "blatant deceit" and the panel's consultant, paid by Alberta Energy, calls the royalty policy "highly deterimental". These are the very people you were thanking two days ago, Ken. At least van Meurs had the courage of his convictions. The unidentified panelist not only has no class, but is gutless and spineless, in my opinion.


  7. Whatever Ken, the government caved and left billions of dollars on the table. The price of oil is going to skyrocket over the next decade and there is no justification for not completely implementing the report. This is yet another betrayal of Albertans by this inept regime. Let's have an election so we can throw the turkey's out.

  8. Peter1:26 pm

    If big oil's credibility is lacking (and I agree it is) why are Stelmach and Taft putting up such weak proposals for royalty reform?

    We own the resource, and a 20% increase in royalties takes us from the bottom of the world pack to somewhere near the bottom.

    Alberta gives big oil a stable place to do business, with a huge reserve of bitumen. We shouldn't be selling ourselves short. Alberta should have one of the highest royalty rates, not the lowest.

  9. Ken, let's leave the Harper bullying allegations for federal issues.

    There are a great many of us who are onboard with Harper who are also onboard with Stelmach, yours truly among them.

    Apples and Oranges here... let's stay on track, friend.

  10. I agree Blake...apples and oranges. Some people think the federal scene is relevant these days. It sure isn't to Alberta or Albertans.

    We can't even get a phone call returned on mountain pine beetle support. All federal funds are going into BC, not that they don't have a problem but that is not the only place where the problem exists.

    I will return to federal issues once they are significant and timely again.

  11. Anonymous8:21 pm


    What are your views on the unidentified panelist who called the Premier's royalty framework "blatant deceit" and the comments of Dr. van Meurs that the royalty framework is "highly detrimental"


  12. Sam – thx for the comment. My thinking is evolving. I was surprised (and not) at the panelist who made the deceit remark. That is an honestly held position based on some analysis undertaken by the panel on their models using the government’s decision.

    Remember a model is not the real world – merely representations of it…lots of other inputs have to come into play before we can trust that a model represents reality.

    Using an economic frame of reference the panelist’s comment has merit. Suncor and Syncrude have until 2016 until they have to face any new royalty reality - so why would they change their contract deals now – based on a pure business model? We are talking 9 more years - that is a geological eon equivalent in political time…and the business model allows them to wait it out. Who knows the extent of political changes Alberta may se in the next 9 years.

    I understand the revenue projections ($1.4B) on the Stelmach approach depend on them adopting the new deal in toto - and soon. They are actively engaged with the government talking - but do we know what the deal will be? Will it be open and transparent as the Premier has promised and campaigned on? I still trust Ed Stelmach but he still has some serious proving to do. So I am suspending any cynicism and disbelief based on the fiasco that the old Klein regime has proven to be …but Ed needs to show me he is different in realty - not in theory or rhetoric.

    If Alberta Energy is the lead negotiator on the government side with Suncor and Syncrude – based on past experience I will undoubtedly doubt the veracity of the outcome and the end results of any deal. The breach of trust embedded there and proven is too long and to profound for any benefit of the doubt to attributed to that department. I do not trust the current players on oil sands royalty collection at all any more based on the AG Report.

    I have problems with bitumen pricing being fair and we need to get any gold plating costing out of project costs that are being set off against revenues for royalties if they are to be still based on net profit. Net profit for royalty calculations is a mugs game for the public interest.

    There is lots good in the Stelmach deal politically - but I am starting to doubt the economic benefit - and that is what it is supposed to be all about...right?

    I am now thinking there is a whole bunch more thinking to do.

    Reinstating the severance tax would solve the Suncor Syncrude problem because we could level the playing field because they would pay the major portion of such tax and the old royalty deals would be fine to stay as they are.

    However, for what I think are ideological reasons, our government did not want to raise taxes and did not want to create a new one. I would revisit and reinstate the severance tax and terminate the Suncor Syncrude royalty deal negations and sole the level pa=laying field that way…they would be the biggest if not the only contributor to such a tax – short term. For the record I hold Suncor shares.

    Recent talk about a tax reduction for Albertans due to oil royalty revenues is a good political move but it distorts the debate away form are we getting our fair share now and for future generation.

    That is the bottom line question and I now have questions I didn't have on Thursday. Lots to think about for sure.

    I hope we get some serious comments on this and not just the shallow self-interest crap we see from to many Anonymous “contributors.”

  13. Anonymous7:49 am

    I don't have a problem with the panelist making an assessment of the government's royalty framework. The issue I have is that the panelist has chosen to remain anonymous and has run the economics based on a model that was prepared using my tax dollars.

    I believe that the analysis prepared by the anonymous panelist should be made public. I believe the same of the email analysis made by Dr. van Meurs which was provided to the Calgary Herald.

    It would seem that you have information that Albertans such as myself are not privy to. I would appreciate if you could post this analysis on your blog.


  14. ken chapman9:32 am

    Good morning Sam - I don't think I am privy to information Albertans don't have. I don't knw amore that what I am reading in the newspapers.

    I have some advantage in understanding the context and history of the panel's process and reasoning because I have had several conversations with some of panel members.

    I will still be posting extensively about the royalty regime because I think the Stelmack decisions is merely getting us to the starting line. We have to see how the execution of this significant change in Alberta economics and governance speheres unfolds.