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Tuesday, October 02, 2007

Tristone's Rebuttal of "Our Fair Share" is Unpersuasive.

The Tristone rebuttal of the “Our Fair Share” Royalty Review is not all that interesting or persuasive. It at least provides some serious analysis instead the rhetoric of others who have denounced the dire consequences of sharing fairly with Albertans.


They mostly say high costs and low prices for conventional and deep well gas means activity will decline drastically in the Western Sedimentary Basin if the "Our Fair Share" model is adopted and royalties go up for high producing profitable wells. They don’t for a minute suggest that idle contractors might reduce their prices to adapt to the marketplace realities. Tristone just seems to suggest the rest of us have to take a haircut on our economic rents instead.

They also say they make different assumptions and use different methodologies than the review panel did and surprise; they come up with difference conclusions. So what! The assumption behind the Tristone analysis seems to be that we have to keep the overheated economy and growth at all costs as a central goal. They essentially want maintain the status quo or to increase subsidies to aspects of the industry. That simply means the “benefits” are not to be shared fairly amongst all Albertans and the energy industry can continue to enjoy record profits on the backs of all other Albertans?

I love the Tristone quote at page 14 that says the Royalty Review Report “included inaccuracies, incorrect assumptions and leaps in logic that makes the data that drives the Panel’s conclusions highly suspect and requiring independent assessment.”

Fair enough, but the Auditor General Report comes to the same conclusions as the “Our Fair Share” Report. The Auditor General is a pretty independent assessor I’d say.

Tristone goes further to say “Without meaningful and accurate data, debate on royalty reform is not fruitful.” The AG and the Review Panel depended on the data provided by industry to the EUB and the Department of Energy. Please tell Albertans that the data supplied by industry is not “inaccurate.” It is the industry data after all.

Costs are high gas prices are low these days but times of late have been extraordinarily good. Perhaps some aspects of the energy industry have priced themselves out of the market and that is why they are not drilling. Maybe they need to sharpen their own pencils instead of asking All Albertans to forego a more than competitive rent.

Albertans are continuing to face unsustainable levels of economic activity. We need a breather and some time to catch up and to clean up the accountability of our government on energy revenue collections and calculations. If the conventional industry wants to keep busy in the meantime maybe they could start cleaning up the orphan well problems they have created and ignored. Maybe they need to spend some time to reclaim some of the unused roads, seismic lines and well sites they have ignored.

The tone I get from the Tristone analysis is it is all about growth at any cost and for protection of the conventional and deep well gas business in particular. Responsible and sustainable integrated growth is not in their consciousness based on what I read in this report. These are major concerns of ordinary Albertan however. And perhaps that is why this industry is currently having a difficult time earning respect for their positions on royalties.