Then Stelmach says “… the two Ministers will bring that forward to caucus.” It is the latter comment that scares me.
It would be prudent for the Premier to be personally in on any and all meetings with the oil industry. He needs to hear first hand what they have to say. It would also be appropriate for the details of the oil industry problems and presentation materials to be released publicly too…ideally in advance so the resource owners can know what the industry has problems with and why.
It would be prudent for the Premier to be personally in on any and all meetings with the oil industry. He needs to hear first hand what they have to say. It would also be appropriate for the details of the oil industry problems and presentation materials to be released publicly too…ideally in advance so the resource owners can know what the industry has problems with and why.
This is not the stuff of deal making behind closed doors, In fact as a show of good faith it would behove the oil industry representatives to go a step further and act as if the Lobbyists Act was already in force and make every effort to voluntarily comply over their issues.
There are indications in the Royalty Review Report that the Department of Energy had difficulty being forthcoming with the Review Panel because their data was seen as unreliable. The Royalty Review Report is reported as saying the Department of Energy is in a difficult conflict position because it wears so many hats. For those reasons alone it would be advisable for the Premier to keep control over this file and not delegate it to Energy but keep them involved.
As for delegating it to Finance that too would be a mistake. One has to merely remember the current Minister was once kicked out of the PC Caucus for making up stories about knowing where there were alleged "skeletons." Has he even kept his promise to disclose his leadership campaign contributions – and it has been 10 months. The Premier would be legitimately cautious about the credibility of any briefing from that Minister about such a critical aspect of Alberta’s future.
There are indications in the Royalty Review Report that the Department of Energy had difficulty being forthcoming with the Review Panel because their data was seen as unreliable. The Royalty Review Report is reported as saying the Department of Energy is in a difficult conflict position because it wears so many hats. For those reasons alone it would be advisable for the Premier to keep control over this file and not delegate it to Energy but keep them involved.
As for delegating it to Finance that too would be a mistake. One has to merely remember the current Minister was once kicked out of the PC Caucus for making up stories about knowing where there were alleged "skeletons." Has he even kept his promise to disclose his leadership campaign contributions – and it has been 10 months. The Premier would be legitimately cautious about the credibility of any briefing from that Minister about such a critical aspect of Alberta’s future.
I hope you proceed with caution Mr. Premier and hear out the industry concerns. They better are based on facts supported by current evidence and not on a 1997 report like in the earlier presentations of some industry submissions to the Royalty Review Panel.
And please Mr. Premier, what ever you do, get your information on this critical issue first hand.
Ken:
ReplyDeleteOnce again, you are suggesting that Alberta Energy data is unreliable. But the Royalty Review Panel used the simulation models maintained by Alberta Energy to conduct a major portion of its analysis. So, in essence, you are suggesting that the Panel's recommendations is based on unreliable data from Alberta Energy. I would suggest that you carefully read page 1 of the Sensitivity Analysis for further background.
More room to manoeuvre
ReplyDeleteRoyalty report allows Stelmach chance to fine-tune new terms
Calgary Herald
Thursday, September 20, 2007
Premier Ed Stelmach's government cannot ignore the royalty review it asked for, but neither should it adopt it paragraph by paragraph, as review-panel chairman Bill Hunter demanded last week, saying it should not be "cherry-picked."
The report is a radical document, here and there recommending arbitrary measures over market solutions, that old contracts not be grandfathered, and treating consultation with industry as a barely necessary inconvenience.
Yet, strangely that all works to Stelmach's advantage.
For, change is in the offing, and the energy industry, especially that part of it working in the oil sands, knows it. The 1997 agreement that coaxed today's extraction complexes into existence, has more than done its job. It makes sense to rewrite the rules so that future projects yield a higher return to the taxpayers.
The problem for any Alberta government would be the howls emanating from the industry.
Enter Hunter, with "Our Fair Share." By presenting such an extreme solution, it gives Stelmach room to come back with less onerous terms, that would still extend the province's total take -- even if not by the $2 billion that Hunter says would have come its way, had his principles been applied to 2006 production at 2006 prices.
Where Stelmach can easily give is in dropping such recommendations of the Hunter panel, as that old contracts not be grandfathered.
Alberta's energy industry has been built on trust, and the expectation that a deal made with government, would stay made. Yet, this report effectively proposes the province unilaterally terminate contracts entered into in good faith between former governments and investors, and arbitrarily establish new ones.
It was a surprising, even offensive, recommendation. One wonders how rich last year's $2.1 billion bonus bids would have been, had the Hunter review's proposals governed the market.
Nor is it conducive to investment that consultation with industry be for appearances sake only. Speaking of a new regimen to establish a market price for bitumen, for example, the report first dismisses market forces as "unlikely to resolve this issue in the best interests of Albertans," then continues, "Consultation for this purpose, as a point of clarification, would not entail or imply negotiation nor is it intended to introduce any sense of veto power or consent requirement on the part of the oilsands industry."
Stelmach should be able to give that away with little fuss, as well. Then, he may start to pick cherries.
While high oil prices do not translate directly into surplus profits -- exporters lose on the Canadian dollar's galloping value much of what they make on oil's galloping price denominated in US dollars -- industry has this ace: An insatiable market, just across the border, in a tense world, with the ability to pay. A government that acknowledges its higher costs, and defers to Alberta's tradition of honest dealing, can reach a satisfactory arrangement with industry.
Above all, Stelmach is as entitled as the Hunter panel -- as leader of an elected government, more so, perhaps -- to decide what is, in fact, fair.
It is an unfortunate hole in the Our Fair Share report, that nowhere does it define "fair."
What is fair? An agreed rate of return on investment, or revenue? A 50-50 split between Alberta and the producer? Two thirds-one third, as Hunter suggests for oilsands and natural gas? To the extent the report answers the question, it infers that Alberta should be in the middle of a pack that includes countries with vastly differing geologies and recovery costs, and not a few political systems.
To that point, it is hardly an argument for Alberta being shortchanged, that it squeezes less from producers than Angola, or Venezuela. Fair, then, becomes what Hunter thinks is fair.
And, that's fair enough, as long as everybody knows there's no objective standard in use here, and that Hunter appears at home with arbitrary dictums.
He presents his report as a whole prescription for Alberta's royalty future, but it would be better treated as the opening bid in a process to recalibrate the province's royalty structure.
Stelmach and his cabinet must examine it carefully. Then, they must decide what they think is fair to both Albertans and the industry, and act accordingly. But make no mistake, there is no question industry will pay more: The question is: What is really fair?
When tenants (oil companies) start dictating to the landlord (Albertans who own the oil) what rent the landlord should charge, we are in socialist la-la land. This is the implication by all the anonymous whines on Ken's blog.
ReplyDeleteWe in Alberta own the only vast oil reserve allied to a stable government and proximity to the U.S. market.
We have been charging a Chevy lease rate for a top-line Mercedes for way too long.
The Energy stats are deficient because of what information Energy DIDN'T ask for.
The stats it did collect are valid and they are the basis.
Charging a market rent is what most landlords do.
Yet the alleged free marketers in the oil patch and their anonymous apologists lead the bleating for free rent.
Enough, Already.
Let me get this straight. The Energy stats are deficient because of what information Energy didn't ask for. But the stats it did collect are valid and they are the basics. So what you are saying is the stats are deficient but valid. As the owner of the resource (and I am not associated with the energy sector), I want stats that are complete and valid. I assume the Panel did as well.
ReplyDelete