Here is a link to an interview Satya Das did with the Toronto Star that ran last Saturday in their business section. It is a strong statement that says Albertans need to start acting like owners of their resources and demanding better public policies from their government and more accountability and revenues from the energy industry.
That means the citizens of the province need to take back some political control and make demands of the political class to better represent the public interest and not just the interests of the resource industry - the tenants! The Premier promised to make some changes coming out of the 77% party support at the PC AGM last week end. Here is another area that needs some serious policy changes by the Premier - especially in royalty revenues and reclamation responsibilities.
The royalty rates for energy resources are ridiculously low compared to all other energy jurisdictions. Alberta is using non-renewable resource revenues as substitute for a responsible rate of taxation that would fund a pay-as-you go approach to the public interest. What we do now is mortgage the future of our children with social and environmental problems and precious little long term value added benefits from the oilsands in particular.
The Lougheed legacy of saving a significant portion of the resource revenues in the Heritage Trust Fund has been dishonoured for too long. It is time to take the money from royalties off the policy and political table. We should make a stretch goal to save 80% of those revenues in the Heritage Fund as our legacy to future generations. Then we need to tax ourselves at the level needed to pay for the necessary operational needs of the province that we decide are in the public interest. This is instead of the current model of constantly subsidizing the energy industry and beggaring everybody else.
The long term benefits of the Alberta energy resources are being squandered by poor planning, lax royalty collection and revenue policies that favour short term industrial growth and ignoring longer term potential benefits and turning a blind eye to the ecological and social costs of unrestrained growth.
Time to wake up Alberta. Time to dust off your citizenship and start paying attention to what is going on. Time to take on the responsibility of citizenship again. Time to get informed and involved in the politics of this province in a positive way. Indifference is a luxury Albertans can't afford any more. The world is run by those who show up.
Learn more about Satya's ideas for the future of Alberta in his book Green Oil
Bumbling Ed just received a party endorsement. How are you going to change his little mind?
ReplyDeleteAnd the Wildrose Alliance said during the royalty review, "Leave the conventional oil and gas royalty system as it is." And these are the competition?
ReplyDeleteThis is exactly what has to happen. We need a tax regime which supports operating expenses.
ReplyDeleteThe PCs have many PR people and these people have "psyched the MLAs right out of their socks." Our MLAs are no longer in touch with reality.
Lots of commentary. Wondering how many of those attended the convention/worked on the last campaigns of anybody/have direct experience and or expertise on any of these issues. As Satya said: "The world is run by those who show up." ...and I said...The rest complain.... and those who have to resort to ad hominem debate, usually don't have any other ammunition.
ReplyDeleteAlberta conservative politicians love to think of themselves as the Texans of Canada (not that this is a positive perception). That self-perception leads them to believe that the oil resource and an apparent refusal to recognize the environmental impacts make Alberta somehow "different" than the rest of Canada. Meanwhile Texas has become the largest producer of wind and other renewable energy sources in the U.S.. It might be nice for our Texans to take notice.
ReplyDeleteWhat I find most curious about this Royalty "debate" is the veiled threat from the Energy Producers that if the Alberta government raises the royalties to the level that is comparable to other jurisdictions - why they'll just "pull up stakes and move out".
ReplyDeleteTo where?
I was working in the energy support sector in 1982 when the NEP came in; I came to work one morning, and everybody above me in my unit was "gone". For the next 8 months, all I saw was drilling rigs moving south to the US.
But that was then and this is now.
Conventional oil is, for all intents (at least in Alberta) "history". It's either in the oilsands or it's not there at all.
Now, 35 + years ago, there was still a fair bit of conventional oil to be found in the US; but that is no longer the case. And there are no oilsands in the US.
The major players have invested literally billions of dollars in the oilsands; are they about to write off that investment and go - where?
I think not.
The profits in the oil & gas sector in Alberta have been, for decades, nothing less than obscene.
I have no problem with a "reasonable" profit; but I do have a problem with obscene profits.
At the expense of the actual owners of the resource - which is each and every one of us.
When are Albertans going to wake up? For every one that lives in the $1M home and drives a $100K car, there are at leat 10,000 that live from paycheque to paycheque - if they even have a paycheque.
But it's the 1 in 10,000 that call the shots.
We all need to give our heads a collective shake. We're not going to wake up tomorrow having won the lottery, and we're not going to wake up tomorrow finding out we've just been promoted to President of a major oil company.
So why do we continue to vote like we live in fantasyland?
he Alberta govt is currently funding operations with Heritage Fund returns. How are they going to add to it when they can't even leave it alone?
ReplyDeleteHow can a 80% target be taken seriously when a 30% target has been continuously rejected?
Ken starts to suggest that the bulk of operations should not be funded by "non-renewable resource revenues" but then argues that this highly volatile revenue source ought to be made into an even BIGGER component of tax revenue generation! Or am I missing something there?
Lest I be perceived as just going negative allow me to suggest moving to a consumption based taxation system instead of a production based (including oil and gas production) system. Excessive consumption is what is burning up the Heritage Fund and harming the environment. Want to use water? How about taxing it. Want to use carbon? Why not tax it?
Respectfully Brian, I think you are missing something. Let me try and clarify. I don't see royalties from resource revenues as a component of tax revednue gereation. I see them as investment capital that should be used for further capital investment - not current operating costs.
ReplyDeleteGOA uses the interest income off the Heritage Fund for general revenue purposes. That captial fund ought to be expanded based on a political commitment to invest the royalty revenues on behalf of Albertans. And then interest earned should be use for long term investment in social, human, physical and intellectual capital - and adaptation purposes. I woujld like to see R&D into conservation and energy alternatives, imporved literacy - the single biggest ROI for GDP gorwth in Alberta today. We don't need it to fund operating grants and for sure not for electing 4 more MLAs.
Getting a realistic return on royalties and then actually collecting what is owed is the first problem that the GOA has ignored for far too long - starting with the Klein era but continuing today.
General operations for government services should be paid by taxes on the current citizens not subsidized by stealing from the non-renewable natrual resource birthright of future generations...as we do now.
To say we are not going to raise taxes to pay for necessary current government means we have to reduce services, pressure the lower middle class to go even lower in theire standards of living with wage restraints, reezes and rollbacks. Heaven forbid the most wealthy in our society should be required to contribute to the common good in a progressive taxation model.
We skim off resource revenues into operating costs when they should be seen as pure capital and treated as investment capital...not as an increased credit card limit for government.
Royalties are merely rents paid by tenants (energy sector companies) for access to exploit natural capital resources for the benefit of investors, workers and SOCIETY - we forget that last group in the equation all too often.
I have heard that all those oil rigs that went south in 1982 ended up in the junkyard there, since the US was in the same worldwide recession that we were in.
ReplyDeleteBut I certainly agree that the resources belong to us and we have got to stop giving them away cheap.
However royalties are characterized, in the end they are just another factor that reduces the net present value calculations that corporate finance planners use to determine a yes/no decision on whether to undertake new investment. As much or even more important is the uncertainty surrounding the projected royalty payments since the driver is often not the numerator of a NPV calculation but the risk adjusted denominator.
ReplyDeleteIf one is going to talk about accumulating capital assets, evidence-based policy as distinct from ideology driven policy would mean leaving the door open to the possibility that so-called "Big Business" with a non-union workforce has a higher propensity to invest in R&D, training, new equipment, and plant modernization than a government with a unionized workforce and an electorate of live-for-today consumers. If "progressive" policy can be shown to add to the capital stock, then fine, but most policy people recognize that it is a trade-off. Say what one will about the IPCC, the primary advocate for the idea of man-made global warming, but its chief, Rajendra Pachauri, thinks the Canadian oil sands should simply be shut down. You can't accuse him of trying to have it both ways.
Serious environmentalism that minimized the cost to the capital stock would focus on the consumer with a carbon tax instead of going after industry.
You mention the book Satya Das is selling frequently, Ken, without advising readers of the relationship you have with Satya Das. What is the nature of your commercial interests, if any, in the successful marketing of Greenoil?
Hi Brian - it is hard to believe that people would not know that Satya and I are co-founders and co-owners of Cambridge Strategies Inc. and that Sextant, the publisher of Green Oil is an imprint of Cambridge Strategies. The links are as obvious as we can make them. But thanks for letting me state it again ;-)
ReplyDeleteAs for royalites they are a cost in the NPV calculations of investment. The upside for Alberta is we are next to the largest fossil fuel market on the planet, already the largest supplier wikth infrastructure in place to deliver and a friendly source with a real democracy, stable government and the rule of law, and we share a language and much of our culture. Plus when you buy our energy the proceeds are not used to fund terrorists that invade your country and demand you have troops oversees who are being killed to protect the energy supply - all under the guise of liberating those countires.
That should amount to a 35% royalty premium over the other providers.
Albertans need to realise that the Conservative government needs to go. They need to get over their liberalphobia and come to grips with the fact that they've allowed the Tories to cheat them over and over.
ReplyDeleteThe only way to take back power is to elect someone new.
Great comments from Brad. Can I quote you? It is good to see that there are still folks who think beyond the money!
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