I know it’s late and I know you’re weary. But this Blogger (thoughtinterrupted) captured so much of what I saw and felt with Mr. Levant’s guest spot on Don Newman’s Politics show yesterday.
Not all of us Albertans - in fact the vast majority of us are not anything like Mr. Levant in terms of view and values. He sure does fit the bill for the wetsuit wearing Stockwell Day model of what too many in the central Canada media likes to portray as the “typical Albertan.”
Expand your Alberta based Rolodex Mr. Newman and do the province - and the country a favour.
Tuesday, September 25, 2007
A Reality Check on Oils Sands Costs and the Impact on Albertans.
Let’s get something straight about oil sand project costs. The oil sand project developers total project costs are paid by the citizens of Alberta in forgone royalties. This is under the current regime and would continue under the recommendations of Royalty Review Report. Only 1% of gross revenues are due as a royalty until all project construction, financing and operational costs during a project build and prior to plant production.
Sure government get taxes on the industry activity from personal income taxes on citizens who earn a living from working on are with the various projects. They get corporate taxes on net profits again – after all expenses are paid.
With that deal from Albertans why would project developer’s care about cost over runs? They end up being paid 100% by deferred royalties by Albertans in any event. Even after project costs are recovered and the royalty kicks in, the current 25% and the proposed 33% royalty of oil sands is only on NET PROFITS. Again all developer operating and related costs of a plant are deducted before royalties are calculated and charged. If a project has a net profit of 10% ( a modest assumption) that is the amount the royalty is calculated against - nothing more.
Besides project costs are management decisions in the hands of the corporations. If they are too high then management of the corporations needs to control them or make alternative arrangements. Like howabout spreading out the projects so they do not all chase the same workforce and suppliers at the same time and drive up prices for labour and materials.
When an oil sands project has a doubling of costs (and that seems to be the norm) they don’t even have to go back to further approvals from the EUB to have the impacts reviewed again. Those increased costs change the essence of the approvals and are not neutral on the rest of the Alberta economy nor the economy in the rest of the Canada. The project managers don’t have to consider the increased cost and accelerated project approvals might have on cumulative impact on housing prices, inflation, wage escalation and competition with other sectors or if municipalities can afford to compete for steel and concrete for public infrastructure.
At at high oil prices they can absorb the cost increases handily so they don’t seem to worry about the implications to other on such decisions. They get to unilaterally turn the entire province into what Fort McMurray has become...thank to the benign neglect of the Klein regime to the regional needs. IN fairness it was the oil sand companies working in conjunction with the municipality that did the calculation and delivered the needs assessment to the Klein government - only to be ignored at the political level. I know because I was on the team with industry and the regional government that wrote and presented the Wood Buffalo Business Case to the Alberta government in 2005.
To say high costs for project is a barrier and royalties are to be kept as they are is rich given who makes the decisions and that the rest of us end up paying the pipers. If that is not infuriating enough, I understand the oil companies have had record sustained profits in the recent past. Here is the kick in the head. Apparently senior people in some companies have had seven figure annual bonuses AND those costs are seen as project costs as well so the rest of us get to pay for them too.
Please you scions of the Alberta energy industry - say and prove this bonus bulls##t ain’t so. Inquiring minds want to know.
Sure government get taxes on the industry activity from personal income taxes on citizens who earn a living from working on are with the various projects. They get corporate taxes on net profits again – after all expenses are paid.
With that deal from Albertans why would project developer’s care about cost over runs? They end up being paid 100% by deferred royalties by Albertans in any event. Even after project costs are recovered and the royalty kicks in, the current 25% and the proposed 33% royalty of oil sands is only on NET PROFITS. Again all developer operating and related costs of a plant are deducted before royalties are calculated and charged. If a project has a net profit of 10% ( a modest assumption) that is the amount the royalty is calculated against - nothing more.
Besides project costs are management decisions in the hands of the corporations. If they are too high then management of the corporations needs to control them or make alternative arrangements. Like howabout spreading out the projects so they do not all chase the same workforce and suppliers at the same time and drive up prices for labour and materials.
When an oil sands project has a doubling of costs (and that seems to be the norm) they don’t even have to go back to further approvals from the EUB to have the impacts reviewed again. Those increased costs change the essence of the approvals and are not neutral on the rest of the Alberta economy nor the economy in the rest of the Canada. The project managers don’t have to consider the increased cost and accelerated project approvals might have on cumulative impact on housing prices, inflation, wage escalation and competition with other sectors or if municipalities can afford to compete for steel and concrete for public infrastructure.
At at high oil prices they can absorb the cost increases handily so they don’t seem to worry about the implications to other on such decisions. They get to unilaterally turn the entire province into what Fort McMurray has become...thank to the benign neglect of the Klein regime to the regional needs. IN fairness it was the oil sand companies working in conjunction with the municipality that did the calculation and delivered the needs assessment to the Klein government - only to be ignored at the political level. I know because I was on the team with industry and the regional government that wrote and presented the Wood Buffalo Business Case to the Alberta government in 2005.
To say high costs for project is a barrier and royalties are to be kept as they are is rich given who makes the decisions and that the rest of us end up paying the pipers. If that is not infuriating enough, I understand the oil companies have had record sustained profits in the recent past. Here is the kick in the head. Apparently senior people in some companies have had seven figure annual bonuses AND those costs are seen as project costs as well so the rest of us get to pay for them too.
Please you scions of the Alberta energy industry - say and prove this bonus bulls##t ain’t so. Inquiring minds want to know.
Stelmach Heckled at the Empire Club in Toronto
Premier Stelmach was heckled at the Empire Club speech in Toronto today over environmental concerns. My friend, crisis management and media relations specialist and fellow Blogger Allan Bonner was there and here is what he has to say about what happened.
The Edmonton Sun has a piece on the Empire Club - Stelmach event too.
The Edmonton Sun has a piece on the Empire Club - Stelmach event too.
Stelmach Wants More Royalty Review Input and Analysis
The Government of Alberta just issued a news release indicating that “While the formal consultation is over, we have not stopped listening. We want to make sure that people how have comments send them to the right place so we can consider this input as part of the review process.”
Nothing wrong with that per se and this initiative may be an obvious admission by the Alberta government that the old style of public consultation is not as effective as it should be at getting authentic citizen input. So citizens of Alberta here is your contact channels for your further input into the Royalty Review Report findings and process...www.alberta.ca and 427-0265. Get at ti and have your comments and concerns over the Royalty Review Report known to the powers that be. And you don’t even have to register as a Lobbyist to do this.
If you do not engage and the powers that be may very well make these decisions behind closed doors (again). If citizens of Alberta value accountability from their government to be reality not rhetoric they better start making those expectations known…loudly and clearly.
It looks like the energy industry gets their very own separate channel of continuing input and communications through the very capable Deputy Premier. He is said to “be the lead minister liaising with the energy industry.” This was the same approach used with the Mayor of Calgary and we saw how the municipal funding formulas were biased against Edmonton at the end of the day.
I am very wary about this approach. I expect everything that the industry says and presents to the government in this further consultation process will be fully disclosed by the government as the original inputs were done in public. This ahs to be part and parcel of a new spirit of an open, accountable and transparent government. I don't understand why doesn’t the government use the new all-party Standing Committee on Resources and Environment and have Industry make their cases there – in public and televised? The next scheduled meeting is October 2 so it is timely.
The Royalty Review Reports has some good advice in this regard too. At page 18 of the Executive Summary the Panel says:
“The government of Alberta must implement means to gather and assess the workings of all aspects of revenue policy and collection associate with energy resources in the province. This must be done on behalf of the citizens of Alberta, and its findings must be made public and have the highest degree of credibility. It must not be a confidential exercise internal to the government.”
Here is the strangest development of all. The Royalty Review Panel used Department of Energy data, senior staff and their advisers in determining what was going on with the industry-government relationships on resource revenues. The Department of Energy was chastised in the Royalty Review Report. The news release says the Minister of Energy is to “lead a technical analysis of the report.”
Nothing wrong with that per se and this initiative may be an obvious admission by the Alberta government that the old style of public consultation is not as effective as it should be at getting authentic citizen input. So citizens of Alberta here is your contact channels for your further input into the Royalty Review Report findings and process...www.alberta.ca and 427-0265. Get at ti and have your comments and concerns over the Royalty Review Report known to the powers that be. And you don’t even have to register as a Lobbyist to do this.
If you do not engage and the powers that be may very well make these decisions behind closed doors (again). If citizens of Alberta value accountability from their government to be reality not rhetoric they better start making those expectations known…loudly and clearly.
It looks like the energy industry gets their very own separate channel of continuing input and communications through the very capable Deputy Premier. He is said to “be the lead minister liaising with the energy industry.” This was the same approach used with the Mayor of Calgary and we saw how the municipal funding formulas were biased against Edmonton at the end of the day.
I am very wary about this approach. I expect everything that the industry says and presents to the government in this further consultation process will be fully disclosed by the government as the original inputs were done in public. This ahs to be part and parcel of a new spirit of an open, accountable and transparent government. I don't understand why doesn’t the government use the new all-party Standing Committee on Resources and Environment and have Industry make their cases there – in public and televised? The next scheduled meeting is October 2 so it is timely.
The Royalty Review Reports has some good advice in this regard too. At page 18 of the Executive Summary the Panel says:
“The government of Alberta must implement means to gather and assess the workings of all aspects of revenue policy and collection associate with energy resources in the province. This must be done on behalf of the citizens of Alberta, and its findings must be made public and have the highest degree of credibility. It must not be a confidential exercise internal to the government.”
Here is the strangest development of all. The Royalty Review Panel used Department of Energy data, senior staff and their advisers in determining what was going on with the industry-government relationships on resource revenues. The Department of Energy was chastised in the Royalty Review Report. The news release says the Minister of Energy is to “lead a technical analysis of the report.”
None of this fiasco is the current Minister’s fault but why on earth do they need a technical analysis of the report findings when it was the DOE data that was used with assistance of departmental staff and advisers who helped the Panel do the review in the first place? Surely they would not let any inaccuracies of a “technical” nature be included in the final document! What is this all about? If industry has a rebuttal on the figures and analysis – let them put it forward. Let’s not have another Melchin kind of faux Royalty Review when we were told “Don’t Worry – Be Happy – Your government has it all under control.”
The mandate of the Royalty Review did not allow for infrastructure, growth pressures and environmental issues to be considered in the public consultation. Too bad but understandable! Since the government has “…not stopped listening” Albertans ought to feel free to use this invitation to have input into the government at “the right places” so it can consider this input as well.
If industry gets a second kick at this – so should citizens. Wake up Alberta and get engaged. The opening sentence of the new release quotes Premier Stelmach: “The decision on the royalty report will affect Alberta and our energy sector for decades to come.” He can say that again - but the final decision his government will make will affect all Albertans in all walks of life and future generations too.
The mandate of the Royalty Review did not allow for infrastructure, growth pressures and environmental issues to be considered in the public consultation. Too bad but understandable! Since the government has “…not stopped listening” Albertans ought to feel free to use this invitation to have input into the government at “the right places” so it can consider this input as well.
If industry gets a second kick at this – so should citizens. Wake up Alberta and get engaged. The opening sentence of the new release quotes Premier Stelmach: “The decision on the royalty report will affect Alberta and our energy sector for decades to come.” He can say that again - but the final decision his government will make will affect all Albertans in all walks of life and future generations too.
Hunter's Royalty Review Is a Tipping Point for Political Change In Alberta!
The Hunter Royalty Review Report is catching fire in the media and in the consciousness of Albertans, with industry and now with politicians. It has captured the attention of Albertans and is about to reach a tipping point where it commands and dominates the primary focus and attention of the Alberta citizenry It will not be the ballot question in the next election but it will be the context setting concern around which the ballot questions are decided in the pending spring election.
Albertans want see some serious changes…including in their government, how it operates and what it pays attention. That is partly the reason Stelmach won the PC Leadership last December. That desire for change has not yet crystallized or coalesced behind an issue or an event that usually tips the politics of change a swell.
I have been waiting to see what will be or moment that captures essence of the concerns of Albertans. Would it be around the quality of life, managing growth or the ecological angst that is raging just below the surface of so many Albertans?
I think we have this political changing tipping point/crystallizing moment with the release Hunter Panel’s work on the royalty review. As proof consider the MSM and Blogosphere response, the letters to the Editors and the open-line radio show coverage. Then realize that in the almost 6 months of the RRR consultation they had 56000 hits on their website. In the four days following the report’s release they had 210,000 hits…and it is still growing. That is not an indication of a merely passive interest by Albertans.
The last such crystallizing moment that triggered massive political changes in Alberta was in 1993. That was when Laurence Decore as Leader of the Opposition stood up in the Legislature in Question Period and held his wallet high above his head. He asked the then rookie Premier, Ralph Klein, when the government was going to get its spending under control? The emotional context was if we did not do this we would not be able to face our children and grandchildren because of the crippling financial burden we would have left them. The political result was not if and when cost cutting would happen. It was about if the cuts would be “massive or brutal.” They were both - and done way too fast for effective planning and sustainable development – which Klein has admitted – was non-existent in his tenure as Premier.
To be fair there was a long term Strategic Plan prepared and presented to Caucus and for full disclosure I had a hand in its preparation. But Klein was a one-man show leader (kind of like Harper today). As Premier he not prepared to engage and push it through...so we ended up with drift and decline to the point the PC Party had to push him out of leadership.
IN the early 90's Albertans knew uncontrolled government spending was a serious problem and at that wallet raising moment the politicians finally caught on too. Today we Albertans know uncontrolled growth is a problem. Now we also have the Royalty Review Reports as evidence that the government has not been doing its most fundamental of jobs. Our government has breached its trustee role where we expect it to protect the best interests of Albertans. We can see form the Review findings that our government’s trustee role both in collecting and accounting for resource revenues and the responsible sustainable development of our non-renewable energy resources is wanting…very wanting indeed.
Will the rookie Premier Stelmach catch on and be as decisive, determined and disciplined as the early days of the rookie Premier Klein was in dealing with this fundamental concern of Albertans?
Whose government is it anyway? Albertans are about to let the political class - regardless of partisan affiliation - know in, no uncertain terms, the unequivocal answer to that question. Changes could once again be massive or brutal - or both and fast.
Albertans want see some serious changes…including in their government, how it operates and what it pays attention. That is partly the reason Stelmach won the PC Leadership last December. That desire for change has not yet crystallized or coalesced behind an issue or an event that usually tips the politics of change a swell.
I have been waiting to see what will be or moment that captures essence of the concerns of Albertans. Would it be around the quality of life, managing growth or the ecological angst that is raging just below the surface of so many Albertans?
I think we have this political changing tipping point/crystallizing moment with the release Hunter Panel’s work on the royalty review. As proof consider the MSM and Blogosphere response, the letters to the Editors and the open-line radio show coverage. Then realize that in the almost 6 months of the RRR consultation they had 56000 hits on their website. In the four days following the report’s release they had 210,000 hits…and it is still growing. That is not an indication of a merely passive interest by Albertans.
The last such crystallizing moment that triggered massive political changes in Alberta was in 1993. That was when Laurence Decore as Leader of the Opposition stood up in the Legislature in Question Period and held his wallet high above his head. He asked the then rookie Premier, Ralph Klein, when the government was going to get its spending under control? The emotional context was if we did not do this we would not be able to face our children and grandchildren because of the crippling financial burden we would have left them. The political result was not if and when cost cutting would happen. It was about if the cuts would be “massive or brutal.” They were both - and done way too fast for effective planning and sustainable development – which Klein has admitted – was non-existent in his tenure as Premier.
To be fair there was a long term Strategic Plan prepared and presented to Caucus and for full disclosure I had a hand in its preparation. But Klein was a one-man show leader (kind of like Harper today). As Premier he not prepared to engage and push it through...so we ended up with drift and decline to the point the PC Party had to push him out of leadership.
IN the early 90's Albertans knew uncontrolled government spending was a serious problem and at that wallet raising moment the politicians finally caught on too. Today we Albertans know uncontrolled growth is a problem. Now we also have the Royalty Review Reports as evidence that the government has not been doing its most fundamental of jobs. Our government has breached its trustee role where we expect it to protect the best interests of Albertans. We can see form the Review findings that our government’s trustee role both in collecting and accounting for resource revenues and the responsible sustainable development of our non-renewable energy resources is wanting…very wanting indeed.
Will the rookie Premier Stelmach catch on and be as decisive, determined and disciplined as the early days of the rookie Premier Klein was in dealing with this fundamental concern of Albertans?
Whose government is it anyway? Albertans are about to let the political class - regardless of partisan affiliation - know in, no uncertain terms, the unequivocal answer to that question. Changes could once again be massive or brutal - or both and fast.
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