Debunking Some So-Called Truths on the Royalty Review Report.

So here is the link to Charles Frank, the Business Editor of the Calgary Herald that some anonymous commenters on this Blog think is the most balanced informed and intelligent print voice on the issues surrounding royalties. Well he is definitely more balanced and informed than Lorne Gunter of the National Post but he is no more thoughtful or intelligent than Thomson and Pratt – or Lamphier on the issues and implications of past and future royalty issues in Alberta.

I would like to explore and agree with some observations and take issue with some of Mr. Frank’s other “Truths.”

Oil Industry Strategy at Royalty Public Hearings Badly Flawed:
1 Mr. Frank is right the oil industry strategy going into the province-wide hearings was flawed. They were not used to having to make their case to government in public and they are proving that they are not used to not having their way. The presentations they made were intentionally misleading. They were based on outdated information like a 10 year old expert consultant’s report. The Review Panel used the same expert consultant to update his report and he found the situation on the Alberta royalties was not longer amongst the most expensive, the just opposite now. The industry was caught with its pants down, and this was not the only time they were found to be misleading and embarrassing to themselves in this process.

2 Some oil industry presenters represented there businesses were in serious trouble but when asked to submit their Annual Reports they were showing record profits and describing the future in glowing optimist language. Again there were some in the oil and gas sector who were intentionally misleading and disingenuous. There are other examples showing that attitude continues to this day from some of the players in the patch. That was (and is) definitely a bad strategy especially when everyone is watching and you have qualified and knowledgeable Review Panel who are prepared to verify representations.

Review Panel Had Its Own Agenda:
3 No sir it didn’t. It had a mandate from the Premier with specific terms of reference and timelines. In fact the only “own agenda” the Panel had was actually discussed by them in the “Our Fair Share” Report. It noted that most of the public’s presentations were on growth, infrastructure and environmental problems with the oil industry. That was outside the Panel’s terms of references and they said that exclusion was an unfortunate limitation on the Royalty Review Panel’s work. If they had “their own agenda, it was also the Premier’s agenda and, based on presentations form citizens, it was the publics agenda too. If Big Oil doesn’t see that they are making another strategic error.

The Panel’s Expectation That Their Report Be Adopted in Total:
4 Mr. Frank takes exception to this representation. However he fails to put this representation in context. The Panel was to look at the entire current and future fossil-fuel energy sector from conventional oil and gas and oils sands but also including Coal Bed Methane, Syngas and even biomass to some degree. The various elements form and integrated systemic energy industry. The Panel dealt with it as an integrated systemic whole in its Report. That balancing and integration of interests is well represented in the final Report. To politically cherry pick and prefer one sector without looking at the implications for the rest is dangerous. We have just sent the disastrous impact of such selective politically driven ideological decision making in the Affordable Housing Task Force. Again we have all the interests and an expert panel provides an integrated whole-system solution that needed to be seen as in entirely. Politicians picked parts and pieces and the result was no real solution – just throw more money at the problem. The Royalty Panel’s approaches are a take it or leave it systemic option for the policy makers. It is complex stuff but the Panel brings clarity to the issues and concerns. Cherry picking recommendations based on politics is not going to resole the complexity or solve the problems. It will only make it worse.

5 To suggest the Panel “may not have considered all the relevant financial and economic data is obfuscation of the worst kind. They had full unedited access to all the data on the energy sector in the hands of the government and the regulators, except of course for individual corporate proprietary information. They had full unfettered access to the senior government administrators and all the third party consultant reports commissioned and provided to government. They were able to hire their own outside consultants without political interference. To see those industry titans and their hired hands now revising their stance using different data and different methodologies in an attempt to discredit the Panel’s work is not surprising but it is disappointing – and again a flawed strategy. If the industry had this better information and methodology, why did they not present it at the hearings? Are they holding back critical information from government? Are they making it up as they go along? None of this adds to the credibility of the industry or enhances the confidence of the public that they have anything except their own interests at heart as they exploit OUR resources.

Finally I agree with Mr. Frank hat the Alberta economy is not bullet proof. Much of investor confidence is based on mass psychology so we must be careful. That said we also have the current negative mass psychology that we are growing too fast, without a plan and no defined end targets or objectives other that to go as fast and furious as possible at any cost – so long and the oil prices can handle it. The Calgary Belt-liners live in this latter logic bubble and they have lost touch with the rest of Alberta. The bullet that can do in the Alberta economy can be not enough growth but it can also be too much growth too fast.

I have more observations on Mr. Frank’s “Truths” but this posting is already too long. I can assure you I will definitely be an avid reader of his from now on.

New York Analyst Calls Albertans Stupid Over Royalties - Has Not Read the "Our Fair Share" Report

I am off to do some yard work but I could not resist taking a moment to provide readers of this Blog with the link to Gary Lamphier’s column in today’s Edmonton Journal. This column is an example of a quality journalist at the top of his game. It does not hurt that he and I agree on the royalties and related energy industry issues either.

So be careful of who apparently speaks with "authority." As often as not, they don't know what they are talking about, have no direct experience and has vested interests to protect and promote...such as the so called "influential financial analyst" in the recent Globe and Mail piece and exposed in Gary's column today.

Big Money Meeting Behind Closed Doors Today with Deputy Premier

So the National Post reports that some of the large capital investors are meeting behind closed doors with Deputy Premier Stevens today to add to “the-sky-is-falling message that for the energy industry to pay a fair share of taxes and royalties will put Alberta into recession. While the next story in this link shows unemployment in Canada is at a 33 year low.

I am sure there is a need for some confidentiality in these discussion with Deputy Premier Stevens. But as one of our Trustees for our natural resources, I am sure he will fully disclose what his visitors have presented to him by the end of today. Albertan deserve to know and transparency demands it.

The Globe and Mail Report on Business front page below the fold story today is interesting too. The headline is “Wall Street to Alberta: Don’t be so Stupid.” An “influential New York based analyst with Oppenheimer & Co.” is quoted as saying raising taxes on industries that are the “lifeblood of your economy…It’s so stupid – I thought these people were more sophisticated than that.”

Speaking of a lack of sophistication, I wonder if this influential analyst has read the Auditor General’s Report. We were such rubes that we have left $6B of oil and gas royalties alone on the table since 2005. That would have paid for school repairs, teacher’s unfunded pension liabilities and increases staff wages to liveable levels in Alberta’s social services sectors so we would not be endangering lives of disables Albertans.

The “Influential Analyst” says Albertan should attract investor, not repel investors.” Sir, perhaps you have been out of the loop as to the facts in Alberta. We have $140B of investors from all over the world keen to participate in Alberta with a 1% pre-production royalty and a 25% - soon to be 33% production royalty payable on their net profits. Pretty damn attractive I’d say…and based on the amount of money coming in…pretty damn effective too.

I find this other item in the Globe story too. It says this past May the Alberta Finance Minister, Dr. Lyle Oberg “returned to the city (New York) to assure analysts and investors that the new government of Premier Stelmach was …committed to a business-friendly investment climate.” A quote attributed to “one American Canada watcher” who was at the Oberg speech says: “There was never any indication there would be a move like this.”

Strange that Dr. Oberg did not mention this in his May meeting with the money men of New York. The Premier had announced the review on February 16, 2007 and it was to report to Dr. Oberg by August 31, 2007. It actually reported on Sept 18 but that is a quibble. Makes you wonder how far you can trust someone who omits such key information doesn’t it!

Too bad the Canada watcher did not know that this now Alberta Finance Minister was once kicked out of the government Caucus for his “misleading statements” over Klein’s political skeletons. Could the $6B royalty boondoggle Auditor General Dunn discovered have been the “skeleton Oberg was talking about? If so why didn’t he say so?

Report Shows Calgary's Quality of Life is "Brutal"

I found this Editorial in the Calgary Herald today to be very informative and telling. A recent report card has been issued on the quality of life in Calgary and the results are termed “brutal.”

Noting the report card gave “barely” passing marks in most categories but 10 C’s and D’s in key community indicators like health, arts and culture, the gap between rich and poor, the environment and housing, which received a “D-.” Ouch.

The best score in the community based self assessment of life in Calgary was a B- in opportunities for learning and work. Speaking of work, Calgarians log more work hours in multiple jobs just to make ends meet than anywhere else in Canada except for the 46,000 people in the NWT. That is not much of a quality of life enhancement.

The editorial questions the science of the survey since it was only 600 who participated and in an on-line process. The kicker here really is that the survey was targeted at community leaders. That is powerful stuff. The community leaders are often the influentials and opinion makers and trend setters in any group, including citizens. What they say means something. They counts, have clout and cause changes.

To not have the usual Stats Can breakdown of demographic alignment is not a fault in such research because it is about informing public policy design for policy makers. Politicians are influenced mostly by community leaders because that is who they mostly talk to. What opinions are held by influentials is critical to impacting political and policy changes.

The Influentials are the ones who show up and get things done in a community. I would rather know what influentials are thinking, saying and doing than any so-called scientific survey. Especially if I am trying to determine what the opinion makers feel is important about a community’s quality of life and what needs attention.

Based on this brutal assessment of the quality of life in Calgary by key Calgarians, perhaps the Big Oil Beltliners will want to reassess their lobbying strategy currently aimed at intimidating Albertans and bullying the province all determined to keep the economic pot boiling and the economy overheated. They seem to think this should be done at any cost so long as the costs can be passed on to consumers and citizens.

They are happily aligned with the Libertarian movement that says keeping royalties low is keeping money away from government and that is a worthy goal in itself. It is however not providing the necessary funds for government help to solve the obvious challenges to living a quality life in Calgary today nor is it securing a positive future for the next generations of Calgarians either.

American Financial Advisor and Business Forecaster Recommends Investing in Alberta's Energy Sector

There are growing indications of an American recession on the horizon. The smart surviving American investor will be looking for secure investment alternatives. The Kiplinger Letter is advising Americans to invest in Alberta based energy income trusts.

Here are some key quotes that some in the Alberta based Big Oil would see as heresy because they are good news about the future of the energy sector in Alberta even considering a royalty increase.

"The trusts have recovered nicely from a big drop last year after Canada enacted legislation that would have the effect of forcing many income trusts to reorganize as corporations, effective in 2011. Currently, Canadian trusts operate similarly to U.S. royalty trusts and real estate investment trusts. As long as the trust passes through most of the income it generates to shareholders, it avoids or defers income taxes."

"Meanwhile, current yields on many of these trusts read like those of a roster of junk bonds issued by companies in bankruptcy: Harvest Energy (HTE), 17%; Canetic Resources Trust (CNE), 15%; Penn West Energy Trust (PWE) 13%, and Enerplus Resources (ERF), 11%. High yields generally suggest big risks, but how high can the risk be for trusts that own proven energy reserves?"

"There is optimism galore. And, frankly, there should be. Until the price of oil and gas starts to fall sharply, something that's unlikely unless there is a global recession, or Canada restricts investment in the energy sector, these investments offer about the best ratio of reward to risk that one can imagine. "

Albertans should not be terrorized or deterred from demanding a fair share of resource royalties. The doom and gloom rhetoric in some media is mostly a self-serving fear campaign coming from the Burghers in the Bubble of the Calgary Beltline.

More Industy Absurdity on Albertan's Resource Ownership and the Royalty Review

Hey Alberta, if you were unsure of the unvarnished corporate attitude about whose oil is it anyway, well Terence Corcoran’s column in the Financial Post today should clarify things for you.

Corcoran is a seasoned business writer and I have always seen him as Canada’s Milton Friedman. But if his observations today reflect the corporate lens and values as to who owns Alberta’s natural resources, then citizens and customers better wake up to what is on the horizon and assert our ownership rights through our government -as our TRUSTEE!

If Corcoran's comments represent Big Oil's attitude that is they who should ultimate owns and control the energy resources of Alberta then they need a reality check. Last guy who tried to assert inappropriate power over the citizens of Alberta's birthright to our natural resources was Pierre Trudeau and the NEP. Who do these Big Oil guys think they are - the reincarnation of Pierre Trudeau?

Corcoran’s final paragraph is the ultimate reduction of logic to the absurd. He alleges that “the real problem with the royalty issue is the degree to which the panel reinforced the legitimacy of the idea that Albertans collectively ‘own’ the resources through there government.”

Read the Canadian Constitution Mr. Corcoran, Section 92A (1) to be exact. Let me save you some time in looking it up. Here is the text:

92A. (1) In each province, the legislature may exclusively make laws in relation to
(a) exploration for non-renewable natural resources in the province;
(b) development, conservation and management of non-renewable natural resources and forestry resources in the province, including laws in relation to the rate of primary production therefrom; and
(c) development, conservation and management of sites and facilities in the province for the generation and production of electrical energy.

Do these guys who think this way not understand the Rule of Law?

His second absurd point is an extension of the first. He equates Albertan’s collective ownership to other counties in the world with state owned resources and tier history of “…an ugly record of plunder, nationalization and monarchical control at the expense of property rights and economic freedom.”

How out of touch is this fellow? To compare Alberta with Nigeria, Venezuela, Bolivia and Kazakhstan, as he and some other pillars of industry and commerce, including have recently done, is untrue and insulting to all Albertans. It shows how dangerously out of touch with Albertan and Canadian values some of these people really are.

Who and What is "www.getitrightalberta.ca"?

We see the energy industry pushing the slogan “Get it Right” in some much of their comments and communications. We now see a website that has a similar name…http://www.getitrightalberta.ca/home.asp Coincidence? Perhaps!

Is this really an independent group of concerned citizens who are behind the site? Or is there something else going on here? Watch the video on the site of the news interview. The “guest” is clearly vague about the pointed questions as to who these folks and what this “citizens initiative” is about.

This may be an old school and popular American PR technique very often used by big business interests. Big Tobacco and (Big Oil?) have been notorious for using this tactic. They form these “ghost sites” and phony organizational fronts to try and create an impression that there is a grassroots concerned citizen’s movement. That movement just happens to be 100% aligned with the cause and claims of the business or industry sector.

It is kind of like the Quebec police who were caught masquerading as protesters at the recent meetings between Harper and Bush. The keystone kops were clearly trying to incite a riot so their comrades could move in with full force to “quell” the “uprising.” At least they got caught and eventually “fessed up!”

I don’t know if that is the case with this website but my Liberal friend Davberta has done some digging as to who is behind this site and he asks some critical questions. Visit him and follow the links through the site – then make up your own mind as to who is pulling the strings on this puppet.

More respect and credibility is being forfeited here by the energy sector if they are using these misleading and manipulative tactics on trying to avoid paying a reasonable and fair share royalty amount.

They would be better advised to set up a Facebook group in support of their cause. It would show some creativity and integrity too.

Not Everyone In the Oil Patch is Threatening to Leave Alberta

It appears that the energy industry is not of one mind when it comes to the impact of increased royalties recommended in “Our Fair Share” review report.

The Calgary Sun is reporting that Enbridge is not following the herd using the same speaking points in the news releases that have recently been promulgated by some energy industry doomers and gloomers.

Interesting in this same Calgary Sun story is comments that clarify (sic) Talisman’s position. They are now repositioning their attempts to punish Alberta. Now they believe “…that public opinion isn’t fully informed.” They say “One of the reasons for Jim’s letter is to educate and inform – it’s important for the public to be aware.” “Jim” I believe is a former Talisman CEO. Shareholders must be wondering why is he still speaking for Talisman instead of the current CEO?) Could there be a difference of opinion between them?

So are we to understand that, as a public service, Talisman issued a news release saying they are pulling $500m of investment out of Alberta because of the “Our Fair Share” Royalty Review Report. Of course that is the reason. What else could it be?

Yes, upon reflection, I do feel much more “educated and informed.” I have a much more educated and informed. Now, thanks to Talisman tactics, I am much more capable of forming an “opinion.” I have a much clearer and more committed opinion of the kind of company Talisman is and how they “communicate.”

They say Talisman’s vow to divestment “is not meant to be threatening.” I don’t feel threatened. I feel insulted. And I think the recent polls showing 88% of Albertans - who actually own the oil and gas - and who believe the oil patch should pay more – are all also insulted.

Citizens of Alberta have never been so focused, so furious,at so many levels and in so many ways over their government's incompetence and the arrogance and intimidation efforts by some energy industry players.

Please appreciate this public opinion poll result is not intended to be threatening to Talisman or the Government of Alberta. It is meant to be a clear message that things are about to change. Those changes will be in royalties, revenues and relationships with both our government as our trustee and the energy sector as our tenants.

Petro-Canada Send a "Cooler Heads" Letter to Stelmach.

Petro-Canada is the next company to get in line to respond to the “Our Fair Share” Royalty review report. They have sent a “cooler heads” letter to the Premier seeking a “compromise solution.” They have acknowledged “that at higher oil and natural gas prices, it is reasonable for Albertans to expect higher revenues from royalties.”

They also believe the analysis of the “Our Fair Share” Royalty Report “contains material flaws.” They say; “If the report were enacted as is, we believe investing in Alberta would be severely impaired given prices today and those reasonably expected in the future. The result would be less total return to Albertan in both short and long term.”

According to the Auditor General we would already have a royalty revenue upside on the existing regime if we merely had a Department of Energy doing its job on the collection and calculation side. Albertans would be up some $6Billion. But that did not happen! There will be consequences no doubt.

The Hunter Royalty Review Panel used the GOA's the most current industry supplied and independent consultant’s numbers available in thier analysis. Royalties are not volatile like interest rates, currency rates or share prices. They are an economic rent concept embedded in a much larger context.

So what if “given prices today and those reasonable expected in the future” makes for a different set of end industry return calculations. The price of oil could crater or skyrocket base on geo-political forces alone not just markets. The Canadian currency exchange dynamics are just that dynamic. We are seeing central banks all over the world putting in billions of dollars to bolster the mortgage and some banks due to the sub-prime mortgage fiasco. They are also adjusting interest rates in response to this stupidity as well.

That volatility and risk assessment is the business of business. But no where in the energy producing world are the circumstances, everything considered, more stable and favourable, than in Alberta.

The business of our government as our trustee is to get us citizens a competitive and fair return from the exploitation of our natural resources in the form of taxes and royalties as well as environmental enhancements and in ways that these assets can be used in the service of the greater good.

Oil companies like all private enterprises have to worry about satisfying shareholder’s expectations at the end of the day. The amass resources like oil and gas leases, equipment, technology, expertise and employees to help serve those ends. But it is only the shareholder who votes in the Board of Directors who in turn hire the corporate managers and leadership. We citizens share the business risk with these managers and shareholders because we calculate royalties on net profits. We Albertans therefore only want quality companies with good corporate citizenship cultures and strong ties to our communities to be developing our resources.

The royalty payments are for access to the owner’s resources and they are rents - not taxes. They do not depend on income nor usually are they based on profits. In Alberta we risk share with the oil sands industry by only applying our royalty returns as a percentage of net profits. Albertans depend on these enterprises being profitable so we can get any royalty payment at all.

So to have some of them threaten to leave the province if we charge a competitive rent for our resources tells me something about their character and judgement. I, along with other Albertans, will start to wonder if they are the kind of enterprises we need to be doing business with in the first place. I am not tarring everyone in the Patch with this brush. I know and have worked for many oil companies who are amongst the very best operations and people I have ever met. But there are some who have forgotten who owns the resource and how it is supposed to work. That is mostly the fault of our past government the way I see it. An that has to be changed and straightened out real fast.

The energy industry is no doubt beavering away at their economic models and the impact the full implementation of the “Our Fair Share” would have. They are going to resist change because it is not in THEIR best interest. Government is about finding the balance – not the compromise – that best serves all of our interests.

The “Our Fair Share” Royalty Review is by far the best option for government to choose when all things and everyone’s interests are considered.

Talisman Says Its Reducing Alberta Investment Too - But Is It Really Due to Royalties?-

Here is the continuation of the energy industry political strategy – unnerve small town and rural Alberta – the Stelmach “base” - with fear mongering. Talisman is now musing in yet another “open letter,” this time to Premier Stelmach about withdrawing $500m of activity from Alberta if royalties go up.

It is a mere coincidence I am sure that on September 7th Talisman signalled in the Financial Post they were already thinking of cutting spending in Canada and the US by as much as 32% “…due to weak natural gas prices.”

This is positioning and posturing and classic issues framing to divert attention for the real issues. Royalties are too low and there is lots of room for them to go up. Secondly, our government have been breathtakingly inept at reviewing them and collecting them.

The Federal LIbera Adscam was touted as a $250m scam that was proven to be more like $40 million by Gomery in the end - and much of that loss was due to fraud. But it brought down a government, crippled the Liberals and may well have destroyed that political party in the process.

We have no indications of fraud at all in this Alberta royalty sham. But the Auditor General says we have about a $6BILLION loss due to royalty leakage caused by governance drift, incompetence and ineptitude.

Step 1 for Stelmach was to set up the royalty review. Good for him.

Step 2 for Stelmach is to implement it becise it is timely and fair and Albertans want it to happen. Otherwise;

Step 3 will see a lot of PC MLAs cleaning out their Legislature desks after the next election.

As Encana Leaves Alberta, Others Are Moving In!

EnCana, Talisman and Crescent Point Energy Trust have recently announced intentions to move investment out of Alberta because Albertans are being told by an expert panel and the Alberta Auditor General to demand competitive rents for their natural resources.

Others are moving in like Taqa from Abu Dhabi, British companies are scouting around to join the Chinese, Koreans, Norwegians, French and others as investment in Alberta’s energy sector continue to be vibrant and robust.

One EnCana shareholder recently told me he sent a letter to the Board questioning its logic about pulling out of Alberta, because it is the fastest growing, most stable and safest place on the planet to be in the energy business.

I was also pleased to see the recent announcement by Suncor Energy, that they are staying and investing in more cost effective technologies to replace natural gas as a clean heat and electricity source for their operations. Suncor is one of the most progressive and enlightened corporations in Canada, and this technology investment announcement proves it once again.

They have just found "several major investors" who are ponying up $100 million into GreatPoint Energy Inc. which has a technology to gasify coal, petroleum coke and biomass into natural gas. The process produces a pure stream of methane, produced much needed hydrogen and removes or captures mercury, sulphur and CO2 which Suncor intends to use for sequestration purposes. CO2 sequestration is a key initiative towards getting more production efficiency out of old oil wells in addition to reducing GHG emissions.

Oxford Properties are reported in the Globe and Mail today as giving "the green light to the second phase of a 1.2 million square foot office tower" in downtown Calgary with construction to start immediately. The story notes that this announcement brings the total "...amount of office space being constructed in downtown Calgary to around 5.6 million square feet." Toronto has only 3.4 million Square feet of space under construction. Who owns Oxford Properties? The Ontario Municipal Employees Retirement System...yes sir - an Ontario Pension Fund is bullish on Alberta too.

The industry bullies send out press releases, call people names and buy full page ads as “Open Letters to All Albertans” trying scare us with scenarios of economic doom and gloom and threats to leave Alberta.

There is a funny thing about Canadian values and paid advertising. A public opinion study showed that 80% of Canadians react negatively to such advocacy advertising…we think if they have to use paid advertising, they must have something to hide. Hmmm!

Alberta's Auditor General Says Higher Royalties Justified Even Beyond the Expert Panel's Recommendations

The Auditor General is calling for even higher royalty rates than the “Our Fair Share” Expert Panel according to a Calgary Herald story this morning. The AG says the Department of Energy has a royalty rate of about 66% to keep it competitive with other jurisdictions. Dunn says even a 70% royalty rate would still keep Alberta’s royalty rate competitive.

The story goes on to say: “The auditor general's comments come the day after the release of his annual report, where he said a lack of political leadership saw the government miss out on an additional $1 billion or more in royalties annually.

Dunn said that money could have been collected without stifling the industry.

The key quote from Fred Dunn is “What is the risk that the industry sees which would therefore justify the owners – Albertans – selling the resource for less than other jurisdictions.”

AG Report Will Be Stelmach's Waterloo or His Trafalgar

The Enlightened Savage is one of my favourite Bloggers and a regular read for me.

His wisdom is way beyond his years. His latest post (Waterloo or Trafalgar) puts forth a high definition picture on the political perspective for the PC Party and Premier Stelmach coming out of the recently released Auditor General’s Report.

Give him - and the AG a read.

Alvarez of CAPP Speaks to the Calgary Chamber on "Our Fair Share."

Today Pierre Alvarez the President of the Canadian Association of Petroleum Producers gave a speech to the Calgary Chamber of Commerce. His comments reflect the same issues as in the Tristone review of “Our Fair Share” but he does is so much more clearly…but not any more convincingly to my mind.

Again it is all about growth at any cost and the attitude seems to be that in the energy sector right now any cost can be absorbed - at $80 oil. There are concerns expressed about conventional oil and gas and again increased costs are stated to be the reasons Albertans can’t get a competitive rent for its resources.

These costs are not seen as something management has to make hard decisions about in the context of the marketplace doing its job. The attitude seems to be we don’t need to adjust our activity because of high costs. They are merely to be accommodated in the project and, in the case of oil sands, passed on to the citizens of Alberta under the current royalty regime.

If our conventional gas industry is uneconomic and uncompetitive because our costs are too high for the current market price of the commodity…adjustments should have to be made by management too. But again that is just the marketplace at work and doing its job. Why does nat mean all Albertans have to forego a competitive market rent for its non-renewable resource?

A unity trust operation is saying that because of the “uncertainty” of the royalty regime in Alberta it is moving its exploration activity into Saskatchewan. Is that a bad thing? Saskatchewan as a province needs to be a sustainable and reliable “have” province and that investment in its energy sector will help them get there.

You can watch the video or read the speech on the CAPP website. While I disagree with Pierre on many of his conclusions, consequences and he takes a few “shots” at the Panel, he is reflective and considered. He is one of the cooler heads from the industry. We all need that right now if we are to get this right.

What Alberta Needs Now is Leadership - Not An Election

I noticed side by side news stories in the Edmonton Sun today, one by the Auditor General saying the Klein government had let $6B of potential energy royalties slip through their fingers. The next story the Auditor General said the Alberta pubic infrastructure deficit was estimated $6B and growing.

Coincidence? Sure! But ironic nonetheless. Klein said he had no plan…so this is not a surprise is it? Had the previous Minister’s of Energy been on the ball we would have the money to deal with the infrastructure deficit.

We have a social deficit now too because our social services sector can’t keep staff because they can’t keep up with wages in the energy sector.

Premier Stelmach, I hear more rumblings about a potential November 2007 election. That would be a mistake as so many levels. Take the time to get some planning done and some changes made before we rush to the polls.

Why would we go into an election now other than fear of the trends in the current polls? Not a good enough reason. We need leadership and we have already had the campaign to choose you in that role last December. It is time to lead - not run! And besides, polls don’t matter, campaigns do. The consequences of an ill-conceived and poorly executed election result can last for a long time in our Alberta.

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.

Why Are There So Many Anonymous Comments Blogs?

I have just rejected two comments that had just forwarded MSM stories on the Royalty Review. They provided no commentary, analysis or opinions of the person posting the comment. I see no value in those non-comments.

I am interested in what individual Albertans as citizens have to say especially in the comments to my posts. Links to news stories are great in comments. To merely expect the entire story to be accepted in total as a “comment” without more form the person sending it - is not going to happen.

I would like to have some reader feedback on anonymous comments too. Some Bloggers moderate comments and disallow anonymous comments. I moderate comments mostly for relevance (like my point above) and legal issues of libel. I have allowed anonymous comments.

I do wonder however why there are so many anonymous comments especially in a free and democratic society like Canada. What are citizens afraid of? Why are they hiding who they are when they speak out on stuff that is obviously important to them? So here is my question. Should I insist that comments on the Blog NOT BE ANONYMOUS?

Bloggers who can be identified as individuals and those who post comments using real names are so much more credible and provide more contexts to their remarks. At least I think so.

Let me know what you think. Should I continue to accept Anonymous Comments?

Tristone Chair Calls Royalty Review Panel "Uneducated"

It is interesting to see the newspaper report in the Globe and Mail today where the Chair of Tristone Capital Inc. is apparently calling the Premier’s hand picked Royalty Review panel members “uneducated.” They panel is reported to include two PhD Economics form Alberta Universities, a professional industry based economist, a retired oil industry senior executive, a technology entrepreneur with a law degree from Columbia and a Chair who recently retired as President and CEO of the largest single line pulp mill in the world with a forest management area the size of New Brunswick…”hardly uneducated.”

Again the angst and aggression of an industry sector that has not been subject to sufficient scrutiny in the past is now showing in this name-calling reaction. This name-calling is not isolated – I am apparently a “Commie” according to one anonymous commenter.

I am reading the Tristone review with interest and will post my reaction to it soon. I trust it will have more substance than the media reported comments on the Tristone Chairman's opinion about the capabilities of the “Our Fair Share” Royalty Review Panel.

Hunter and Dunn Have Fixed the Blame - Stelmach Has to Fix the Problem

The story is coming out and the narrative is unfolding. The picture we are seeing from the “Our Fair Share” Royalty Review Panel’s findings and recommendations and now the Auditor General’s Report is not reassuring that we have been governed well or competently for some time now.

I take this narrative back to an earlier Auditor General Report outlining the incompetent land dealings in Fort McMurray where highly developable land was given away and later “justified” with a trumped up post-sale valuation. The conditions imposed on the appraiser's scope and terms of reference on the lands were so limiting that there was no way he could not have come up with a “vindication” valuation that sanitized the administrative and governance incompetence.

I was disgusted then and I am even more disgusted now. There is a serious issue in our society around the public’s confidence in our institutions, including government. It is hard to think of a single institution in our society that has not let us down, misled us or breached our trust in the past 15 years or so. That goes from church to state and from business to regulators - and I could go on!

It is looking more and more like Klein is doing to Stelmach what Mulroney did to Kim Campbell. Klein has obviously left a legacy of poor governance coupled with an incompetent and complacent political culture. The federal PCs under Mulroney went from the largest majority in the history of the country to only 2 seats in the next election under Kim Campbell.

Shift happens Mr. Premier. You best get ahead of this mess and right away. Your reponse in a couple of week to the "Our Fair Share" and the AG Report will signal to citizens exactly who you intend to serve.

Politics is a confidence game (sic and yes - every pun intended). At its best it is about earning trust and respect and having the confidence of the citizens as expressed in their vote. It about being worthy of the citizen's consent to be governed.

Too many people in politics today are about power and not about public service or good governance. They see the matter of confidence as a game – yes a confidence game. They seem intent on swindling citizens who are persuaded to trust them and then we become victims of the politicians.

It gets worse, because too many times we see this confidence game played out “in confidence” meaning behind closed doors. That was too often the modus operandi of the Klein government as it drifted and diverted attentions from many serious issues.

That has to change and Premier Stelmach has to make that change happen. He has often said since becoming Premier that you get for form government by having the confidence of the people, by earning their respect and being worthy of their trust.

Truer words were never spoken. Now we have to see if Ed Stelmach’s political and governance actions ring true as well. My advice is to take some time to get it right Ed. Make some wholesale changes in the PC government and ask the party membership for some help and advice on how to clean this up too.

Do all this well in advance of going into an election. In fact announce now that the next election will not be until the fall of 2008. That will get your government out of the “red zone” that it has recently fallen into and where nothing happens without a cynical political filter. Right now we need some good governing and not petty politics or electioneering

The “Our Fair Share” Review and the Auditor General Report has fixed the blame. You need to fix the problem.

AG Says the Dept of Energy and Former Ministers Have a Problem

I thought is a worthwhile exercise to post and highlight some comments from the Auditor General’s Report released today on the royalty issues and the Department of Energy.

Page91: says the Department (Energy) has identified critical issues that have not been addressed publicly and they relate to higher oil and gas prices outside the range anticipated by the old royalty regimes. The Department has know for at least three years royalty revenue were not meeting government's targets. The Department, (meaning the bureaucrats) estimated that it could collect an additional $1B or more per year without stifling industry profitability. The AG notes that "...neither this information nor the reasons why changes have not taken place have been made public."

Page92: says "Readers will ask 'Why have these issues not been addressed?" The AG says those "...questions must be directed to those responsible for the royalty regimes." The AG then clarifies the point by saying "The Minister of Energy has final responsibility and is accountable for these decisions."


In those two paraphrased statements the AG has identified problem and who is to blame…various past the Minister’s of Energy! He then makes five key recommendations and they are interesting.


First the Department of Energy should clarify it royalty objectives and make them public. The current objective to "optimize Albertans' resource revenue share" is code to accept what ever we get as the target.


The Department's "technical review work" needs to be improved in terms of planning, coverage and reporting and it needs to expand the topic and issues it considers.


The Department needs to improve its annual performance measures related to the effectiveness of the royalty regime beyond the current "share the profit" measure. Again this smacks of accepting whatever shows up as royalty payments is deemed to be the target. The Department's performance measures indicated satisfactory performance of the royalty regimes FOR SEVERAL YEARS while a detailed analysis in the Department "indicated otherwise. What gives?


The Department should periodically report in greater detail on the status of the provinces' royalty regime. The AG says with better information, Albertans can ask better questions about the management of their resources.


Finally the Department needs to "improve controls for its monitoring and technical review." They need to document complex processes, reviewing and signing off key outputs and referencing final results to source documentation." This tells me the Department does not know what is actually happening in terms of records, controls and monitoring of resource revenues...and if they did they can't prove it.


Very strong parallels between the AG and the "Our Fair Share" Panel recommendations. Some past Energy Ministers have got some serious Explaining to do by the looks of it.

What has the Auditor General Said About Government's Handling of Our Royalties?

I will be reading the Alberta Auditor General Report as it relates to the Department of Energy and its capacity and competence around the royalty issues and will post my comments on it later today.

In the mean time I recommend you read the excellent piece by U of C political scientist Doreen Barry entitled "Will Alberta's Tory Government Be Able to Protect the Public Interest?"

It was published in today’s Edmonton Journal. Take your time and reflect on what she is saying. It is very important stuff and very well written.

Thank You Joe Handley: Its Election Day in the NWT

It is Election Day today in the North West Territories. That is one of the most exciting places in Canada and is home to some of the most interesting characters you will ever meet too.

I often describe the NWT as another Alberta in the making but North of 60. They can avoid and even learn from the mistakes we are making down here – if they are careful.

Thanks to retiring NWT Premier Joe Handley – a great guy who did a great job for the NWT. He also made the south aware of the northern people and its potential. In the process he taught us to appreciate Canada in a different - and better way.

A Critique of the Energy Sector's Oppostion to the Royalty Review

Another energy based organization has issues a news release with the same language and issues as previous announcements for CAPP, drilling contractors and EnCana. The lobbying has begun and that is a good thing in a free, open, transparent and democratic society.

I think it would be helpful to do some analysis of the news releases and the issue framing and positioning of the energy industry as they try to tell us and our government that “Our Fair Share” of resource royalties’ recommendations are “draconian.”

Let’s deal with some facts and context on the representations of the Canadian Association of Geophysical Contractors in their news release of Sept 27, 2007. In the news release they say the “wholesale changes to the process and structures of royalties in Alberta, jeopardizes investment and employment in the Canadian energy industry.”

The day after the release of the “Our Fair Share” Royalty Report, PetroCanada increased its investment in their Fort Hills project. The same day Dubai – one of the lowest cost oil production centres on the planet - bought a significant amount of our oil sands leases. What does Dubai know that the Canadian Association of Geophysical Contractors don't know abut the future of Alberta?

Also the "Our Fair Share" report does not recommend "wholesale changes to the process and structures of royalties in Alberta." They in fact recommend continuation of the 1% project development stage payment. They suggested post-development rates go from 25% to 33% but still only based on NET Profits. None of that that is either structural or a process change to royalties...and they should know that!

“Natural gas drilling accounts for 65% of drilling activity in Alberta” they say. Sure when prices are high enough and costs are in line…neither of which is true of the marketplace for natural gas today. That is not the fault of the owners of the resource – that is the marketplace. Record profits have been made in the past number of years when prices were high and royalties low. But when the market shifts and the cash flow that hid a lot of poor management choices drys up, the private sector always comes to government to bail them out.

We have also have very poor government oversight and conduct of of its responsibility in the energy sector for a decade catches up - industry and government has to adapt to the new realities in Alberta today.

“One in six Albertans work directly or indirectly in the oil and gas industry. The seismic industry reinvests the majority of its service and supply dollars in the communities of Alberta. The impact of economic downturns in our industry in this province has grave implications for the rural communities that have so strongly supported this government.”

This statement is pure political positioning and imprudent strategic posturing to boot. Ask any of those small towns about the energy sector’s level of real commitment to their communities. Calgary as a community gets big donations from Big Oil as a result of the Boardroom decisions. Look at the $1B Encana head office building project. The small rural towns I talk too, and there is lots of them, get a relative "squat" in terms of community supports from Big Oil and related operators. The energy industry tears up the local roads. They increase traffic and noise at all hours. They monopolize the hotels and motels so that communities can’t even stage regional hockey tournaments because they can’t get rooms.

Those communities see industry activity around them but no real enduring energy sector commitment in the local communities. The energy industry in small towns are the transient and “shadow" populations with demands on community services but without enough serious investments being put back into those towns by good corporate citizens.

"The people of Alberta whose 'fair share' this report professes to defend are our employees, their friends and families." This one slays me. Note to Energy Sector, this is not just about your employees, their friends and families…it is about all of us. So what about the rest of us who are not benefiting but instead suffering from the growth pressures? We can’t get our schools fixed, we can’t afford housing, our health care system is not catching up and crime and homelessness is increasing.

Our municipal infrastructure is now costing us an arm and a leg now because of the inflation you have caused and the competition for skills and materials you dominate and control. Wages have not gone up of ordinary Albertans outside the energy sector but every Albertan has seen their costs of living skyrocket.

At $80 oil you guys just absorb cost increases and foster inflation by writing the bigger cheque...because YOU CAN. AND on top of that, with the 1% royalty regime you get to charge all that increase cost back to the rest of us as differed royalties in the 1% phase. And you have the gall to complain!

Finally the last straw! They say: "Removing two billion dollars from the industry that employs so many Albertans and placing it in government coffers, as this report proposes to do, is an odd way to help people. It is Albertans' hard work and investor capital, not some government program that created Alberta's prosperity.”

This is revising history and misrepresenting the facts. IT WAS A GOVERNMENT PROGRAM THAT CREATED ALBERTA’S ENERGY SECTOR BASED PROSPERITY. Getting rid of debt and deficit in order to keep taxes low started the "Alberta Advantage." But more importantly it was the 1997 government royalty regime of 1% and the 25% rte on net profits that created the investment climate that resulted in this "prosperity."

That prosperity is not being shared on any fair basis throughout Alberta and the Hunter Royalty Review Report proves it. The Auditor General in tomorrows report will once again show the Government of Alberta's lax accountability and absence of transparency in royalty collection and calculations. Hunter underscored the incompetence and incapacity of our government to meet it TRUSTEE obligations to its citizens.

Where are these guys who are sending out these statements about draconian changes in royalties coming? One can only conclude that they are continuing to think only about themselves and only with a very short term myopic perspective. The EUB is about to change,the government is about to change and Albertans are mad as hell and not going to take it anymore. Albertans will be demanding these changes as well as more transparency, accountability in the industry-government relationship. They will be demanding a more integrated, responsible, sustainable and long view approach to our energy sector development too.

If industry thinks paying a fair share is draconian, wait until they see land, air and water policy demands. They are not too far off in the future for the emerging and changing public policy agenda for the Alberta energy sector too.

Neil Waugh and I Agree on EnCana's Bullying Over Royalties

Neil Waugh of the Edmonton Sun and I are agreeing again. This time we agree on the very inappropriate and bullying intimidation tactics of Encana on the “Out Fair Share” Royalty Review Report. Blaming a proposed 8% increase in royalties from 25% to 33% and based on net profits only. That means Encana shares with Albertans as owners of the resource after ALL capital and operating cost are deducted. And the 8% increase is being touted by Encana as the stated reason to pull back on $1B of capital investment in Alberta! That is ludicrous. See my post on Saturday the 29th to get a sense of just how well Encana is doing.

Stelmach said he would not be intimidated by Big Oil. Encana should have listened.

This is twice Neil and I are on the same page in less than a month this has happened.
I must check tonight to see if it is a blue moon. Something strange is happening…like maybe power is shifting back to the citizens of Alberta. Both Neil and I obviously see that as a good thing. I am sure we are not alone. It is our oil and we deserve a fair share.

The Stelmach government is our trustee to get this done for all Albertans now, and in the future.

EnCana Agrees with Premier Stelmach and Calls for "Cooler Heads"

Isn’t this precious…EnCana is now saying Premier Stelmach is right and “cooler heads” should prevail. Apparently there is room for some royalty increase now and the issue is actually a question of balance. The unmitigated gall and hubris behind the $1B cheap shot intimidation tactics of Encana last week was breathe taking. I am glad to see them reconsidering their attitude and tactics in responding to the “Our Fair Share” report.

Well, I agree, cooler heads and balance are good things and necessary under these circumstances. I suggest they, and the rest of the energy sector, consider that there is already balance in what is being proposed by the Royalty Review Panel for royalty and taxes.

The recommendations in the “Our Fair Share Royalty Report” are also the result of cooler heads…and some pretty competent and experienced head on good people too. They recommended a “balance” that would put Alberta just below the average for all other competitive oil and gas producer markets. How about reconsidering your strategy EnCana and considering that there already is a balance in the “Our Fair Share Report” recommendations?

Consider some other aspects that bring about balance in doing business in Alberta, like the “side benefits” of a stable government that is obviously somewhat incompetent – but it is not corrupt. That governance incompetence has played in your favour in the past too, don’t you think? You can’t ignore the sweetheart relationships the energy sector seems to have had with regulators but that is about to change - big time.

Then there is the minor advantage of an independent judiciary that is there to settle disputes using the Rule of Law. Then we have the helpful facts that Alberta has an abundant, healthy, young and skilled workforce and a pretty stable and strong currency. Those elements provide for some certainty in a risky business.

And the real kicker – we charge a mere 1% royalty until you recover all your cost – regardless of how outrageous they may be – and you even get to unilaterally decide what and who you will pay for such project costs. In fact you can even fix your own prices for bitumen between your producer side and your upgrader operations without any need to worry about how it might impact the owners of the resources.

Where else on the planet can you get that kind of certainty, a positive business environment and risk sharing for the energy sector with a such a vast amount of known deposits all in one place? The Middle East offers you the political benefits of Iraq, Iran and Saudi Arabia. Eastern Europe is a good place – if you don’t mind the political instability and the business “culture.” How about Africa or perhaps Russia is more attractive for you? They are well known entities for how they do business, if you don't mind kidnappings.

Don’t rule out the serious alternative of Hugo Chavez’s Venezuela is your first alternate choice to do business. Apparently some in your industry think Alberta and Venezuela have a lot in common so they must be a legitimate alternative. The USA is more expensive and past its peak and do you think Norway is going to treat you as well as Alberta’s 1% risk share royalty rate? Get serious!

Cooler head are definitely needed coupled with a big dose of realism and a serious focus on the bigger picture. That bigger picture includes all of us Albertans and people all over Canada actually. So when you think about balance don’t just think about benefiting yourselves. Also think about how well you have been meeting your other legally required and oft ignored related duties and responsibilities. That also has to factor into what we define as balance.

A more considered and reflective analysis of what you could and should be doing to meet your obligations for restoration and reclamation of sites, roads and seismic lines in order to continue to justify your social license to operate as tenants in the public realm of Alberta’s non-renewable resources would be in order. Remember, the way you have been doing business means you actually cut down more trees than the entire Alberta forest industry.

Balance those elements into your equation as to balance and fairness too as you cool down and think seriously about how to move forward. It is time to start thinking about how you can adapt to get along better with Albertans as your partner as we work out this complex and critical issue together. Name calling, cheap shots and silly tactics and intimidations and unfounded allegations all must be a thing of the past or else they will backfire on you big time.

EnCana Cash Flow up 55% to over $2.5B at June 2007

A quick check on Google Finance shows EnCana (ECA) reported in the 2ndQtr2007 it had a cash flow of $2.5B or $3.33 per share up 55%. At the same time it was enjoying a Net Profit Margin or 25.76%, an Operating Margin of 32.25% and an Average Return on Equity of 32.85% Very impressive. Third Qtr results are scheduled to be released on October 25. I can't wait how much more they are hurting that they can't take a mere 8% royalty increase on that 25.76% NET PROFIT MARGIN.

EnCana saber rattled this past week about reducing investment in Alberta by $1B in 2008 because of the “Our Fair Share” Royalty Review Report. Ironically the management at EnCana was telling a different story at a Peters and Co investor’s conference in Toronto a week earlier. Here is an EnCana quote from Mr. Graham president of EnCana's Foothills division in a September 11, 2007 National Post story:

"Our budget will probably be very similar to what it was in 2007, maybe a little bit higher…" "Costs have been moving down in Canada, probably flat or even better than that,"…"The rig fleet is probably only 40% busy today. We are happy to see where costs are going."

Now I wonder how EnCana can square that circle of impressive performance in the face of low gas prices and higher operating costs already in place and accounted for in their impressive results with the sudden need to cut $1B from their 2008 capital budget a week later. Can this threat be interpreted in any other way except to say it is posturing and intimidation.

The Editorial Board of the Calgary Herald from a city that is smack dab in the eye of the Alberta economic storm, is the voice or reason and responsibility today too. Slowing down Alberta a bit is a necessity and the marketplace is doing it but that is no reason not to increase the citizens fair share of their resource revenues now too.

Could it be the drilling contractors woes outlined in their recent news release on the “Our Fair Share Royalty Review” are self induced and market driven and not really about possible government policy at all?

For the record it was someone at Peters and Co. who sent an email to their client’s in response to the “Our Fair Share Royalty Review” suggesting Alberta was like Venezuela. A comment that was kindly considered as “over the top.”

Harper on "Nation" - Quebec Style!

In the past week I have been concentrating on the Alberta Royalty Review Report. That attention to the issues and concerns will continue here and on Policy Channel for awhile I am sure.

In the meantime I have neglected to post our regular op-ed for LaPresse in Montreal. We can see Dion is having his challenges in Quebec and Harper is trying to pander to soft nationalists…with some success I might add. So here is what we said about Steve’s musings in Australia a few weeks ago about Quebec and Canadian politics. Strange he didn’t say this at home!

La Presse septembre 2007 Ken Chapman and Satya Das

Only the insular deny the distinction of Quebec, and only extremists would posit that Quebec constitutes anything other than a distinct society within Canada.

Yet there is certain unease at Prime Minister Stephen Harper’s proclamation this month in Australia, regarding what he calls the Quebecois nation.

It is unprecedented that a Canadian prime minister would make such a reference in a foreign country. And it is all the more satisfying that it comes from an Albertan prime minister, given the unjustified reputation our province suffers as a hotbed of bigotry. Our Albertan and Canadian capacity for accommodation manifests itself in Harper’s affirmation of a societal reality. It is pleasing that this should come as Quebec itself is conducting a brave dialogue with citizens about accommodating its own minorities.

So why our unease? Because “nation” means different things in English and in French. One worries whether the Prime Minister leaves himself open to interpretations that may raise unrealistic expectations, particularly among Quebecois who might view Harper’s declaration as a prelude to sovereignty-association.

Consider what he said in the Australian parliament, in French:
« Le Canada est né en français, à Québec, il y aura 400 ans l’année prochaine, et cela se reflète jusqu’à ce jour par la présence des francophones et de la nation québécoise au sein de notre pays uni»

In English, in the presence of Australian Prime Minister John Howard, he also used the phrase « the Quebecois nation. »

There is an enormous gulf between the implications of the word, in the two languages. The French and English begin with the same core meaning, using “nation” as an evocation of shared culture, history and values; implying a certain homogeneity of experience.

Then comes the gulf. The French use of the word “nation” is more appropriately translated as the English word “polity.” Polity in English means a process of society organising itself into civil government, a political entity that evolves a constitution or charter or other codes of law to perpetuate its being. And within that there is an unspoken “next level” that such a nation must of course be the master of its own destiny.

Yet the English sense of the word nation, as in “the Quebecois nation” of Harper’s usage, is closer the word “people” as in “the Quebecois people.” It is understood as one might mean “the Latino people” while referring to a socio-cultural description, rather than any specific Hispanic country. In the sense that Harper uses it in English, “nation” is much closer to “people”, without the French overtone of a polity that merits autonomy or even sovereignty by its very existence.

This is why we can speak in English of a Quebecois nation, in a way that we cannot speak of the Albertan nation. In Anglophone and Allophone Canada, the province that could most aptly bear the designation of “nation” would be “the Newfoundland nation”, particularly because of an established history of cultural and ethnic homogeneity.

And it is why we can understand, despite the brutal rhetoric of some of the intervenors, why it is necessary for the Quebecois nation to have its dialogue about minorities.

It seems quaint and even archaic to those of us in heterogenous Alberta, but we recognise that it is a good and useful thing for Quebec to discuss the boundaries of pluralism, because it may lead to a better understanding of the virtues of embracing otherness. This accommodation is the vital precondition to flourishing in the borderless world, and we must respect the sentiments of those Quebecois who are impelled to cling to the past, even as we disagree fundamentally and vigorously with their retrograde perspective.

As Quebec continues its internal dialogue, though, it might be unwise and even misleading to expect that a Canadian Prime Minister who uses the word “nation” in both English and French would knowingly promote secession or separation.

With the advent of the Clarity Act we have a process to establish nationhood and to leave the Canadian nation. Thus when Harper uses the word “nation” in both official languages we do not really need to pick one meaning over the other. But we must understand the difference — and live with it in our uniquely Canadian accommodation.

EnCana Says It Will Lower Investment If Royalties Rise.

In the face of paying more royalties EnCana is threatening to cut $1B of capital spending in Alberta next year? This is sounding a lot like a latter-day Peter Pocklington Oiler Hockey Team gambit to me. “If you don’t submit to my demands I am taking the team out of Edmonton” what his mantra. He "left town" (sic) and nobody in Edmonton misses him.

Very low natural gas prices and the extremely high cost of drilling would not be a factor at play at all here would it? In any event given the market factor realities perhaps prudent business management practices would suggest such a strategic move is wise in any event; royalties notwithstanding.

Besides, this pull back and slowdown would help the overall Alberta economy to catch up to the growth pressures. We would have more trades, labour, material and other services available for all the projects that our municipalities so desperately need. They have money too. Right now the prices the municipalities have to pay for these projects are way out of line because of this over heated economy. This EnCana's move may be a blessing in the bigger picture.

Premier Stelmach is telling everybody in the patch to slow down and catch their breath. I would also add – if you have alternatives then bring forth some sound arguments with verifiable evidence to support them. If you have a better idea on how to get Albertans a fair share for their resources, that also shows a way towards more responsible sustainable development with enhanced resource stewardship – I will be the first to support it. We are looking for win-win here so be sure your ideas deliver on that goal too.

In the meantime don’t try to use intimidation tactics with either my government or with the citizens of Alberta - who are your landlords. Besides it's bad PR and it sucks as an example of Corporate Social Responsibility too.

Drilling Contractors Complain Business is Down - Its the Marketplace Not the Royalties

Drilling contractors issued a news release today saying their business is down. Why? Because of the market price of natural gas…and I dare suggest they have priced themselves out of the market right now. The commodity prices they drill for are too low for the rates they are charging. So the work dries up. Pretty normal supply and demand economics 101 stuff I’d say. Sounds to me we have a perfect example here of competitive the marketplace of supply and demand working as it should.
Don’t complain adapt and adjust.

Check the record of this sector and you will see this sector has enjoyed record profits for three successive years. They are showing that they are paying excellent wages and benefits and pulling workers from all other sectors of the Alberta economy. Those other sectors suffer because they can’t afford to pay those wages and they lose staff to the energy sector. No one blames the employees and many of these other suffering sectors are actually closing their businesses….because they can’t find staff.

My read of this news release is that these contractors – who have done extraordinarily well as of late - are now complaining because they are wanting to keep their good times rolling. Fair enough but they want the government and the rest of Albertans to ensure they prosper and we don’t get our fair share of our resource rents. The need for a fare share for the rest of Alberta is not on their radar screen at all.

They seem to only like the magic marketplace when it generates sufficient cash flows that they don’t have to worry, plan or - heaven forbid…manage.

Premier Stelmach's Next Week Will Just as "Interesting" as His Last Week

Ed Stelmach has had a busy couple of weeks and next week will not see any slack in his pace with the stuff that is known to be coming up.

The next shoe that is going to fall on the Alberta government is when the Auditor General releases his report next Monday morning at 10 am. That report will deal with the tepid (to put it politely) responses accountability and record keeping for energy royalties by the Alberta government. My guess is that it will not be any kinder than the independent expert panel lead by Bill Hunter was on the Alberta government in its role as stewards and trustees of our non-renewable natural resources.

This will not be the first time Fred Dunn has brought this issue up. What makes it different this time is the Hunter Royalty Review Panel’s Report that reinforces the messages to the powers that be.

Another interesting issue that will be in the Auditor General’s Annual Report will be an update on what progress the EUB has made since the 2005 recommendation that they strengthen the controls for verifying the accuracy and completeness of oil and gas volumetric data and for enforcing measuring standards.

Big oil is complaining that the Royalty Review Panel got its numbers wrong in its analysis and the Panel says they merely used the data supplied by industry to the government…and no doubt some of those numbers come from EUB. Funny how all this stuff networks and connects together as between government and the energy sector. Nothing wrong with that as long as the information is complete, accurate, timely and verifiable…and we have to wonder if any of those tests are being met.

.

Gary Mar Goes to Washinton - That is a Good Thing for Alberta.

The appointment of Gary Mar to the Alberta Washington Office is a great one. Yes there will be the cries of partisanship from the opposition but they are hollow and pale when measured beside the experience and capabilities of Gary. Kudos to Premier Stelmach for this choice.

Mar has served in a number of Alberta ministerial portfolios since he entered Alberta politics in 1993. His quick mind, quick wit and analytical capacity plus a well honed BS detector will serve him (and Alberta) well in this new position.

For a policy wonk like Gary going to Washington, the centre of the political universe of the planet has to be a treat for him too. This is going to be especially true given the enormous changes that will be happening in American politics between now and the Presidential elections of 2008.

The Alberta-US-Canada triangulation of issues and jurisdictions will benefit from Gary's education as Alberta's Minister of Intergovernmental and International Relations. Having a strong background in law will be a core talent that he brings to the new position too.

Talk about a politician's next dream job and particularly for a young guy who bleeds policy issues. Who knows Gary maybe one day you will find yourself as the Secretary General of the UN. It would be a good thing for a Canadian to be in that role some time soon.

The Pembina Institute Website Has a Royalty Tracker

The Pembina Institute has a Royalty Reform Tracker on their website. It tracks how much royalties Albertans would have earned if the Alberta Government had accepted the Review Panel Recommendations when presented.


That is unrealistic because the need time to review the review and be sure they understand all the implications of the recommendations...including the political ramifications after all.

Check out what not accepting the Review Panel recommendations is costing you in continuing forgone royalty payments. ths link is Albertans' Fair Share Minimizing Environmental Impacts of Oil Sands Development in Canada The Pembina Institute



The fact the Royalty Review Report was made public at the same time the government received it is a step towards more open democracy for sure. Usually these report go on the shelf or into the back rooms for "discussion."


So far this has been a pretty open process. We shall see how the Minister of Justice and Attorney General handles his "industry liaison role" in the "further consultation" they are engaged in. I know and trust Ron Stevens to be totally open, transparent and accountable in all his discussion with industry pending a government decision on recommendations.


Albertans will be wondering and watching.

Contact Premier Stelmach to Let Your Royalty Concerns Be Known

I have been harping about getting your views on how much rent Albertans should change for access to the oil sands and other energy reserves. The way to do that is to contact the Premier’s office by phone or email or seeing what events he is at and show up and share your thoughts.

This works! He is forthright enough to say so. Check out this story on the test for EUB restored confidence for some straight from the Premier’s mouth proof.

If this knd of information is good enough for measuring public confidence in the EUB, it ought to be good enough to tell him if you believe the oil companies or the independent review panel's analysis about what is a reasonable royalty rate for your resources.

You Can't Handle The Truth

I think this scene from "A Few Good Men" is one of the best of all time.

Any Albertan who reads the Royalty Reviw Report "wants answers" and we can "handle the truth."

We are questioning the manner of how decisions are being made.

"We use words like honour code and loyalty" reminds me governments use words like Integrity Transparency and Accountability. They better become meaningful and evident to Albertans.

This further consideration of this Royalty Review Report is a great place to start making those governance values self-evident.

Albertans Are Sending Messages on the Royalty Review to the Government

Here is an example of an email I received from a citizen of Alberta who is concerned about the long term future of this province. This is what she sent to the Premier on the Royalty Review Report.


"I applaud the government for reviewing oil and gas royalties. The subject
matter is beyond my realm of understanding of the oil and gas industry.
However, I do believe that there is a need to rebalance the distribution of
wealth generated from oil and gas development. The oil and gas industry
and its allies (i.e. FirstEnergy) responses to the report are predictable and
demonstrate the arrogance and opulence of Calgary's corporate elite.

The resource belongs to Albertans and it is often rural Albertans
(where resources are developed) that bear the brunt of development, and not
necessarily the enormous benefits. I am hopeful the government will
stand-up to the oil and gas industry and implement a royalty structure that is
current and reflects today's marketplace. I am also hopeful, that an
increase in royalties will be invested into the Heritage Trust Fund. I
believe Alberta should follow the lead of jurisdictions such as Alaska and
Norway who have significant investment funds as a result of their oil and gas
development. These funds benefit all residents of the jurisdictions, today
and into the future.

Finally, as a resident of rural Alberta (who does business with corporate Calgary) I am completely unsympathetic to the complaints of corporate Calgary. This small interest group is obviously focused on themselves. They are ignorant and inconsiderate of the
hinterland and its residents who play an enormous part in fueling the economic
engine of this province.


I would argue rural Alberta will support a restructuring of the royalty review and is willing to have its economies and communities slow down if oil and gas investment is dampened."

We need thousand more like her to take up this issue for a fair share of royalties.


Exercise your citizenship rights Alberta. Use it or lose it!

TD Reports on the Alberta Economy - More Boom - No Bust

The Toronto Dominion Bank has issued a new report on the Alberta economy today (10 days after the release of the Royalty Review Report) saying the “Alberta Boom Will Not Go Bust.” They predict another “solid advance in real GDP of 4.3% in 2007 after accounting for lower gas prices and activity. The reasons are based on “…the massive surge in oil sands investments and related activities as a key driver in the province’s ongoing expansion.

The Edmonton Calgary Corridor is going to grow even faster at an estimated 5% in 2007. They also predict the growth in 2008-09 will moderate to 2.5-3% “…because of dampening forces on demand stemming from rising labour costs, producer and infrastructure costs. This simmering is seen as a good thing and a chance for Alberta to catch her breath and according to the TD Bank “…is what the doctor is ordering to ensure that expansion continues over the medium term.”

They make a point about the growth in medium sized (10k-100k populations) centres in Canada. Alberta has 7 of the fastest 15 such cities and 5 of those Alberta municipalities are outside the Edmonton Calgary corridor.

The Edmonton Calgary Corridor is ranked 4th amongst the 19 largest North American urban centres in terms of job creation and lowest unemployment in 2006. The average purchasing power for Albertans living in the Corridor is $57,000 in 2005, a full $15,000 above the average American’s purchasing power. If the Edmonton Calgary Corridor were an OECD country its prosperity would rank second in the world – just behind Luxembourg.

There is a cost to good times. Labour markets are tight and the retiring baby boomers will make it harder to sustain growth. Housing shortages and recent dramatic price hikes makes affordability is a problem and vacancy rates make it worse.

Infrastructure is strained and new growth requirement are putting project in jeopardy because of premium pricing and worker and material shortages. As a result government spending has skyrocketed increasing 12% per year every year since 2004.

While Alberta is the new economic engine of Canada other parts of the country are suffering because they have to compete and costs have gone up as a result. That said the TD notes 60% of the oil sands spin off goes to the rest of Canada through demands for manufacturing. The higher incomes for Alberta residents’ results in them paying a net $9B per year more than other Canadians into federal taxes. That is about $3000 for every man woman and child living in Alberta today. The other provinces benefit form Alberta’s prosperity because they can keep taxes lower because they now qualify for even larger equalization payments.

Note to Premier Stelmach: Oil is a Seller's Market

Here is some highly relevant information for Albertans and their politicians when they consider the recommendation of the Royalty Review Report.

I find it interesting that some of the current oil patch players are saying the industry will leave Alberta if the royalties go up. Strange when we see “unsophisticated oil nations” like Norway, China and Dubai buying up companies or oil sands leases.

It is a sellers market Premier Stelmach. This is a but and a big picture long term policy issue Premier Stelmach. You and your government are our Trustees responsible for long term stewardship and development of our resources. YOU must ensure the development benefits all of the citizens of Alberta - anw and in the future.

The answer to the Royalty Review Report is obvious…don’t let anyone obfuscate the issues with short term narrowly framed self interest positions or threats.

-----Original Message-----
From: UNNews@un.org [mailto:UNNews@un.org]
Sent: September 27, 2007 9:00 AM
To: news11@secint00.un.org
Subject: COMPETITION FOR OIL AND GAS RESERVES HEATING UP, SAYS UN TRADE BODY

COMPETITION FOR OIL AND GAS RESERVES HEATING UP, SAYS UN TRADE BODY New York, Sep 27 2007 11:00AM The emergence of new players in the global market and shifts in the policies of gas and oil producers means that traditional conglomerates from industrialized nations are facing increasing competition in the race to access the world’s reserves, the United Nations agency on trade and development issues said today.

With crude oil prices staying well above $70 a barrel, traditional transnational corporations are losing bargaining power to oil-producing countries “eager to use climbing demand to capture a larger share of the rents,” <" http://www.unctad.org/Templates/webflyer.asp?docid=9016&intItemID=1528&lang=1 to the UN Conference on Trade and Development (UNCTAD).

The agency draws attention to “large imbalances” in global consumption, production and reserves of oil and gas, such as the fact that developed countries consume more than half of global oil and gas output, while they account for only a quarter of production.

Moreover, less than 8 per cent of the world’s remaining proved reserves of oil and gas are found in these countries. As many as 21 of the top 25 countries ranked in 2005 by total remaining proved reserves were developing or transition economies.

In addition, data suggests that resources in developed countries are being depleted more than 10 times faster that that of developing and transition economies, which means that the former will have to rely increasingly on oil and gas imported from the latter.

Competition for oil and gas resources is becoming more complex, according to UNCTAD, due to changes in government policies in producing nations. Some developing countries with large reserves, such as Kuwait, Mexico and Saudi Arabia, do not allow foreign participation in oil and gas extraction.

Others permit foreign investment but are facing embargoes applied by the home countries of companies, such as in the case of those from the United States which are not allowed to invest in Iran or Sudan.

Also affecting competition is the entry of new corporations based in developing and transition economies, including Kuwait Petroleum, Lukoil (Russia), Petrobras (Brazil) and Petronas (Malaysia), who are already among the main foreign investors in selected oil and gas producing countries and operate alongside traditional companies from the developed countries such as British Petroleum, Royal Dutch Shell and Chevron.
2007-09-27 00:00:00.000


___________________

For more details go to UN News Centre at http://www.un.org/news
To listen to news and in-depth programmes from UN Radio go to: http://radio.un.org/
_______________________________

Oil Exec Calls Royalty Review Chair "A Lumberjack"

I see from the Front Page of the Edmonton Journal and Gary Lamphier’s continued excellent business coverage on the RRR the Hunter Panel on Royalty Review is not going to stay out of the fray. Some of them made the rounds to some media people yesterday and are ready, willing and able to actively explain their processes, findings and continue to clarify the issues and their recommendations. Good for them.

There are some oil company executives who are now becoming insulting and calling names like some school yard bully. One such person recently appeared on a radio show saying Bill Hunter, the Chair of the Panel and former president of Alberta-Pacific Forest Industries was a “lumberjack” and suggesting he didn’t know the energy industry.

I have worked in both industries and I can tell you one thing though. If the oil and gas industry took a similar responsible stewardship view of their obligations to the citizens as owners of the natural resources as does the forest industry, the energy industry would not be in the public relations and political jam they are in now over rents and royalties.

The Edmonton Journal Headlines today says it all about the tactics being used by some – clearly not all of the oil patch leadership. Bill Hunter the Review Chair says “We’re Not a Bunch of Morons” is the front page of today’s Edmonton Journal. The inside story headline states the Panel position “Industry Argument ‘Distorts Picture.’”

These reactions from some of the industry “leaders” remind me of some “practical” advice from one of my professors in Law School. He said “If the law is against you argue the facts. If the facts are against you, argue the law. If both the facts and law are against you, then call the other side names.” Let’s hope the players keep this pubic consideration about this very important matter to all Albertans at a professional level and in a civil manner – even where we disagree.

This complex issue of providing for responsible, sustainable and optimal development of our oil sands is one of the most important economic, environmental, social AND POLITICAL decisions facing Alberta.

The record shows the development of the oil sands has not been well planned by our political level, not well regulated by our regulatory agencies and not well administrated by our bureaucracy. The impacts and implications of this decision will be felt for a long time to come.

This resource belongs to all citizens of Alberta and we need to be sure we, and industry and government are all clear about that. As Albertans we need all the various parties to work together but the ultimate decision is ours. Let your MLA know what you think responsible development and sustainable stewardship of your oils sands means. I will soon post on some of my ideas and those of others I have spoken with on the subject.

Ed Stelmach Wants To Hear From Albertans (Again) But This Time on the Royalty Review Report Recommendations

CAPP obviously wanted a “further consultation” process on the final report itself given the statement in their September 24th news release. There is nothing wrong with that. Industry and other stakeholders are free to challenge the findings in a factual and forthright fashion. Lets be sure we do not turn this post-report process into an exercise of recurring reviews like Quebec's perpetual threats of independence referendums.

We hear the official word out of the Alberta oil industry is that Hunter Royalty Review analysis is flawed. The Canadian Association of Petroleum Producers, the voice of the oil and gas industry in Alberta says they want to “focus on the facts” and we can all agree with that. They claim the report recommendations will slow oil sands investment. Are we pleased with the pace of growth and how we are managing it now? They claim a report was commissioned by the Panel on relative royalty revenues in Alberta tha tis not reflective of the real world...they ought to get to comment for sure. They claim project costs were not considered. The Report deals with that most effectively. Go to page 78 of the Royalty Review Report wher they say that cost control is a management issue and besides with no significnat royalty payment due until all cost are recoved - what is the issues for investors.

The Panel was given a free hand to hire world call experts. They were given a free hand to work with government officials and their advisers. They provided background papers on royalty issues and context and specific advice to Albertans on how to participate that included online submissions, snail mail, fax or personal appearance at hearings. The panel went all over the province to meet with interested stakeholders and ordinary Albertans about their concerns. Copies of all the submissions received were published on the Panels website at http://www.albertaroyaltyreview.ca/


Albertans are clearly interested in the Royalty Review Report. I am told in the 4 days last week after it was released there were 210,000 hits on the Panel’s website. Unfortunately the government has decided to receive the post-report consultation to their own website http://www.gov.ab.ca/ so some continuity and context will be lost.

I suggest before you go to the government's post-consultation website be sure to visit the Review Panel website and educate yourself on the review process, facts and findings. Then let your thoughts be known but don't be anonymous. This is about citizenship in a free and democratic society. No Alberta citizen, acting as such, should fear their government or their employer - so anonymity is unnecessary and intimidation only works if you let it.

I hope we can trust this government, who I support, to run process. We need them to have the same honesty, integrity, openness, transparency and accountability as the citizens who contributed their time and expertise to the Royalty Review Report in the first place.

This is a critical issue facing all Albertans and we all better get involved because after all it is our resource and our children’s future at stake here.