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.