Nope they aren't morons, but the guys in the Tired Old Tory government are as another report showed today.
Alberta's royalty review panel fired back Wednesday at industry critics of its report, arguing its call to hike energy royalties by 20 per cent is reasonable by global standards and based on sound data provided by the oilpatch itself.
Since issuing its report to the Stelmach government last week, the panel led by former Al-Pac president Bill Hunter has been accused by some in the energy sector and investment community of basing its report's controversial conclusions on flawed math that doesn't reflect reality. Hunter and fellow panelists said the industry's arguments distort the real picture as they see it.
"We're not a bunch of morons, as is indicated by some of the folks who are fighting against us," Hunter said in a group interview with Journal columnists and reporters Wednesday.
The provincial government sat on a report for seven years that outlined massive failures in policing its $100-million-a-year farm fuel benefit program, before similar concerns were raised by Alberta’s auditor general in 2006.
Now it must explain how Albertans can be sure the almost $1-billion spent on the program in that time was used wisely, said Liberal critic Hugh MacDonald.
Auditor General Fred Dunn said last year the process “does not verify the information in application forms before issuing a certificate” for the program, which gives farmers a six-cents per litre deduction on diesel, and eliminates the tax on both diesel and gas the government would normally get.
“Nor does it have any other processes to ensure that only eligible individuals get certificates -- or to identify people who became ineligible,” Dunn wrote, adding that the “department has not completed a renewal process or requested confirmation of eligibility from registrants since 1997.”
But the government did produce an audit of the renewal process -- one year later, in 1998. And the 10-page document outlined identical concerns to the auditor’s in 2006, which themselves came three years after Dunn declared the program “high risk”.
Which is what the Royalty Review also said, that the Government lost $8 billion in royalties paid. It went somewhere but nobody knows where or if it was even collected.
It's a joy to watch capitalists tarred with the same brush as the left by Big Oil. Of course the facts back the Royalty Review board not the Petro Bullies.
In 2006, Alberta's top five energy firms alone earned more than $17 billion. That's twice the province's 2007 budget surplus, and eight times the $2-billion annual hike in royalty fees called for by a government-appointed review panel.
Drillers complain that their sector -- already hit by low natural gas prices and a surplus of rigs -- would be decimated if the report is implemented.
But panel members stress that 82 per cent of conventional natural gas wells, and 57 per cent of conventional oil wells, would actually see royalty rates decline, based on 2006 prices.
Higher oil sands royalties could cut 13 per cent of the value from current and planned projects around Fort McMurray, but Alberta would remain one of the cheaper places to do business in the world even with more money going to government, according to research by British energy consultancy Wood Mackenzie.
Of 100 fiscal regimes around the world analyzed by Wood Mackenzie, money paid to government in the oil sands is ranked as the 11th-most generous system for industry. Should higher royalties and taxes be instituted, the ranking would fall to 44th, still in the top half.
Sudden change in fiscal regimes is bad for planning. Yet it is hardly surprising that a resource-rich government wants a bigger slice of the pie when oil is topping $80 a barrel. At an estimated 64 per cent share of the value of oil sands projects, Alberta’s “take” would remain moderate compared with the likes of Venezuela and Russia. And the Canadians are at least being upfront about simply wanting a bigger cheque, rather than hiding behind professed environmental concerns.
The biggest impact would come from an increase in the royalty on production after initial investment has been recovered, hitting operators with projects already up and running. The value of projects still in the investment phase should suffer less, as the affected cash flows are further in the future. Rather cynically, the proposals largely preserve the attraction for new developers, while milking existing producers a little more – after all, where will the latter go?
The silver lining is that this measure could cool a sector suffering rampant cost inflation – and cut speculative valuations on potential takeover targets – by making potential new entrants think twice. Moreover, if the pace of development really does slow, it will be time to upgrade long-term oil price projections in those project models.
Gee I said that here.
And a comment in Ken Chapman's blog also points out the simple empirical fact that ;
In "Alberta's Royalty Review and the Law of Grandparenting" IAPR Fellow Nigel Bankes, a Professor in the Faculty of Law, reviews the law on this question and concludes that the royalty review panel has proposed nothing that violates existing contracts or is otherwise inappropriate or unusual.Big Oil is painting all of us as morons, the real morons of course run the Government of Alberta on their behalf.
Don't Let Big Oil Set Our Royalty Rates make sure Ed hears from you.
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