Royalty Review

Alberta is currently reviewing the royalties assessed on oil and gas production. this review has come about because ordinary Albertans feel the royalties charged on oil sands production is not sufficient. The sore point is the 1% royalty charged while capital costs are being recovered. This is a particular problem for the oil sands because capital costs are always being incurred because of the nature of the operations. This extends the time before 25% royalties are paid. It isn't the same as drilling a well and hooking it up. The nature of the operation is different and a different approach to royalties is needed if Albertans are to get a fair return on their resources.

An indicator that the royalty returns favour industry is the multiple oil sands projects being built and planned. The current regime is so attractive that companies are willing to pay inflated prices for workers, plants, equipment and mineral rights. (Why wouldn't they, they don`t pay royalties until they have recovered the inflated costs). Meanwhile, Albertans are paying inflated prices for roads, schools, and housing, if they are built at all. Albertans are paying an outrageous price to give away our resources. It is time to curb our generosity and make oil sands development less attractive. Projects are now importing labour; plan to import plants built in Asia; and exporting bitumen to the US. All Albertans are receiving is inflation and pollution.

In addition to the royalty rates, the review committee should be asking:
What is included in capital costs?
Is the definition such that capital costs are never recovered?
After considering the inflation related to the oilsands, do Albertans receive any net benefit?

Labels: oil royalties Alberta

- posted by Larry @ 12:13 p.m.