Do Albertans Benefit From Oilsands Development?
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. For example, Edmonton city council
just agreed to move forward with the 23rd Avenue interchange. The cost
overrun is over $130 million. 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?
- posted by Larry @ 1:28 p.m.