Tuesday, April 03, 2007

Alberta Royalties 75% for Oil, only 25% for Alberta!

An examination of Alberta’s oil royalties and revenues under the Conservative Regime:

All royalties must be examined, not just oil and not just tar sands!

This Government is in the business of guaranteeing profits for the oil companies while ensuring Alberta only takes the bare minimum of royalty tax.

This province is being managed for the energy companies, not for the population Conservative fall out at work.


The price of production in conventional oil is paid by the oil companies. This aggregated cost is estimated at about 17.00 per bbl Canadian. You may recall the tar sands consortiums saying two years ago they could produce a barrel of oil below the 17.50 threshold of conventional oil.

The Tar Sands are covered for all exploration and construction expenses up front. Their costs are deducted from the sale of product until all costs are paid for. Only 1% is returned to Alberta in this period. Hardly and investment! More like a float.

The CAPP records 10 billion in investment in infrastructure and technology in 2005. If this is the case, the 10 billion dollars adventure will be paid for by the taxpayer out of the taxpayer share of oil revenues. Taxpayers pay for it; Oil Companies own it. We get no favors here!

One has to wonder where all the so called risk is the tar sands companies refer to.

Also noteworthy is these same tar sands groups and now NWT pipeline groups have shifted their conversation to “we would expect greater returns on an investment of this size”. Spin Doctors run the show.

My question to them is “How much do you get in the Philippians’; In China? In Russia? In India?

Alberta Royalties are the lowest in the world, bar none. A 15% increase in royalty would still leave us at the bottom!

We will not deal with the lease price in this document only to mention the lease prices appear to be at par with other jurisdictions. Don't confuse this revenue with royalty.

Conventional Oil:
80% of Alberta conventional royalty comes from conventional, down-hole drilling by oil companies on leases that have been purchased from the crown in Alberta.

20% of Alberta conventional royalty comes from “freehold” oil, that oil which is drilled and recovered from “private” lands that still retain their own mineral rights. The royalty rates collected from both tar sands and conventional oil and freehold are similar, 25%

Conventional Revenue distribution:
2003/2004 year Oil averaged 43.916 dollars US per bbl.

80% Conventional oil Royalty .981 billion dollarsCanadian
20% Freehold Oil ------------.288 billion dollars Canadian
Total Conventional --------$1.269 billion for Alberta
----------------------------$2.96 Billion taken by Big Oil.

2004/2005 year Oil averaged 45.05 dollars US per bbl

80% Conventional oil Royalty 1.273 billion dollars Canadian
20% Freehold Oil -------------.306 billion dollars Canadian
Total Conventional ---------$1.579 billion dollars for Alberta
----------------------------$4.737 Billion taken by Big Oil.

2006/2006 year Oil Averaged 59.6 dollars US per bbl

80% Conventional oil Royalty 1.463 billion
20% Freehold Oil -------------. 344 billionTotal Conventional
-----------------------------$1.807 billion dollars for Alberta
-----------------------------$5.421 Billion Dollars taken by Big Oil

Totals for Conventional Oil this period:
Alberta $4.655 Billion
Big Oil $13.118 Billion Dollars

Tar Sands Royalties (All expenses paid before royalty is taken)

2003/04 Alberta $.197 billion dollars Oil averaged 43.916 dollars US per bbl.
Big Oil $.591 Billion Dollars

2004/05 Alberta $.718 billion Dollars
Big oil $2.154 Billion Dollars.

Low royalities here but remember you spent 10 billion in infrastructure out of your 25%

Using Government figures, production should increase by 5 times by the year 2020 under this Government.

2020 will produce the following tar sands revenue:
2020 Alberta Revenue $3.59 billion dollars
Big Oil Profits after expenses will be $10.77 Billion dollars.

Natural gas royalty programs produce a similar figure of sell off of resources!

30% of sale to Alberta and 70% to the Resource companies.

Like the oil, this Government has decided to reduce the royalty taken by 5%.

Not to be left out of our Energy picture is the Electricity where Alberta’s advantage (lowest power in North America or Europe) was given away by this Government leaving us with the highest Utility in North America. The kicker here is the companies who are in the electrical distribution and generation businesses seem to be guaranteed a profit under the veil of the EUB.

This deal is so good American companies who sold off their holdings in the US to move to Alberta! Give away the resource that is what this Government calls making it worth while.

Creating a climate for companies to invest in Alberta means simply we guarantee them we take the lowest royalties in the world and now, guarantee those profits. Meanwhile all the costs and inflation burden falls on us, the citizens.

The short verison is: We are being governed by the energy companies.

I say, time for a change in Government!

John Clark
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