Thursday, August 16, 2007

Alberta Ropyalities will drop.

Excellent article in the Edmonton Sun.

Alberta's oil royalties could drop: report
Critic says government full of 'suckers'

By JEREMY LOOME, Legislature Bureau

Alberta’s share of oil royalties could decline while the federal government’s take increases under a new royalty option for the oil sands proposed by the provincial government, says one of the world’s top oil consultants.

It’s more evidence the Alberta government is full of “suckers,” said NDP Leader Brian Mason.
He said the same report shows Alberta is losing potentially hundreds of millions of dollars annually in revenues it should collect. “They have lost sight of the interests of the people of this province,” he said.

In his study for Alberta Energy, Calgary-based consultant Pedro van Meurs said the proposal – which would allow companies to calculate royalty payments on a choice of either the finished synthetic crude product or the tar-sands bitumen from which it is extracted – could lead to two significantly different outcomes.

The companies being offered the new plans, Suncor and Syncrude, have until this year to decide which to opt into.

If the companies opt for royalties based on synthetic crude, Alberta’s royalty rates will be 8% higher than if it opts for a rate based on unprocessed bitumen, says Van Meurs.
If Alberta allows them to choose the latter, recent changes to federal tax laws mean the federal take will increase while Alberta’s take decreases, he indicates.

“It is very obvious that Alberta is faced with a very high level of royalty reduction, when under the Suncor and Syncrude terms companies opt for a switch to bitumen values from SCO values,” he notes.

He said the switch “will result in a drop of about 8% in the overall government take. However, that drop is only experienced by Alberta, the federal share actually goes up, since royalties are now deductible for tax purposes.”

The government isn’t commenting on the report, over concerns it might bias the ongoing review of royalty rates.

But Liberal opposition critic Hugh MacDonald said Albertans don’t want to hear that their own government is allowing more revenue from Alberta oil to head to Ottawa.
“The results of this study are damning with respect to this government’s handling of a resource that belongs to the people of Alberta,” he said.

“Under an Alberta plan, we could actually get less. It’s astonishing, and it’s more clear evidence this government has been operating without any real plan for the last 10 years.”

The study, first reported in yesterday’s Sun, also suggests Alberta is being taken to the cleaners compared to other jurisdictions, receiving between 15% and 30% less overall revenue from companies here, or as much as $2 billion since the rates were set in 1996.
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