Friday, March 16, 2012

Its time Alberta Stopped Giving away its oil.

An excellent subject article appears in the Calgary Herald by Trevor W. Harrison.  Your future under a Conservative Government is clear, should you choose that route! 

I will cut quotes from the article and what it means.  The Conservatives have adopted the full play book of the Wild Rose Party so, there is no win for us there.

February 22, 2012.
The Alberta government’s new budget is laudable for its commitment to providing stability to education and health-care funding, and for its reinvestments in some areas  of social services, notably increased payments to AISH recipients.

Under the guise of "providing stability to Health Care and the education system" they usher in the private pay health care system, along with Private schools like the ones in the US and the Abandonment of Alberta Health Care as you know it will be in full force if you elect them again!  See  

Our health care costs have been padded with expense trips to Sweden, public hospitals upgraded and turned over to private companies the multimillion shortfalls are charged to health care for no purpose other than driving up the costs.   Under a Government that had the concerns and health of Albertans as a guideline, AISH could easily be doubled!  There is no give away!
Hopefully, the government will also follow through on its intentions, as stated in the recent throne speech, to review the province’s fiscal framework. A return to progressive taxation in Alberta is overdue and would scale back the expensive tax cuts being showered on the wealthy and corporations.

Now, to Progressive Taxation Alberta Style.  Gone is the flat rate on personal income tax. 
Expect a sharp increase as the scales and rates for personal income tax are adjusted upward. Small business and corporations will see tax hikes that will bring them up but not quite to par with the joining provinces. All this will be billed as sacrifice by the industry and bowing to Alberta Tax Federation demands.

It will be accompanied by a proper dose of irate press by the petroleum industry as they claim mistreatment.

The oil royalty will remain nonexistent; zero supported by your higher tax bill.  As Mr. Liepert told us, "Royalty is different than taxation"

Yet, such a review will inevitably fail to bring about the “foundational changes” the  
Redford government has also promised if the issue of oil and gas royalties is excluded. NOT SO!  Foundational Charges will be massive with the US system of Health Care and the abandonment of Alberta Health Care.  

They have been busy building schools too small through the P3 programs with Alberta Pensions Investing in them.  We now pay our taxes to the schools we send our kids to.  Your increased tax bill will drastically increase the amount directed to schools. Your property taxes will jump to accommodate Your Library of Private schools which will charge much more and hand pick their kids taking only the best and the brightest while the beleaguered public system is criticized as being substandard because of the low scores due to the loss of the brightest students..  Newly built schools that are "too small" will be turned over to private enterprise.  The now deteriorated public school system will further deteriorate through short funding.

Don’t forget how this Government uses the public pensions!  If it suits them a private school will take the new building at cost or less.  The pensions will take a hit because of no interest paid in or capital lost though “bad investment”.  Public outrage should be directed in a different direction!

Yes indeed!  There will be lots of “foundational changes”
Contradictions happen when one doesn’t want to deal with hard facts. The fact is, the Alberta government has all but abandoned any effort to reach specified revenue targets, preferring instead to engage in a misguided quest for competitiveness through repeated reductions in royalty rates while ignoring the real, tough changes necessary to set Alberta on the right track for the coming boom.

Putting "hard facts" and "coming boom" in the same paragraph is a stretch!  There will be no "boom" for the next 10 to 15 years.  They have been bundling long term ideas into text that would have you think it is imminent!   If we get a Government in place that is looking after Alberta there will be an organized expansion of the industry not the fallacy of the phantom "boom"
Much is said to hook Boom with Employment.  There are presently more illegal Americans working in the oil patch than Albertans. Being illegal they contribute nothing back to Alberta or Canada by way of taxes and, if my guess in correct they contribute nothing back to the USA either!  The management is foreign because of the Conservatives decision to stop support for University Education at the high school level obliging Albertans into Trade Schools which were well endowed. 

When we talk increased employment they are not talking about employing Albertans so, why push the expansions?

 The reasons for the government’s silence — and that, frankly, of much of the opposition — are obvious. Big Oil carries a big stick in this province, one that it wielded none too subtly upon former premier Ed Stelmach when he tried to raise rates in 2008. Albertans will soon be going to the polls and, even though the majority of Albertans (including Tory supporters) favor increasing royalty rates, no one — especially the government — wants the oil companies threatening Armageddon in the midst of an election.
Big oil does not carry the biggest stick however, a strong voter turnout does!
Ed Stelmach never tried to raise rates in 2008!  Hit by a crush demand for increases to royalty rates they put out a BS sheet called “The New Royalty Regime” which was nonsense from start.  The numbers in that sheet were too high to be attainable but waxed the greed of the uninformed.

The last line on the sheet said “Revenues taken in Canadian dollars” which was a further loss to Alberta of 18% at that time!
It also fueled a rash of uniformed oil workers petty comments about the rape of the industry.  This was at a time there was a world downturn in exploration. Rigs were nearly shut down in BC, Saskatchewan and the US not to mention the North Sea.

The myopic, dull types (thinking here of aka Diesel 99 and Robmax) took this as Alberta slow down only and harangued everybody on the net about the travesty of high royalty rates. 

Royalty has dropped from 25% to zero in a straight line since the Election of Ralph Klein. If we wait until after an election for a discussion of royalty rates it will be too late; game over!

And such a discussion is badly needed. Critics of the budget, and not merely supporters of Alberta’s opposition parties, have been quick to point out an obvious contradiction between the government’s stated desire to rebuild Alberta’s Heritage Savings Trust Fund and Sustainability Fund by reducing its dependence upon unrenewable resource revenues to fund ongoing programs, while doing just that in stating how it will meet expenditures in the coming year (e.g., a withdrawal of $3.7 billion from the latter to cover the current year’s shortfall). That circle doesn’t square.

There never has been a sustainability fund!  The title was not even mentioned before the crunch and did not appear in any ledger leading up to the announcement.  Like a mist it appeared in a Stelmach media speech under a well managed plan. 

If this Government wanted to pay any of the 8 billion dollars back, AIMCo would have shown it as an investment.  It did not; it is shown as an outright loss even though the rest of their industry showed a 3% profit for the same period of time.

The Heritage Trust now sits at 15 billion dollars rather than the 180 billion or so that should have been in there!  Danielle Smith and Redford are all for drawing it down to zero as is the intention of the Conservatives.  Both have said they want a new account made up of taxpayer contributions.  They have identified the Heritage Trust Fund as being stolen from the resource companies!
For a solution to the problem, Premier Alison Redford need look no further than her earlier predecessor, Peter Lougheed, who took a tough love stance with the oil companies and set a bold royalty target of 35 per cent of oil revenues, amid uncertain times, to boot. Embracing such a target today would mean, based on the government’s own forecasts for production and oil prices, an additional $14 billion for Albertans over the next three years. The potential in the oilsands is even greater, where a less ambitious target of 25 per cent, to account for higher upfront costs, would bring in more than $31 billion. Altogether, that would mean a total of $45 billion in extra revenue over the next three years.

Peter Lougheed worked out a deal between the Oil Company, the Federal Government and the Alberta Government which was a steal for the oil company.  The Feds, who were in the partnership also through in tax concessions which still ride and should not be in there!

The deal was 25% taken as a base royalty for Alberta, not 35.  Also incorporated was a 1% build rate. While the exploration, survey and plant build was going on costs were kept track of.  All of those costs were returned to the company by taking only 1% royalty allowing them to keep the Provinces 24% until the expenses were totally paid for.  Expenses included chartered trips to holiday spots for “business meetings” private jets owned by the companies for the presidents’ exclusive use and so on.  Not to be left out of expenses were the library of dinner meetings and interest paid on any money used.

Alberta taxpayers paid every cent of the construction, probably two times over!

They were never ever audited!

When the plants were built and on the verge of paying 25% Syncrude and the Conservatives opened a public debate for the benefit of ignorant Albertans.  Syncrude took the position the new build for the Firestorm technology should be paid for at the 1% construction rate.   Klein said he would talk about it and proceeded to go on a fishing trip to a very private location.  That trip resulted in all the royalty being dropped to 19% from 25 with a provision on top of that cut (yet to be determined) for Firestorm specifically.

What’s past is past. We can’t entirely correct for past misdeeds, but we sure don’t need to repeat them. For too many years, successive Alberta governments have sold off Alberta’s oil at fire sale rates. In doing so, they have let the vast potential of our resource gifts slip through our fingers. Consider only the following: In 1978, Albertans received 40 per cent of revenues from the oilpatch, but by 2009, this had fallen to 10 per cent. The situation has been made worse, not better, by the emergence of the oil sands as the dominant market player.

While true that 40% of Alberta revenue was resource oriented, Natural Gas was the major contributors by virtue of the sheer volumes and the high rates at the time..  If memory serves me, only 6% was from the oil side of the equation.  The crash of gas from 15 cents to 3 cents  left the Government with choices of increasing royalty or robbing pensions; they took the latter.

If the government wants to rebuild Alberta’s Heritage Savings Trust Fund and Sustainability Fund, and ensure stable funding for programs into the future, as it has stated it wishes to do, the solution lies in getting for Albertans a larger, fairer, return on our oil.

This Government has no intention of rebuilding the Heritage Trust fund (it belongs to the oil companies you know!) and the Sustainability fund is a neat name for stealing pensions when the surplus tucked away in Government accounts is eaten up.
Albertans cannot continue to vote repeatedly for the same party (WRP or Con) and expect a different result than they have been getting!

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