Could we convince Ed Stelmach to postpone the new Royalty plan

[GarthChapman]

QUOTE (mcgregok @ Nov 29 2008, 10:07 AM)
Maybe Mr. Stelmak could spend the massive Heritage fund they are hoarding. I can't understand why a goverment should have a massive saving accout. Alberta business could use the cash to expand. As far as the oil companues go, they have left before then come back a few years later in droves.




They only come back when the economics make sense for them. They are in business to make profits.



By the way - if we had saved more in our Heritage Fund during the good times we could spend some when it rains. Like Noraway has. Last time I saw the numbers they had about 250 BILLION USD in their fund - and after less than 15 years of saving. They have a population about the same as Alberta. And they could now live off the income from their Savings Account - FOREVER. They could eliminate all taxes from their economy - FOREVER. And they did this by budgeting as if there was no oil revenues and only used the oil revenues to fund deficits.

 

[GarthChapman]

QUOTE (Jack @ Nov 29 2008, 09:22 AM) Really? Guess what - the 2009 capital plans & budgets are already locked down. These big companies aren`t nimble enough to just up and decide to explore/produce/invest/drill one morning after hearing some favourable news. The `09 plans have been made, they`ve been disclosed to the public, and they`re not going to be deviating from them.

But if Stelmach acted now they would make changes for 2010, and you would see the smaller companies more active in 2009.

Things aren`t quite as black and white as you portray them.

 

[GarthChapman]

QUOTE (wealthyboomer @ Nov 29 2008, 04:16 PM) If postponing the royalties generate more development than higher royalties do, and not just more profitable development for the resource companies, then this is an argument to delay the new royalties program. But this does not end that calculation. This additional development must be balanced against the other development that would come from [public spending financed by] higher royalties .

It doesn`t work that way. Higher taxes results in less business activity and therefore less overall tax revenues from the industry that has been more highly taxed. The challenge is to strike a balance - have the highest tax possible on a depleting resource but not so high that you reduce exploration and production so the overall sector tax revenue drops below what is preferable.

Peter Lougheed knew this. Ralph Klein knew this. Even Don Getty got it. But Ed Stelmach doesn`t get it. Either that or he was just to eager to create an issue to get himself elected on (remember that he was appointed as Premier before he got elected).

 

[GarthChapman]

QUOTE (Dan_Eisenhauer @ Nov 29 2008, 05:17 PM) I am not knowledgeable enough about the oil and gas industry to comment on whether the Royalty changes are good or bad for the industry and/or Alberta. I do know that the Albertan economy was super heated and needed to cool down. Wages, prices, etc were going through the roof. Employers could not find enough employees. It needs some breathing room.

It is my feeling and understanding that the new Royalty regime does just that... it temporarily made oil companies review their projects. Some were "cancelled" (Time will tell how long they remain "cancelled".) Some were postponed. But, IMHO, most, if not all, of those "cancelled" projects will be back again when the economy and the demand for oil products grows.

My impression is that any down turn in the oil patch is probably a result of a sagging economy more than it is with Royalties. It is just a matter of time before we begin to see an upturn in the industry in Alberta.

As I said, I am just an outsider looking in. I would love to hear what a really knowledgeable oilman/woman has to say on this subject.

Dan, I agree with you, and I won`t try to pretend I am an expert in this field. But I have been a businessman long enough to have absorbed some basic logic and to have seen a couple of cycles, especially in this industry.

All I am really saying is that we now have two very large drags on our oil and gas sector - and one is enough to create the needed cool-down. So let`s remove the one we have control over, and then replace it when that makes good economic sense.

It`s a big boat and it takes a while to make a turn, so we should be acting quickly.

 

[mcgregok]

QUOTE (GarthChapman @ Nov 29 2008, 08:25 PM)
They only come back when the economics make sense for them. They are in business to make profits.



By the way - if we had saved more in our Heritage Fund during the good times we could spend some when it rains. Like Noraway has. Last time I saw the numbers they had about 250 BILLION USD in their fund - and after less than 15 years of saving. They have a population about the same as Alberta. And they could now live off the income from their Savings Account - FOREVER. They could eliminate all taxes from their economy - FOREVER. And they did this by budgeting as if there was no oil revenues and only used the oil revenues to fund deficits.






I can't imagine the goverment having full contol of my pay check FOREVER. People need an insentive to get up in the morning. Theres no sense of accomplishments form getting goverments hadouts. Why use your brain when the goverment pays you for dong nothing.