2008 Article Archives
Invest in junior oil and gas companies
December 31, 2008
If indeed the higher royalties are stopping Alberta's small oil and gas firms from drilling more wells, the Alberta government should give them the option of keeping the additional royalties in exchange for equity interests (working interests) in their exploration plays. A provincial Crown corporation, the Alberta Oil & Gas Corporation, should be established to negotiate and manage these working interests.
Likewise, instead of forgoing $1.8 billion in royalties through its five-year royalty transition program, the Alberta government should instead collect the full royalty amount and create a $2 billion drilling investment fund. This capital would then be invested in drilling programs of Canadian-owned junior oil and gas companies under the auspices of the Alberta Oil & Gas Corporation, acting on behalf of all Albertans.
By partnering with all Albertans, Alberta’s junior oil and gas companies would have access to the capital they need to explore and develop the province’s conventional oil and gas resources. And Albertans would be one step closer to retaining a fair share of their oil and gas wealth.
Len Skowronski
The Courage to Sustain Prosperity
December 19, 2008
Alberta’s Provincial Energy Strategy states that there is a price to be paid to achieve sustainable prosperity: “The price, of course, is courage.” One step towards sustainable prosperity is to “exploit the ways in which we can add value to Alberta’s energy industry”. An immediate way of adding value to our energy industry is by limiting the amount of bitumen exported and upgrading most of the bitumen produced into synthetic crude oil in Alberta. Bitumen sells for 30 to 50 percent less than oil, so we receive less royalties and taxes on a barrel of exported bitumen than on a barrel of oil.
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Stop Carbon Capture Subsidy
Do Albertans really need to subsidize the energy industry by $2 billion? Can’t these companies absorb the cost of reducing carbon dioxide emissions by using a portion of the huge profits they are making?
Canadian Natural Resources and Petro-Canada are two oilsands players in line for a portion of this hand-out. Canadian Natural Resources Ltd. reported that its 2007 profit rose to $2.6 billion from $2.5 billion in 2006. At Petro-Canada, this year’s third-quarter profit climbed to $1.25 billion from the $776 million recorded in the same period a year earlier.
With this order of profits, surely these companies could afford to capture, transport and store the carbon dioxide they are emitting. Alberta taxpayers should not be subsidizing this effort.
The Alberta government needs to set a target for carbon emission reduction and enforce it. Current emitters should be given five years to reduce their emissions by 90%. Large fines should be levied to those who do not comply. Permits for new energy projects should require that green house gas emissions be completely eliminated or at least limited to 10% of what current projects are producing on the average. This should be considered another cost of doing business; no subsidies or tax breaks should be given.
If the government proceeds with this subsidy then at least it must insist on a share of the patents for any new technology developed through this program and the profits from leasing out this technology. Then the $2 billion could be considered an investment instead of a hand-out.
Len Skowronski
Socreds on the Comeback Trail
The Alberta Social Credit Party held its Annual General Meeting on November 8, 2008 in Red Deer. Len Skowronski reported on his “interesting, exciting and challenging” first year as Leader of the Party. He recounted the challenge of mounting an election campaign after the snap drop of the writ in February. The new signs, brochures and platform were well received by the electorate but the Party suffered from the lack of media attention. “We must have a slate of 83 highly qualified candidates in the next election if we are to garner media coverage even close to that received by the other parties” counselled Leader Skowronski.
A new Board of Directors was elected. Earl Solberg was returned as President. Gordon Barrett, Trevor Grover, Wilf Tricker and Helge Nome were elected Vice Presidents. Jim Doody was appointed Calgary Area Director.
The afternoon was dedicated to a brainstorming session entitled “The Comeback Trail”. Short- and long-term goals were proposed by the members and actions towards achieving these goals were suggested. The Board of Directors will use the results of this exercise to formulate a strategy that will revitalize the Party and transform it to a winner again.
Len Skowronski
Albertans Win with More Royalties
The October 25, 2008 edition of the Calgary Herald featured an article headlined “Alberta’s energy gamble”.
The debate over the Alberta government’s “New Royalty Framework” which evolved from the Royalty Review Panel’s report “Our Fair Share” was reviewed. On October 25, 2007, the government released its plan to introduce new royalty regimes for conventional oil, natural gas and the oil sands that would increase revenue by an estimated 20%. The New Royalty regime would take effect on January1, 2009.
The oil industry responded with protests, indignation and treats. Though the heat of the debate has subsided over the last twelve months, industry representatives still try to get the government to back-off at every opportunity. They are claiming that because of the current economic problems and the decline in oil and gas prices, the government should delay the implementation of the new royalty regime or even give a complete royalty holiday to encourage investment in drilling of conventional oil and gas wells.
It is my opinion that the increase in royalties is long overdue and should not be postponed or watered down in any matter. Rather the current plan should be implemented on January 1, 2009 and a schedule of regular reviews should be instituted thereafter. I hope to explain why I have come to this conclusion and convince free-thinking Albertans to support this action.
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Len Skowronski
The Courage to Sustain Prosperity
December 19, 2008
Alberta’s Provincial Energy Strategy states that there is a price to be paid to achieve sustainable prosperity: “The price, of course, is courage.” One step towards sustainable prosperity is to “exploit the ways in which we can add value to Alberta’s energy industry”. An immediate way of adding value to our energy industry is by limiting the amount of bitumen exported and upgrading most of the bitumen produced into synthetic crude oil in Alberta. Bitumen sells for 30 to 50 percent less than oil, so we receive less royalties and taxes on a barrel of exported bitumen than on a barrel of oil.
When an upgrader is built in Alberta many jobs are created locally as well as throughout Canada in industries providing materials and support services. Once built, the upgrader provides jobs for operation and maintenance. These jobs and the upgrader profits result in additional municipal, provincial and federal tax revenues which may be used to improve services to all Canadians.
Sturgeon County, where much of the upgrading may take place, estimates that if we should export 1.5 million barrels per day of bitumen, the take in royalties and taxes would be between $3 billion and $4 billion a year. If the same amount is upgraded in Alberta, the take jumps to between $10 billion and $11 billion a year, assuming an oil price of $80 per barrel and a bitumen price of $56 per barrel.
Citing the decrease in oil prices and other reasons, Total Canada, Canadian Natural Resources, StatoilHydro and Petro-Canada have all delayed or cancelled facilities to process raw bitumen into synthetic crude oil. The President of StatoilHydro best exemplifies their attitude: "This decision does not impact the upstream part of the company's oilsands venture. The production from the project will be marketed as unprocessed bitumen."
The Alberta government must respond to these decisions with the courage to enforce its goal of upgrading at least 75% of the bitumen in Alberta. Currently, a little over 60 % of the 1.6 million barrels of bitumen and heavy oil produced per day is upgraded in Alberta. The exports should be capped at the current 600,000 barrels per day until the 75% goal is reached. No company should be allowed to export more than 25% of the bitumen it produces.
The oil companies are being short-sighted in cancelling their construction projects. The costs for materials such as steel have fallen by about two-thirds since reaching their peaks. With the layoffs in the manufacturing and forestry industries, many skilled workers are available. With Canada in stimulus mode, these companies could probably get the federal government to assume the cost of moving and training these workers to build and operate upgrader plants in Alberta. Now is the time for low-cost construction so that upgraders will be in place when the price of oil inevitably rebounds to previous high levels.
The Alberta government must have the courage to motivate oil companies to upgrade and refine our bitumen in Alberta so that we can sustain our prosperity.
Energy Resource Dividends for Voters
In the October 4, 2008 edition of the Calgary Herald, a special report entitled “Why We Don’t Vote” was published. Eight ideas to increase voter turnout were featured: fixed election dates, citizen’s assembly, MP/MLA recall, plebiscite, landed immigrants, electronic/anywhere voting, proportional representation, outreach. The Alberta Social Credit Party proposes that a ninth option be added to improve the turnout of Alberta voters: Option 9 - Energy resource dividends linked to voting.
First, the size of the Heritage Trust Fund should be increased significantly by consistently saving a much larger portion of our energy resource wealth. Then a yearly, tax-free dividend from the earnings of the Heritage Fund would be paid to every Albertan who voted in the last provincial election.
As an incentive to complete high school, eighteen year-old Albertans who graduate from high school would commence receiving yearly dividends upon graduation instead of requiring them to wait until they vote at the next provincial election.
Not only would this entice more Albertans to vote but it would also encourage them to become more interested in the management of our energy resources and the distribution of the resulting wealth.
Voters would demand answers from their MLAs regarding the government’s management (or lack of management) of Alberta’s energy resources. Why aren’t we getting larger dividend cheques? Why aren’t we receiving higher royalties and taxes from the production of oil and gas? Why are we exporting bitumen instead of upgrading it in Alberta? Why are we subsidizing the building of oilsands facilities through royalty holidays without taking an equity interest in these facilities? And so on.
Yes, this option would get-out the voters, voters who would have acquired a much better understanding of major issues facing Alberta.
Len Skowronski
Tell Stephen Harper we will stop all bitumen exports
Stephen Harper announced that a Tory government would prohibit bitumen exports to countries with greenhouse-gas emission standards weaker than Canada's. The Alberta government indicated it is concerned that the federal government is planning to interfere in the management of its energy resources.
Here is a sure-fire way of avoiding this dispute over federal and provincial turf. The Alberta government should pass legislation that requires all bitumen be upgraded in Alberta and that only high-grade synthetic crude oil, gasoline and diesel may be exported.
This would allow us to control emissions within Canadian standards. It would also allow us to keep the investment, jobs and profits arising from building and operating our own bitumen upgrading plants. It would increase our royalty revenue, for the royalties on bitumen are considerably less than those on crude oil.
EnCana Corp. and joint-venture partner ConocoPhillips are expanding their Wood River refinery in Roxana, Ill, to raise total refining capacity to 356,000 barrels per day through the addition of a new coker that will convert Alberta bitumen into light crude and gas. For this expansion, they will spend $US 3.6 billion, mainly from profits gained from the mining of low-royalty bitumen from the Athabasca oilsands.
Now wouldn’t it be better if we kept these billions of dollars, plus the jobs and profits from upgrading the bitumen in Alberta? It is time that the Alberta PC government takes action on bitumen exports so that we do not lose control of our resources to the federal government and USA.
Len Skowronski
Stop the Wealthy Jumping the Healthcare Queue!
How dumb does Don Copeman think Albertans are? Does he really believe we accept that the clients of Copeman Healthcare Centre are paying $2900 to $3900 a year for preventative heath services? That we cannot see beyond the façade and see it for the queue – jumping scam that it really is? Well the majority of Albertans are much smarter than he thinks! It is only members of our provincial government who chose not to see through Copeman’s smoke-screen so that they can promote their ideology to privatize healthcare.
Two doctors have left general practices with universal access to join the Clinic in Calgary and serve the wealthy elite. What will the patients of these doctors do, if they cannot afford to pay the annual fees to continue having access to their doctors? Copeman says that these doctors may have quit being general practitioners completely because of the high rental costs for their facilities. This points to another instance of the PC government failing to do its job by refusing to cap rent increases to the rate of inflation.
If our provincial government refuses to stop the slide of healthcare into a two-tiered system then perhaps it is time for the federal government to step-in. Stephen Harper is claiming during his election campaign that he is a common man who stands-up for the common people. Well here is his chance to support equal access to healthcare and stop special access for the wealthy. Even though this Clinic may pass a legal interpretation of the Canada Health Act, it doesn’t keep to the spirit intended by the founders of the Act. If need be, Mr. Harper should sponsor an amendment to the Act that would safeguard the universality of healthcare in Canada.
Len Skowronski
PC Government Shames Albertans
For over two decades, conscientious Albertans have been urging the PC government to properly manage the development of our oil and gas resources. Our call has mostly been ignored. Now the world is taking notice of this government’s failings and Albertans are being perceived as polluters, major global warming contributors and poor fiscal planners.
Politicians in the USA are threatening to boycott our “dirty oil”. The Organization for Economic Development and Co-operation (OECD) chastised us for saving so little of our resource wealth, pointing out that Norway has built a fund of $400 billion while Alberta has only $16 billion in its Heritage Trust Fund.
What has the government done to respond to these criticisms? The Premier visited US politicians, arguing that they should suppress their environmental concerns in order to sustain a reliable supply of oil and gas. $24 million will be spent to propagate the message “things are not as bad as they seem”. A third of the budget surplus will be saved.
The government has missed the point. Substantial actions rather than excuses are needed. Suspend the allocation of new leases and the approval of new projects until a comprehensive oilsands plan is developed. Limit the use of natural gas and fresh water for bitumen recovery. Capture the carbon dioxide created during the recovery and processing of bitumen and store it or use it in some other productive process.
This year the total budget surplus should be saved. At least a third of our oil and gas revenues should be saved in subsequent years.
Len Skowronski
Buy Back Alberta!
Establishing the Alberta Investment Management Corp. (AIMCo) to manage the $70 billion in the Heritage Trust and other funds could prove beneficial to Albertans provided the Alberta government leads this organization with the appropriate oversight and mandate.
First, immediate oversight action is needed to stop the building of an empire for Alberta Finance personnel. Why does this start-up investment organization need to have a staff of 150 when it has only one client, the Alberta government?
Secondly, although growing our funds through wise investment is a laudable goal, this organization should be given a larger, long-term mandate: Buy Back Alberta! Instead of participating in a $7.4-billion takeover of a power and gas utility in Washington State, AIMCo should focus on initiating and growing Alberta-owned ventures in Alberta and the rest of Canada.
We should use this capital to regain control of our resources, environment and economy by taking equity interests in all future oils sands projects, including the building of bitumen upgrading plants. Likewise, we should provide capital investment in Alberta-owned food processing and merchandising companies so that they could compete with the foreign-owned companies that now control these sectors in Alberta. Let’s help build our own Exxons, Cargills and Wal-Marts.
Given the right vision from the government, AIMCo could use the funds in its care to reverse the tide of foreign takeovers in Alberta and the rest of Canada, so that we would become “Masters in our own house”.
Len Skowronski