Pipelines and Oil Companies

[parsley]

A lot of land owners have received very generous cheque’s from oil and piplenine companies over many decades. Have their cheque’s benefited your land?

Right now, both are struggling. They cannot survive $10 oil, plus Eastern Govts openly fighting against them.

Would landowners and mineral-rights owners be willing to refund, or subtract 5%, of your agreement -payment from them, as an indication of support?

They’ve been kicked hard.

It would help ensure future development in Canada and help them when they are down and out, bleeding red ink. Any comments?

Of course if you don’t get any annual benefits, it is non applicable to you. Pars.

PS I shall get back to the Jim Karahalios thread. I’ve been really pressed for time, but I have enjoyed reading some of the new comments and also look forward to reading the most recent ones.

[woodland]

Currently have leases that haven’t been paid from the company in three years and getting the province to pay is frustrating. The last pipeline that went across our place took nearly a year to pay us damages from gates being left open, flooding from their trenches, and us doing fencing for them. They agreed that all the charges were justified and it took us threatening to sue them to pay up. The lease payments are not tied to the value of land or oil so haven’t changed much over the years except for the value of the crop they displace and general disturbance (nuisance factor).

We work back and forth with the one good company here without any complaints. Kenny gave them $113 million today too.

I view my lease money to be the same as a landlord renting out a house. It’s not free or easy money. They didn’t pay me anything extra when BSE obliterated our balance sheet.

I’d rather they clean up the abandoned wells on my place than getting the rent cheque’s. I don’t think the companies will be the ones footing the bill for that ........... if you know what I mean.

[makar]

After being treated like a leper for 40 years and laughing at paying more when crude was a 100 hell no.

[makar]

Pipelines unless a major dont pay rent.

[ajl]

Pipelines unless a major dont pay rent.

They do restrict what you can do with the land though even on the ones that don't pay rent. Had a situation where they did not want to cross the line with sludge hauling trucks. 10 page crossing agreements.

[woodland]

Pipelines unless a major dont pay rent.

My FIL has the trans mountain and signed up for the TMX and gets no rent. Don’t know of anyone who gets paid rent unless there’s a riser or valve above ground.

[foragefarmer]

Rather than sending Jim K a $250.00 cheque Parsley, you should have sent it to an oil company of your choice.

You could have been the first to start the donations and set an example, at least the $250.00 wouldn't have been pissed away!

[GDR]

My FIL has the trans mountain and signed up for the TMX and gets no rent. Don’t know of anyone who gets paid rent unless there’s a riser or valve above ground.

I'm surprised they dont pay. We have a TC pipeline crossing one quarter and get $9500/yr, all underground. That is a good deal, but I dont feel the same way about the wells we have. Now have one that is an orphan well too.

I agree they will get no rate concession from me, they made the deals, they need to honour them, cant see them paying more when farm commodities fall.

[chuckChuck]

Oil prices are low but many oil companies will have locked in higher prices or hedged their oil prices so they are not all getting the very low prices that we are at.

Several of the Alberta companies also are integrated and do some value added refining so have been making a profit when other producers have been struggling.

A lot depends on how long the low prices last.

Royalties in western Canada are already some of the lowest in the world. There are numerous incentive programs to encourage drilling and exploration.

Supporting laid off workers and their families directly would be a better investment. Enhancing and extending EI would cover alot of workers. I am not sure what you do for small contractors who have avoided paying EI.

Having landowners offer a small break on lease rates will have very little impact. Lease rates and land costs are only a very small cost of drilling and operating a well or a building a pipeline.

Knowing that Albertan's could have had $14 Billion dollar surplus last fiscal year if they had a tax system like Saskatchewan's, indicates they had a lot of room during the peak of $100 dollar oil to collect a whole lot more revenue from the oil industry.

The lesson here is, that given what Norway, Alaska and other state owned savings plans were able to accomplish with collecting higher royalties and putting some away for a downturn, Alberta looks like it has a missed a golden opportunity.

But Albertans valued low provincial taxes and low royalties over the long term security of a sustainable provincial tax system and building some resilience and diversity into their economy.

Albertans pay the same federal tax rate as every other province. Yes they make a large contribution to federal taxes but only because they have the highest wages in the country and highest GDP per capita of any province. They have been really well off untill the oil prices collapsed in 2014.

That is the nature of every other oil producing region in the world. The smart ones and fiscally prudent ones knew that high oil prices wouldn't last forever.

[shtferbrains]

You should move to Norway Chuck.

Highest tax to GDP ration in the developed world @ +54%

Even Canada was only 32% in 2018.

We are trying to catch up.

You love that system. The government keeps all the money cause they always know the best way to spend it.

Always ends well.

[makar]

As much as we love cc his post above makes sense.

[chuckChuck]

Norway has one of the highest standards of living in the world. It is a great place to live by most measures.

Alaska has $66 Billion in their permanent fund. They pay annual dividends to every Alaskan.

Norwegian officials visited Alberta to examine the Alberta Heritage Fund that Peter Lougheed set up in 1976.

https://en.wikipedia.org/wiki/Alberta_Heritage_Savings_Trust_Fund https://en.wikipedia.org/wiki/Alberta_Heritage_Savings_Trust_Fund

"The Alberta Heritage Savings Trust Fund (HSTF)[1][2] is a sovereign wealth fund established in 1976[3]:10[4] by the Government of Alberta under then-Premier Peter Lougheed.[3]:10[4][5] The HSTF had three objectives: "to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans"

This is radical? Not really. Peter Lougheed was just being a good manager.

Criticisms

In their August 2015 contrast for The Globe and Mail between the AHSTF and the Norwegian Government Pension Fund Global, Brian Milner and Jeff Lewis wrote that Norway parks 100 per cent of its non-renewable resource (NRR) revenue from royalties and dividends in a fund that is barred from investing a krone in the domestic economy.[10]

Reports by the Canadian Centre for Policy Alternatives and the Fraser Institute[15]:9 concluded that Alberta should be saving more of its non-renewable resource revenues. Since 1980, the NRR in Alberta has generated almost $190 billion, but the value of the Heritage Fund was only $17.3 billion in 2014. After 1987, NRR was no longer added to the Heritage Fund.[4] The Fraser Institute report compared the Alberta Heritage Fund to Norway and Alaska's NRR funds and argued that Alberta's was significantly "smaller than others because of its relative under-funding and chronic withdrawals of most income from the fund."[15]:9 Alaska for example continued to deposit 25 percent of its NRR from 1982- 2011 and Norway contributed 100 percent. If Alberta had followed the Alaskan formula, by 2011 the Heritage Fund would have had $42.4 billion instead of $9.1 billion. By the Norway rules, Alberta would have had $121.9 billion by 2011.[3][15]:9

In 2013 Madelaine Drohan, author of the Canadian International Council report entitled The 9 Habits of Highly Effective Resource Economies: Lessons for Canada,[16]:94and a Canadian correspondent for The Economist, echoed the IMF call for "stabilization funds" arguing that every province in Canada should consider establishing a sovereign wealth fund, as global peers have done, and treat non-renewable resource revenue (NRR) as "capital to be saved and invested, rather than income to be spent."[17] She added that in provinces like Alberta where the Fund already exists, it "should be implemented with a great deal more rigour."[17] Drohan warned in 2013 against the "political temptation" to "raid" the Fund and offered the Canadian Pension Plan Investment Board (CPPIB), a Crown corporation, the largest pension fund in Canada, as a model.[17] By March 2015 the CPPIB fund had grown to $219-billion and made a 16.5-per-cent rate-of-return in 2013.[18]

In its annual report on the Canadian economy in February 2013, the Washington-based International Monetary Fund (IMF) urged Canada, and resource-rich provinces like Alberta and Quebec to "better manage boom-and-bust commodities cycles by stashing away more tax revenue in good times".[19] IMF mission chief for Canada, Roberto Cardarelli, suggested that Norway, with the largest sovereign wealth fund, is an example Canada should follow. However, unlike Norway, resource royalties are collected at the provincial, not the federal level in Canada.

Max Fawcett, the editor of Alberta Oil magazine, warned that the "new" Alberta Future Fund, "which would receive $200 million a year" that would "support big-picture projects" and the two "new innovation endowments" announced by Finance Minister Doug Horner in the 2014 budget, would be funded by raiding the Alberta Heritage Savings Trust Fund. There were no new savings.[7]

According to Fumbling the Alberta Advantage, a Fraser Institute report written in 2015, "Between 2005/06 and 2013/14, and adjusted for inflation, the province of Alberta garnered $101.3 billion in resource revenues."[20]:2

Given what is now known about the spending patterns of the last decade—that Alberta spent an extra $49.2 billion on programs above inflation and population growth—a deposit of 25% of resource revenues, or $25.3 billion, into the Heritage Fund would not have been unreasonable had program spending been more carefully controlled. Instead, the province deposited just $4.5 billion, or 4.5% of all resource revenues between 2005/06 and 2013/14.
— Fumbling the Alberta Advantage

[farming101]

While I highly doubt The Fund could ever be wiped out it will be interesting to see the next report.

[shtferbrains]

"According to Fumbling the Alberta Advantage, a Fraser Institute report written in 2015, "Between 2005/06 and 2013/14, and adjusted for inflation, the province of Alberta garnered $101.3 billion in resource revenues."[20]:2

Given what is now known about the spending patterns of the last decade—that Alberta spent an extra $49.2 billion on programs above inflation and population growth—a deposit of 25% of resource revenues, or $25.3 billion, into the Heritage Fund would not have been unreasonable had program spending been more carefully controlled. Instead, the province deposited just $4.5 billion, or 4.5% of all resource revenues between 2005/06 and 2013/14."

Interesting numbers Chuck.

Thanks for posting that.

Did Mr. Trudeau's relief packages last week not put his budget into 101 billion dollar deficit for this year?

I might be wrong, but that number in the top paragraph rang a bell.

Good thing the budget will balance itself because the shit hasn't hit the fan yet IMHO.

We're so screwed.