Lots of Traffic!

[cowman]

grassfarmer: I suspect the NFU addendum is the same one the surface rights groups put out? I will also add you can write anything extra you might feel is necessary into an addendum?
Believe it or not I am becoming impressed with the actions of the NFU! They are coming across as a very sensible grassroots organization, of late! They seem to have their ducks in a row.

[farmers_son]

The oil industry has always used the threat of pullbacks in activity causing oilfield workers to be unemployed to lever better deals from the province. Maybe that argument held water when oil was $11 a barrel, not so much so at today’s prices.

And I guess if you work in the oilfield you are receiving a benefit from the Alberta Advantage. If you are a full time farmer, not so much benefit except for the few thousand dollars a year you might get if a well is drilled on your property. That is a big if for many producers who do not have a well on their land, and I would say that is most of us.

Only 7% of the provinces workforce are employed in the mining, oil and gas sector. Granted there are spin off jobs but the economy of this province is bigger than oil and gas. There is a breakdown of Alberta companies by sales and by employment at:

http://www.alberta-canada.com/statpub/topabco.cfm#2

The energy sector dominates the list of top companies by sales but not by employment which suggests to me that the bulk of the benefit from Alberta’s oil and gas is flowing south of the border through corporate profits and not that much is flowing to the people of this province, even those who do work in the oil patch.

The Province's policy of cheap royalties for oil and gas is questionable. Most Albertans are not participating in the Alberta Advantage, the royalties the province collects are not as large as many believe, and a few companies, mostly American, are reaping the benefit of the provinces non renewable energy reserves.

[Horse]

Farmers son it sure is nice to have another voice in the wilderness with me I have been trying to get peoples attention on this subject for yrs . now that some of the farmers are hurting we will get a few more ears. that is until some form of govmt throws out a few coins then they all forget what they saw as an injustice .
Here in alta they are probably in the 150/200 mill subsidy to app 4000 lease holders per yr for oil revenue and most are required to keep a few cows to get the cash therefore driving down the price to the rest of us.
Now watch the defence come for the lease holders .

[farmers_son]

I would not say that I am a voice in that wilderness. I am saying basically the opposite, that not enough of this provinces energy windfall is finding its way into not only farmers hands but the general population of this province. Unless you work in the oil patch the Alberta Advantage may be passing you by.

The province is not getting that much money from royalties, really about the equivalent of a sales tax. I am thinking the energy will be gone with all the money going to a few oil companies and what will be left? We have not diversified into manufacturing, Alberta Agriculture Food and Rural Development has not done much in the way of Rural Development (unless the provinces idea of Rural Development is a well site on the farmers land) and so forth. Unless the province collects a reasonable royalty, their fair share of the oil and gas in the province, they will not have sufficient resources to adequately diversify Alberta’s economy so the prosperity can continue when the resources are gone, which will be in my lifetime.

Not only no money for packing plants but no money for value adding in other sectors, agriculture, forestry, tourism, manufacturing.
Instead the rest of the economy has to compete with an overheated energy sector and finds that they cannot attract either labour or capital to their projects. This drives potential initiatives away.

[cowman]

farmers son: You must figure on living one hell of a long life if you think the oil will be long gone! Conventional yes, but not the oil sands.
I totally agree that the province is not getting enough of the revenue, but I will also say they are giving away too much also? I think it was $12 billion last year? If royalties rose significantly a huge slice of that would go to Ottawa?
Saskatchewan will become a "have" province this year and start to send money to the black hole in Ottawa. BC, Alberta, and Saskatchewan...all sending money to feed Quebec! Someone is making a bundle on our oil and gas...and it just isn't the oil companies!
I'd rather see the oil and gas companies get the money than a bunch of eastern slackards...at least the oil companies spend some of the loot in the west!
Horse: While I agree that the grazing leases need to be reformed...you need to realize it likely won't happen? That is just politics and Jack Horner pretty well whipped Klein on that one?
Also you should realize that everyone in Alberta benifits from the oil and gas in this province? Where do you think the money came from for all the government "cow welfare" checks? Sask. and Manitoba never got the level of support we did.

[farmers_son]

You might be interested to read the Alberta budget at:

http://www.finance.gov.ab.ca/publications/budget/budget2005/fiscal.html#12

Equalization payments are cash transfer payments by the federal government of Canada to less wealthy Canadian provinces to equalize the provinces' "fiscal capacity" or their ability to deliver government services.

Contrary to popular belief, it does not redistribute wealth from richer provinces to poorer ones, since money for equalization payments comes from general federal government funds. Rather, as with every federal program, it is paid for most by the individual Canadian taxpayers who pay the most taxes, whatever their province of residence. Ontario and Alberta are the only provinces that do not receive equalization payments, but as discussed, the money for equalization payments to the other provinces is not somehow taken from their treasuries.

Unlike conditional transfer payments such as the Canada Health and Social Transfer, the money the provinces receive through equalization can be spent in any way the provincial government desires. The payments help guarantee equal levels of health care, education, and welfare in all the provinces.

Today the total amount of the Federal Equalization Program is around 10 billion Canadian dollars per year.

See: http://www.nationmaster.com/encyclopedia/Equalization-payments

Alberta expects to receive $3.5 billion in transfers from Ottawa for such things as Health Care.

Alberta has received about $6 billion per year oil and gas royalties over the last 10 years, roughly the amount it collects in personal and corporate income taxes.

[farmers_son]

farmers_son, in order to really understand the impact of the oil and gas industry in Alberta, you need to also consider the amount of tax dollars this industry pays to municipalities. In resource based municipalities the machinery and equipment, pipeline assessment will likely make up 80 of the assessment. Farmland on the other hand will make up less than 10% of the assessment in many municipalities.
Granted, having the pressure that the resource industry puts on local infrastructure costs dollars, but the added assessment also allows for municipal funds to be used for recreation projects, seniors lodges etc.
I have had the opportunity to visit nearly every rural municipality and some of the municipalities would give their eye teeth for some resource assessment in order to provide essential services without having the local residents having to pay hefty property taxes.
It is a real eyeopener to check the assessment of each rural municipality and cross reference it with the mill rate.

[farmers_son]

Yes, but…The value of oil and gas production in Alberta would be in excess of $70 billion dollars in 2004. 81% of that oil and gas is owned by all Albertans, not the oil companies. That oil and gas is owned by all Albertans, not just those Albertans who work in the oil patch, or those Albertans who live in municipalities which have pipelines and well sites. That oil and gas is owned by all Albertans, not just those who have well sites on their farms or who can afford to invest in junior oil companies. I am thinking that the benefits of this tremendous non renewable, depleting resource are not being shared by all Albertans. That the benefits of the oil and gas under this province accrue to the oil and gas industry and are not being captured by the province to diversify the economy for the days when the drilling activity decreases, and the conventional oil is hard to find, and the pipelines are all built. Then the oil patch workers are laid off, there are no other jobs to go to and the profits simply go to the more often than not American companies through unseen underground pipelines. That oil and gas is not for the benefit of the oil and gas companies, it should be for the benefit of the Albertans who own it, shouldn’t it? We have forgotten that.

[farmers_son]

farmers_son you don't have to look far to see how the oil and gas industry has benefitted all Albertans. I don't know where you reside but I am willing to bet that in the nearest urban centre there will be recreation facilities, libraries, perhaps a hospital or long term care facility, seniors housing, paved streets, and perhaps a paved highway near you as well. All these things have been made possible by injection of oil and gas dollars into local projects by the province.
The municipalities that have the oil industry at their doorstep are charged with providing infrastructure to keep that industry on the move. Drive down the streets of towns like Ponoka, and other agricultural based urban centres and you likely won't see many industry related vehicles pounding the hell out of the pavement. Alternatively, drive through towns such as Whitecourt, Drayton Valley to name a couple and you will see tank trucks, service rigs, and a huge array of other oilfield equipment using the urban and rural infrastructure on a regular basis. Not to mention logging trucks that carry timber to local mills, where the tax dollars are paid to the urban centre, and the rural municipality mantains some of the roads that are used as haul routes, to transport logs for which the province is paid a mere pittance in stumpage for FMA's on Crown Land!!!
In short, I feel that ALL Albertans benifit a lot more than they realize by having the oil and gas industry here. This province was able to step up to the plate and attempt to alleviate the impact of the BSE crisis albeit the funding perhaps wasn't directed where it did the most good. The fact that the province did have the funds is thanks to the oil and gas industry.

[farmers_son]

Again, good comments. That is all true.

Albertans do benefit from the oil and gas. But you do not have to be an economist to see that that oil and gas industry is overheated, they are making more than modest profits or we would not see the extreme level of activity that we do. They are making those extreme profits because the province is not collecting a reasonable level of royalties from its energy reserves. Granted the oil sector will seek a profit but the government should be seeking to realize a fair return on its non renewable resources as well. That is how the market place should work. Instead the government chooses to subsidize the oil industry through unrealistically low royalties, in effect selling its energy reserves to the oil sector for less than it is worth. I question whether the oil industry needs to be subsidized when oil is $50 a barrel and gas is bringing record prices as well. Some citizens of the province will realize benefits from the subsidization of the oil sector through cheap royalties by having employment in the oil patch or through business opportunities, and as you pointed out the municipalities collect some taxes on infrastructure but are expected to provide some services to the oil sector in return.

But the benefit to agriculture and the rest of the economy is modest. Some but not all farmers see a benefit from annual rentals and surface lease income as Cowman pointed out in the first post. Most of the benefit goes to the oil patch. It is naïve to believe that diversification of the Alberta economy will take place if the benefits of the oil and gas under our ground go to the oil sector instead of being used to develop value adding, manufacturing and so on in other sectors of the economy.

The level of oil patch activity we see is not sustainable, what happens then? If agriculture received money from the province because it had oil and gas, what happens to agriculture when that bounty is gone? No money was invested in value adding, no money was invested in rural development. Horner tells us that the province has contributed enough to BSE but at the same time the province continues to contribute to the energy sector through cheap royalties. The energy sector does not need the help. But my bigger concern is that our economy is not being diversified, and that we are not positioned for continued prosperity after the bounty is gone. That is because the province is not collecting enough royalties to effectively build a diversified economy in other sectors of the provincial economy.

[farmers_son]

farmers_son, you will never hear me argue that the industry is not paying a fair amount in royalties. That is a discussion that needs to take place between the people of Alberta and the government .
With regard to some farmers receiving lease rental, right of entry and right of way renumeration etc., you and I have both read posts on this site that indicate that some folks do not wish to see oil and gas exploration in their neighbourhood. If that is the case, then in my opinion those individuals should not feel slighted by the fact that some folks do get some monies from the oil and gas industry, and in fact, many farmers have off farm jobs in the industry.
Many of the seismic crews in this area in the winter are farm fellows that go out and work in the winter.
I think that a lobby group should start at the grass roots level and lobby for increased royalties, because it is very doubtful if any MLA will take that initiative forward without lots of prodding from their constituents.

[farmers_son]

The kind of lobby group that will spring up is more likely than not another political party that has its ear to the ground and structures its policies to appeal to those disenfranchised Albertans who feel as if they are missing out on the Alberta advantage.

Mexico produces a comparable amount of oil and gas as Alberta but realizes 3 times the revenue. Cowman mentioned Norway; that Norway collects about 3 times the royalty that Alberta does. Norway’s Petroleum Fund (the equivalent of our Heritage Savings Fund) has 150 billion dollars. In contrast the Heritage Savings Fund has $11.5 billion.

Alberta is the seventh largest energy producing region in the world. Alberta collects royalties that amount to $2000 per capita. The most obvious benefit to Albertans that has not been mentioned is that the royalties the province collects allows Alberta to have no sales tax but will that benefit diversify our province’s economy to prepare for the days when we are no longer the sheiks of the North? We are not really sheiks anyway at $2000 per capita. Worlds largest reserves of oil in the Tar Sands, yes. Worlds smallest royalty at 1% of revenues, sadly that is true as well. Previously the only other major oil producing region collecting 1% royalties was Venezuala. Last year they raised royalties to 16% and the oil kept flowing. Now Venezuala has announced a 30% royalty, so it can be done.