Lots of Traffic!

[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.

[farmers_son]

farmers_son, you make some valid points but to compare us to Mexico is a stretch. I don't know if you have visited Mexico but it is crime ridden, people living in abject poverty, people entering the US illegally and many other negatives, that I don't think Alberta has !
I know we have people living in poverty, and many of them are in that state due to choices they have made. I am sure we don't have people swimming across any border to try and find work, and I know that we have crime but not the corruption that is evident in many parts of Mexico even though Fox has done some good and eradicated a lot of it.
The Premier is heading to New York to market our energy, and ring the closing bell at the Stock Exchange later this month. He is also meeting with the western Governors in Wyoming. I am interested in your comments on this !
I am sure you are correct about a fledgling party coming out of the woodwork and capitalizing on the support of those who are disgruntled with things, but do you honestly think that any such party would win any seats or many seats in the next election in AB?

[farmers_son]

The comparison I was making was that Mexico makes more from their energy than Alberta does.

I see energy royalties as an Achilles Heel for the Alberta Conservatives. The close relationship between this government and the oil sector could be a political liability. The
Alberta Tories were a marginal party before Lougheed became leader of the PCs and capitalized on the change in Socred leadership from Manning to Strom. It is not too great of a stretch in imagination to see that, like in 1971, a marginal opposition party could come out of the woodwork to gain a majority in this province if the people believe that the ruling Conservatives are giving away their heritage to the oil companies.

There is an increasing income spread between Albertans working in the oil patch and the rest of us. That breeds discontent. Health care and education are touted as the big issues in this province. But if another party grabs onto cheap royalties as an issue they might find that it gets them more votes. The Alberta government is annually giving away more money to the oil companies through cheap royalties than some provinces receive for their total revenue. That is an election issue if I have ever seen one.

The garish prosperity of the oil sector is an overall political liability for the ruling Conservatives. Throw in energy deregulation, high consumer electrical and heating costs and the Conservatives look vulnerable.

[cakadu]

If, for the sake of discussion, Albertans are all benefitting from the Alberta advantage and the oil revenues, then how do you explain the fact that we have had a record low minimum wage for years? It has only been a recent development that we have raised the minimum wage. How do you extoll the virtues of all the oil revenues to a single mom with 3 kids barely scraping by or worse yet going further into the red with every passing month?

I don't begrudge anyone who gets the money from the leases - if they want it they can have it. I just wonder about the true costs of that lease to producers and landowners.

What also concerns me is the fact that many producers are signing leases, particularly coalbed methane leases, and not being fully informed about them. Without the decision being made about how many coalbed methane holes can be dug per level per quarter, do some of these people that have signed leases know just how much of an effect signing that piece of paper will have on them? Many signing the leases are in desperate straights and short-term money to stay afloat for a little longer may "blind" them to what they are really doing. Maybe it is already a foregone conclusion about the drilling sites (particularly since drilling activity is rapidly gaining momentum with each passing month.)

Here's something to ponder and I don't have a ready answer for it myself, so I'm hoping that other opinions will help me to understand it a little better. How do you see getting more in royalties helping when we are relying on a non-renewable resource, doing more and more in the way of leaving a footprint that cannot be erased or not without having to spend huge amounts of money on it. Will we feel better because the government has more money to throw around due to increased royalties?

[cakadu]

Linda, firstly, if an oil company has drilling rights on a parcel of land and want to drill, the landowner really doesn't have much say in the matter with the exception of how they manage to negotiate the surface lease and right of entry etc.

As far as explaining the difference in income to a single mom with three kids goes, life isn't always fair and everyone is NOT going to have the same standard of living. I learned as a kid growing up with parents that were old enough to be my grandparents and did have much to give me except a whole whack of love and some excellent values, that there were lots of folks that had way more than we did, but we were rich in friends, family values and most importantly had our good health.
I live in a community where there are over 80 millionaires, and there are the single moms that are struggling to get by.
Likely as not the 'have' people in our community as in most others, do their fair share to help provide for those who aren't as fortunate but life is not about everyone having the exact same livelihood.
The Alberta advantage does allow for the single mom to upgrade her education, get assistance while doing so, get a deadbeat ex to pay support, get subsidized child care and many other things.
The issue of low return on our resources really cannot be tied to the fact that they are a non renewable resource. If the in fact are depleting at the rate some folks seem to think they are, then likely it is all the more reason that we should have a better return to the Province.
I don't know enough about coalbed methane to make any comments but I do know that there are farmers in this area that are totally opposed to the exploration that is proposed, and then there are others that can't wait for the checks to start rolling in.

[farmers_son]

Emrald1: Aren’t those things you mentioned, assistance for upgrading education, get a deadbeat ex to pay support, get subsidized child care and many other things available in other provinces besides Alberta? And in some provinces there is more help available.

Alberta is one of only three provinces to charge health care premiums, amounting to about $1000 per year for an Albertan family. That partly offsets the Alberta Advantage of no sales tax.

Is there an Alberta Advantage? Of course there is. And if you compare Alberta to other provinces that have no oil revenue, things look pretty good here. But if you compare Alberta to other major energy producing regions, we do not stand up so well. Albertans are not collecting a level of royalties comparable to that of the other major oil producing regions. By 2010 the oil sands are projected to account for 60% of Canada’s oil production. According to Syncrude, “at below $18 (Cdn.) a barrel, Syncrude's operating costs [in the oil sands] are comparable to finding and developing new sources of conventional crude oil." Yet the province only collects royalties at the rate of 1% of revenues on that oil.

One could argue that the Alberta Advantage should be more social programs or like I would prefer to see the Alberta economy diversify into more sustainable and long term opportunities including value adding for agriculture as well as the province's other major resource sectors, lumber and tourism. However when the province is only collecting 1% royalties it is clear the real Alberta Advantage is being an oil producer in this province and will never be much more than that.

[farmers_son]

farmers_son health care premiums are subsidized for low income families, and in my view the Province should NOT cover the costs of health care premiums for those that can afford to pay their own. Social programs are necessary for those that through no fault of their own fall through the cracks in society.
Perhaps we should poll all the folks that have moved here from other parts of Canada and ask if they feel there is an Alberta Advantage.
I don't think that the advantage will be so great in years to come due to the increasing population and demands for infrastructure, and people services, which will drain the provincial coffers.
One thing I will say is that people in some communities seem to think that all they need to do is demand and governments both municipal and provincial and even federal will just hand over the cash.
MLA's are constantly inundated with demands from special interest groups to inject funds into one project or another and of course the reasoning is that the province is awash with oil royalities !!!