Oilsands?

[cowman]

Sorry...I keep forgetting to put all the questions I have!
A huge portion of Albertas Natural gas goes to operate the tarsands? With a fivefold increase...where will the gas come from? Is there enough gas in Alberta to meet current domestic and export demands, plus fuel the expansion?
If tarsands production also moves into the Peace, a large portion of the high producing gas wells in BC will be needed?
Every so often we hear little stories about nuclear energy being used to extract the oil in the tarsands? In fact Ralph Klein mused about it last year?
Will that ever happen and if so when? Do the people of Alberta want a nuclear reactor? Would the people of Saskatchewan be leery or have a say...as they would probably be the ones most affected in case of a meltdown?
How much does a reactor cost and how long to build it?

[farmers_son]

Cowman: Re leasing the tarsands or for that matter any of the provinces energy reserves.

If they were truly leased there would be a lease period during which the lessee would make lease payments. At the end of the lease period the item would revert back to the lessor or if the lease was a capital lease the lessee would purchase the item at an agreed upon cash value.

The situation in Alberta with our energy reserves would be more akin to a sale with payments made over time tied to the depletion of the reserves.
In fact the province uses the word "land sales" to describe the allocation of its energy reserves to the various and most often U.S. controlled companies who then, for all intents and purposes, own the oil and gas under our feet. Bottom line, Alberta and Canada do not have signficant energy reserves any more as they have been effectively sold to U.S. interests. I believe that to be true.

[cowman]

farmers son: Not just sure how the Alberta government does it but on a freehold lease the lease is for a set number of years? There is an annual payment(although very small token payment) once the well starts to produce? You enter freely into these agreements? You are not required to enter into a mineral agreement...so in fact you do own the minerals under the land.
Once you sign that legal agreement the oil company does have the right to extract the minerals. You recieve an agreed upon royalty. I have a few issues about how this works and the law certainly favors the company over the freeholder! In Alberta(don't know about other places) the law favors big business! I think you know that.

[coppertop]

With the oilsands you can throw compensation to First Nations into the mix, because much of the land in question is either reserve or Crown land. First Nations are arguing that they have a right to compensation for any activity on crown land because of the treaties signed back in the days of Queen Victoria. These issues were discussed at the Land Use Policy Framework meetings last month. Oberg is the head of the review on the oilsands royalty issue, I haven't heard who else is involved but you can bet it will include environmental groups, First Nations etc., plus of course the industry affected by the outcome.

[cowman]

cowdog: Obviously you know a lot more about this stuff than I do!
I have to ask you about this "royalty free gas"? What is that all about? Personally I would be quite upset if Alberta is not collecting a royalty on the public property of Albertans!
Maybe we all need to be educated about this stuff?

[coppertop]

I may be wrong but I think the royalites are less on crown land than deeded land.

[cowdog]

cowman when a company uses gas in the production of oil or gas that gas used is royalty free. How this was intended was that an energy company could use the gas produced from the anulus of an oil well to operate a gas energy to pump the oil or operate a tank heater rather than vent or flare an uneconomical volume of gas. These rules were then stretched to let the oilsands use the gas produced by that company from its own gas wells to extract bitumin without paying any royalties on that gas. This gas is not waste gas it is gas from the existing pipeline system.
So, if our grains and canola seed is used to make fuel should not the gas used to produce the fertilizer, dry the grain, heat the homes of the producers, and the diesel used to grow it be royalty free????

[cowdog]

coppertop, royalties are the same regardless of the ownership of the land. There is a royalty insentive for production in remote areas I believe. Royalties are based on a complex formula based on rate of production, cost of production and commodity values. Some production may also have been involved in royalty reduction or holidays but, I don't know all of the ins andouts of these.
What I do know is that we have one of the lowest royalty rates in the world and that we are robbing our grandchildren by having them this low. If we raised our royalties to the level of Saskatchewan we would be far better off and this marginal economic gas and oil would stay in the ground until the economics are there.

[FarmRanger]

It might be time to change the royalty structure for oilsands? Years ago, before current technologies were developed, we had to offer incentives. If we hadn't, the only thing in Ft. McMurray would be the remains of an old RCMP fort.

But the technology is there now, the people of Alberta basically bought that technology through foregoing higher royalties? Shouldn't we be able to charge for it now through increased royalties?

[coppertop]

I do know that there are tax concessions. Taxes are on a sliding scale on M and E ( Machinery and Equipment), with older facilities taxed less. I have had many discussions with my oil patch sons and friends about the incentives to industry vs what they feel are subsidies to agriculture. ( My son's don't get too vocal....at least not as long as they have a faint hope of inheriting anything !).

The royalty review of the oilsands is going to be very interesting. More about it in today's Edmonton Journal but still no word on who besides Oberg is involved.