Oilsands?

[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.

[Horse]

Coppertop I think what you were geting at is the surface rent on crown land is less than on deeded land.

[cowman]

Cowdog: Not sure about on government land but on freehold there definitely is a difference in royalties? The percent you get depends on what you negotiated...and you are not required to negotiate at all...if that is your choice? I would assume the government has the same option?

[cowdog]

cowman the royalties on non-freehold lands are set by legislation not negotiation.
Be careful with freehold royalties because many a freeholder has received far less than the government rate; in some cases they have ended up owing money to the energy company.

[cowman]

cowdog: You are entirely right about freehold leases. I would never consider entering one without a competent lawyer specializing in oil and gas. Often a farmer will be dazzled by the percentage and forget the bottom line! You need to ensure you have protection on the cost side of things!
The really nice thing about CBM is how low the operating costs are? As a freeholder, you will be paying your share of the operating costs! CBM has very low operating costs.