Quote:
Originally Posted by Cowboy89
If these rates get implemented not only will it help cause small gas companies to go bankrupt, but it will be harder for new companies to get investment dollars for their enterprises when the prices come around anytime in the next ten years or so. The investment community will put an additional 'risk-premium' on Alberta as they are not sure how stable our politics are.
In my personal opinion, whenever you here phrases like 'Fair share' being bandied about in any serious political discussion vote for the opposite viewpoint in the next election. It indicates a shift in the government's or the general publics focus from growing the economic pie to trying to artificially distribute it. It artificially stunts current growth and deepens the bust that would naturally follow as well.
While many argue the virtue about 'slowing down so we can catch-up' they fail to understand that we've already slowed down naturally on both the oil sands and the gas front. Costs are high for both sectors but the oil price hasn't risen as much as costs and gas prices have actually gone the other way. Many people in this province have been duped into thinking that somehow as a whole Alberta is worse off due to 'growing pains.' This is absolutely absurd. Every possible economic metric available indicates that on all accounts Albertans are collectively much better off than any period before. The opportunities available now are unprecidented.
Yes there will be stories of individual people in specific jobs that didn't see 'as much of an increase' as others, or who have a more difficult time affording things because costs are up, but that's why the province already collects a heavy chunk of royalty revenues. If you're not seeing evidence of this in the services you recieve then why not take the government to task for what they're doing with the money they already do get(Considering that they're spending more than twice the amount most other provinces are spending per head I would imagine a lot is being squandered). Failing that, no ones stopping anyone from seeking work that pays more (Which is in abundance).
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Squandered insofar as they are paying 2007 dollars + labor premium for projects 10-15 years overdue.
I agree with you. People have no idea how adverse the effects could be by screwing with royalty rates. While EnCana might "send a message" by allocating $1 billion elsewhere, small and even midsize producers don't have the luxury of doing the same. This means job loss... not just "Bill and Marty from Accounting," but thousands of jobs. Say "Exploration Company A" can only produce 50% of their drilling program... that's 50% less need for in house staff. That's where it ends, right? Wrong. That's 50% less need for drilling rigs, service companies, surveyors... all the way down the line. That 50% will also be buying a lot less, so there's the hit to the service sector. Getting the "fair share" ends up damaging the two largest sectors of the Alberta economy.
As Cowboy89 points out... if Alberta is deemed politically unstable, the big companies will simply take their ball and go somewhere else until things change and Alberta is deemed a business friendly locale again. The oil and gas isn't going anywhere. They will take who they need with them to wherever they transfer operations to and fire the rest. They'll come back later when its lucrative again.
But there's a labor shortage... this is a good thing then, right? Yes and no. What a lot of people outside the oilpatch don't realize is that job cuts are already going on. Another mild winter along the eastern seaboard, and natural gas operators will be drilling substantially less... at current royalty rates. Let alone increased rates. Less drilling programs = less royalty tax. If this is not handled exactly right, this will actually cost billions rather than recoup them. While the economy needs to be cooled a little, tampering with natural market conditions could lead to a much rougher landing.