It's all about looking at the big picture here. Oil & Gas prices were heating up, so drilling was heating up, so costs were heating up, and so the royalties are heating up.
Prices have dropped significantly... so what do we all think is going to happen here? Come on people... we don't need econ degrees to figure this out. And guess what else? This happens ALL the time... this is a cyclical industry.
Oil & gas companies are PRIVATE companies that act in the best interests of their shareholders. At the end of the day, that's what they do whether you like it or not, and whether you like how much they earn or not. A private company is not going to drill a well and lose or break-even. They're going to shift investment into neighbouring provinces or countries where they can get their shareholders the returns they promise them. That's common sense, I'm sure we'd all agree.
It's called running a business, and the government just admitted with this announcement, that they may have been over-burdensome with this new regime. The fact that people in this thread think companies make "too much money" should take some of their own money, and invest it in some oil and gas companies if they are agitated by the "extreme profit" being found here.
A royalty isn't a tax, it's a royalty because oil and gas companies are removing substances from the province. A royalty is to REIMBURSE the province for the winning, taking and removing of resources because the province owns them, but doesn't have the ability to remove them all on their own. Some places do try to do it all on their own, see anywhere in the world with a nationalized oil & gas industry (Saudi Arabia, Norway, Venezuela......). In Alberta we've decided to not do this (to encourage competition which drives this society), and therefore the province must somehow be reimbursed. A bank or insurance company shouldn't have to pay a royalty, because they aren't sucking the province dry of resources, they are providing a service- and this is the difference.
I bet you there's some environmental companies out there making "too much profit" too. That concept is absolutely hilarious.
Alberta's just not a good place to drill right now. It's an old, mature province, it's been developed far more than it's neighbours, and it sure doesn't need anymore dis-incentive to drill like huge royalties, at this point in time (but perhaps in the future!).
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