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Originally Posted by Rerun
Exactly. It costs more to find the oil and to get it out of the ground and the oil they get isn't as high of a grade as elsewhere. Therefore the risk in losing your investment is higher, therefore royalties are lower and subsidies/incentives, more prevalent
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There's no risk of losing your investment. The infrastructure is already in place, and it is a proven revenue stream. The question is one of profit, and how profit vs. cost was derived. There should be a significant jump in royalties after costs are recouped by the companies involved, but the structure of the agreement makes it such that that threshold will never be reached.
This is an interesting short read on how other jurisdictions handle the resource.
http://desmog.ca/2013/02/28/if-canad...are-we-so-debt
If I remember correctly, when Stelmach was trying to raise the royalty rate, the CEO of Shell arrived to say that his company would welcome a new deal and raise in royalty. This is because he new that even doubling the royalty rate was far cheaper than straightening out the existing deal so that the high mark of 35% royalty to Alberta became a reality.
A friend of mine once summed it up like this. A company is not going to abandon an enterprise because now they are making only 3 billion a year as opposed to 4 billion. That our government is such a pushover on this issue, for so long, reeks of either incompetence or corruption.