Alberta Politics Thread v2

[Frequitude]

And if I might add, using that tool will just serve to turn industry participants bitterly against one another which is the absolute last thing we need to get distracted by. We need to maintain complete focus and solidarity on the big issue of pipelines.

[CaptainCrunch]

Originally Posted by you&me

Absolutely ridiculous. And not at all surprising.

I can't be reading that right.

[iggy_oi]

Originally Posted by Slava

Almost indefensible in my view: https://www.cbc.ca/news/canada/edmon...l-27-1.4913685

Originally Posted by you&me

Absolutely ridiculous. And not at all surprising.

From the article:

Bill 27 will not affect how the plans are funded nor the benefits given to employees. If passed, the transition to the new governance model would happen on March 1, 2019.

Public sector pension plans in British Columbia and Ontario also use a joint governance model.

The government spent the summer consulting with unions and employers about a new governance structure. The consensus was that a joint employee-employer model was the best.

What boogie man are you worried is going to come out as a result of this bill?

[CaptainYooh]

Originally Posted by Frequitude

And if I might add, using that tool will just serve to turn industry participants bitterly against one another which is the absolute last thing we need to get distracted by. We need to maintain complete focus and solidarity on the big issue of pipelines.

Oh, no disagreement here at all. It will drive a wedge between the industry biggest players and further weaken the Alberta energy industry, undoubtedly. Which is what Trudeau father and son’s ultimate goal always was, I believe. Divide and conquer.

But, fundamentally, it is still our oil and the provincial government (any government) has the responsibility to not give it away for peanuts. This is like choosing which poison would be better for you - one may taste better, but they are both bad. You must choose the one that’s less likely to kill ... or will kill you slower...

[puckedoff]

Originally Posted by Frequitude

And if I might add, using that tool will just serve to turn industry participants bitterly against one another which is the absolute last thing we need to get distracted by. We need to maintain complete focus and solidarity on the big issue of pipelines.

The problem though is that it isn't a true market system in place for apportionment, for allocating barrels to pipeline capacity in the first place. It is a regulated, non-market mechanism. The way the apportionment rules are currently set up, some players can intentionally game the system in a way that creates profit for them and destroys royalty value for Albertans & the Government.

[Frequitude]

Originally Posted by puckedoff

The problem though is that it isn't a true market system in place for apportionment, for allocating barrels to pipeline capacity in the first place. It is a regulated, non-market mechanism. The way the apportionment rules are currently set up, some players can intentionally game the system in a way that creates profit for them and destroys royalty value for Albertans & the Government.

I believe we are talking about different things. I think you are referring to the air barrels issue. https://business.financialpost.com/c...-hit-80m-a-day

I am referring to the likes of Cenovus, CNRL, and MEG calling on the province to implement industry-wide production restrictions to reduce supply and bouy price.
https://www.theglobeandmail.com/busi...its-oil-patch/

[Frequitude]

Originally Posted by CaptainYooh

Oh, no disagreement here at all. It will drive a wedge between the industry biggest players and further weaken the Alberta energy industry, undoubtedly. Which is what Trudeau father and son’s ultimate goal always was, I believe. Divide and conquer.

But, fundamentally, it is still our oil and the provincial government (any government) has the responsibility to not give it away for peanuts. This is like choosing which poison would be better for you - one may taste better, but they are both bad. You must choose the one that’s less likely to kill ... or will kill you slower...

I argue that governments intervening in markets like this is the worst poison of all.

Do you honestly think Steve Laut or Cenovus/MEG are speaking for concern of Albertans? Hell no. They want the lower cost integrated producers to shut in to save the high cost single product producers.

Sorry, that’s not the way it works. Suncor/Husky/Imperial took a risk and spent tens of billions on upgraders, refineries, and pipeline capacity to transform bitumen into higher value products which earn them global prices. While MEG and Cenovus spent tens of billions on making more bitumen, the exact thing causing the current glut, assuming a pipeline would come. And now that it hasn’t they’re effectively trying to say “hey Suncor/Imperial/Husky, I know you spent tens of billions on all that stuff but you’re gonna have to slow it down and make less money so I can make more with all this bitumen I’ve got, kthanks”. Again, sorry, that’s not the way it works. It was not the bargain the province struck with the producers when they handed over the leases.

CNRL/Cenovus/MEG need to maintain laser like focus outward on the true problem...no pipelines and those who are irrationally stopping them.

[DiracSpike]

Originally Posted by Frequitude

I argue that governments intervening in markets like this is the worst poison of all.

Do you honestly think Steve Laut or Cenovus/MEG are speaking for concern of Albertans? Hell no. They want the lower cost integrated producers to shut in to save the high cost single product producers.

Sorry, that’s not the way it works. Suncor/Husky/Imperial took a risk and spent tens of billions on upgraders, refineries, and pipeline capacity to transform bitumen into higher value products which earn them global prices. While MEG and Cenovus spent tens of billions on making more bitumen, the exact thing causing the current glut, assuming a pipeline would come. And now that it hasn’t they’re effectively trying to say “hey Suncor/Imperial/Husky, I know you spent tens of billions on all that stuff but you’re gonna have to slow it down and make less money so I can make more with all this bitumen I’ve got, kthanks”. Again, sorry, that’s not the way it works. It was not the bargain the province struck with the producers when they handed over the leases.

CNRL/Cenovus/MEG need to maintain laser like focus outward on the true problem...no pipelines and those who are irrationally stopping them.

I agree with basically everything you said here. Giving Government more control on production is concerning to me and the more integrated companies should be rewarded for what looks like a better strategy now. I would just say that although it's completely fair that the pro-apportionment parties are looking out for themselves their interests align with those of the people in Alberta in regard to boosting prices. So even though they may be arguing for what's best for them it would also benefit Alberta.

To me it comes down to whether you believe CNRL and Cenovus in their assertion that it's a relatively small amount of oversupply contributing to this exacerbation. If that's true then it shouldn't take a very large cut for very long to rebalance the market (relatively rebalance, obviously the main overhang is how stupid we are as a country in regards to pipelines). If so then I think it's a worthy measure to take in order to preserve citizen royalty value.

[Dion]

Originally Posted by PepsiFree

And yet, there are many champing at the bit to vote for the UCP, yet not a platform in sight to vote for.

And that is my biggest problem with Kenney and the UCP. They rail against the Carbon Tax and the free spending ways of the NDP but have yet to offer any concrete alternatives other than their standard talking points. It's as if Kenney feels he can win the next election based on his promise to get rid of Carbon Tax.

I suspect we'll see a platform from the UCP in the early spring, I just wish they'd release it a lot sooner.

So while I agree with what you’re saying in spirit, unfortunately, this same attitude is exactly what’s going to give us a UCP government, so I don’t see an end in sight.

Anybody but the NDP might be the rallying cry in the next election. Frankly that's sad.

[Frequitude]

Sure production curtailment might help short term, but imagine the long term implications on capital investment. Pretend for a second you’re someone who wants to invest in this province and the government responds “ok, but just in case this investment pans out and your competitor’s doesn’t, we may force you to give them some money to help them out”. That’s what this basically is and I as an Albertan who owns the resource am not ok with that.

About the only thing I’d be willing to at least explore is prorated curtailments based on everyone’s actual WCS sales volume (I.e. exclude all production which goes on to be upgraded, refined, or through commutes pipeline space). That way you don’t punish those who invested in integration, just those who invested in making more bitumen hoping to sell it through pipelines that didn’t even have a shovel in the ground.

[chemgear]

Originally Posted by Dion

Anybody but the NDP might be the rallying cry in the next election. Frankly that's sad.

It was the rally call last election.

[Slava]

Originally Posted by iggy_oi

From the article:




What boogie man are you worried is going to come out as a result of this bill?

We all know what this is doing. It’s further entrenching the gold plated pensions for union employees, and making it so that reducing these benefits is much more difficult in the event that the NDP loses the election. Of course the consultation with the unions suggested that it would be best if they were included...what other result could be expected?

[DiracSpike]

Originally Posted by Frequitude

Sure production curtailment might help short term, but imagine the long term implications on capital investment. Pretend for a second you’re someone who wants to invest in this province and the government responds “ok, but just in case this investment pans out and your competitor’s doesn’t, we may force you to give them some money to help them out”. That’s what this basically is and I as an Albertan who owns the resource am not ok with that.

About the only thing I’d be willing to at least explore is prorated curtailments based on everyone’s actual WCS sales volume (I.e. exclude all production which goes on to be upgraded, refined, or through commutes pipeline space). That way you don’t punish those who invested in integration, just those who invested in making more bitumen hoping to sell it through pipelines that didn’t even have a shovel in the ground.

Yeah that's an interesting aspect and one I don't know that much about. You'd think that any volumes immediately going in to the refinery system would be irrelevant the export pipelines anyway, unless maybe the existing transport sysyem is moving some fully refined product along with raw bitumen and SCO to American hubs. Another layer of complexity to this issue, my only hope is those in the ogvernment get the minute but important details on all these factors and make the right call. It's a crisis point right now.

[GullFoss]

Originally Posted by Frequitude

Thanks, Cap. My problem with it is the signal it sends to the markets. This punishes good decision making which disincentivizes capital investment in this industry even further. As if that wasn’t already a problem. That will hurt royalties and economic prosperity in the long run far more than near term price differentials.

I’ll try to dig up Laut’s interview though.

You're ignoring the following:

1) downstream refining companies in the Midwest are holding Canadian upstream companies captive because they have crazy pricing power because we are short pipeline capacity. The refiners own the pipeline capacity. Profits are not going from Canadian MEG to Canadian Suncor. It's going from Canadian MEG to USA Phillips 66 and USA marathon refining.

2) Suncor, imperial and husky are shifting their upstream profits in Alberta to downstream profits in other jurisdictions. So Alberta suffers a lot in terms of lower royalties and taxes, while Ohio and Colorado benefit. That's why Suncor isn't worse off...it's because they don't have to pay fair royalties or taxes right now.

3) those with refineries are using predatory strategies around air barrels and a strong marketing position to game prices and keep them artificially low.

4) there is a limit to how much sagd and CSS companies can cut because of potential damage to the reservoir.

5) the 3 large integrated producers are a huge share of production and we need their participation to make the program work.

6) Two of these players are foreigned owned (IMO and HSE) so they care a lot less about what's best for the industry and province. Money is going from Canadian Meg to li ka shing in China.

7) Each of IMO, HSE and SU want to take advantage of the current enviornment to buy competitors at distressed prices. That's why Suncor is planning layoffs in advance of it's next purchase (maybe Total Canada). That's also why Husky is buying Meg on the cheap.

For all these reasons markets aren't perfectly competitive. And when markets aren't perfectly competitive, the government should step in. Even moreso right now because the government owns the resource.

The solution needs to be that upstream only companies like Meg and cnrl need to cut more than the integrated producers. But the integrated producers do also need to cut as well for the reasons mentioned above.

[DiracSpike]

Originally Posted by GullFoss

You're ignoring the following:

1) downstream refining companies in the Midwest are holding Canadian upstream companies captive because they have crazy pricing power because we are short pipeline capacity. The refiners own the pipeline capacity. Profits are not going from Canadian MEG to Canadian Suncor. It's going from Canadian MEG to USA Phillips 66 and USA marathon refining.

2) Suncor, imperial and husky are shifting their upstream profits in Alberta to downstream profits in other jurisdictions. So Alberta suffers a lot in terms of lower royalties and taxes, while Ohio and Colorado benefit. That's why Suncor isn't worse off...it's because they don't have to pay fair royalties or taxes right now.

3) those with refineries are using predatory strategies around air barrels and a strong marketing position to game prices and keep them artificially low.

4) there is a limit to how much sagd and CSS companies can cut because of potential damage to the reservoir.

5) the 3 large integrated producers are a huge share of production and we need their participation to make the program work.

6) Two of these players are foreigned owned (IMO and HSE) so they care a lot less about what's best for the industry and province. Money is going from Canadian Meg to li ka shing in China.

7) Each of IMO, HSE and SU want to take advantage of the current enviornment to buy competitors at distressed prices. That's why Suncor is planning layoffs in advance of it's next purchase (maybe Total Canada). That's also why Husky is buying Meg on the cheap.

For all these reasons markets aren't perfectly competitive. And when markets aren't perfectly competitive, the government should step in. Even moreso right now because the government owns the resource.

The solution needs to be that upstream only companies like Meg and cnrl need to cut more than the integrated producers. But the integrated producers do also need to cut as well for the reasons mentioned above.

Awesome post. Laut basically insuitated as much in his interview with BNN that background assumptions in how production and transportation should be carried out worked fine with spare pipeline capacity but now that that has essentially been breached it is no longer a true market. That point might still be up for debate but it is one of governments core mandates to preserve a properly functioning and fair market.

[Husky]

Wtf. Based on population and union people - its almost 10% of alberta. To ke that is insane. 1 union person to support 9 non union.

[Frequitude]

1) Agreed. Why should the integrateds pay for MEG’s poor strategy?

2) The integrateds are not “shifting” their profits from the refineries which benefit from the diff (the Edmonton ones) to other jurisdictions. They are paying provincial and federal income taxes on those profits. As for royalties, I don’t follow since royalties have absolutely nothing to do with refining profits. Royalties are bitumen based.

3) The air barrels issue should be addressed. We can’t be losing precious takeaway capacity, the exact thing we’re fighting for more of, to games. It will be easier said than done. You are not correct that it is just those refineries who are to blame. Speaking with friends closer to the game, Cenovus is also a very guilty party in it.

4) You are correct. That’s not the integrated’s fault though. Why should they pay for the sins of the upstream producer who overinvested? What signal does that send to anyone who might want to invest here in the future?

5) My whole argument is that this whole “program” should not exist. So no, I don’t believe the integrateds should prop up any unsustainable failing business.

6) You can’t reap the benefits of foreign investment (jobs, high salaries, royalties, taxes, etc) while at the same time lament the offshoring of their profits.

7) Sounds like capitalism to me. The strong and those who made smart decisions survive. And Husky is buying MEG at a premium to their current market value.

Only 1 of your 7 points are damaging to competition (air barrels). The rest are fundamental aspects of capitalism. You’re incorrectly attributing the consequences of a poor business model (bitumen growth with no takeaway capacity) to uncompetitive markets. A market isn’t uncompetitive just because some participants failed. Again, that’s capitalism.

The market is functioning just fine. It just sucks that it’s kicking many O&G employees, Albertans, and Canadians right in the teeth. Myself very much included.

[Frequitude]

Look, I am definitely coming across as an unabashed brutal cold capitalist. I just believe that the regulated free markets will get us to a better place than one-off non-expert government intervention will, even if it means some very tough times in the near term. Even if it means I lose my own job because of it.

[iggy_oi]

Originally Posted by Slava

We all know what this is doing. It’s further entrenching the gold plated pensions for union employees, and making it so that reducing these benefits is much more difficult in the event that the NDP loses the election. Of course the consultation with the unions suggested that it would be best if they were included...what other result could be expected?

This in no way prevents any government from negotiating changes to the pension plan during collective bargaining.

[GaiJin]

Originally Posted by iggy_oi

This in no way prevents any government from negotiating changes to the pension plan during collective bargaining.

You really think they are going to give that up once they got it? New strike issue.