Alberta Politics & Government Thread 3.0

[Harry Lime]

I like how Danielle keeps making demands, so that she can take credit down the line.

I hereby DEMAND that the next time it snows, those fatcats in Edmonton and Ottawa SUBMIT to my COMMAND that they plow the snow on major roadways.

There. You are welcome Alberta. That was all me.

[Slava]

Originally Posted by Fuzz

OK, so about needing this pipeline to save Canada...I'd like some facts on that. I'll get started.

What percent of GDP would this pipeline boost? To get started:
2023: petroleum 7.7% ($209 billion)

I didn't find a breakdown of gas/oil, but the CGA link says gas is ~$6 billion.

A quick check shows the 2023 average price of ~$59 WCS per barrel, so it's probably an OK year as a representative data point for future prices. Maybe a bit high, but fine for this ballpark exercise.

So on exports of 4 MMb/d oil accounts for ~200 billion, or $50 billion per 1MMb/d of export. A new pipeline would bump our GDP by $50 billion per year, or take oil from 7.7% to ~9.5%. So that's what a pipeline is worth. $50 billion a year or 1.8% of GDP.

We can debate the importance of that, and what it means for Canada without it, but I think the facts are enough to show this isn't REQUIRED for Canada to survive as a country. Open to corrections or additions here if I missed anything big.

https://energy-information.canada.ca...5-section6.pdf
https://www.cga.ca/natural-gas-stati...ral-gas-facts/
https://www.aer.ca/data-and-performa...anadian-select

So, using those numbers, you build that pipe for sure. It costs you a year of revenue and you have the asset operation for decades. Say the lifetime of that asset is 30 years, purely to pick a number. You make your money back and then generate a trillion or two? I didn’t pull out a calculator here, but it’s not exactly debatable.

[Mr.Coffee]

Originally Posted by Fuzz

OK, so about needing this pipeline to save Canada...I'd like some facts on that. I'll get started.

What percent of GDP would this pipeline boost? To get started:
2023: petroleum 7.7% ($209 billion)

I didn't find a breakdown of gas/oil, but the CGA link says gas is ~$6 billion.

A quick check shows the 2023 average price of ~$59 WCS per barrel, so it's probably an OK year as a representative data point for future prices. Maybe a bit high, but fine for this ballpark exercise.

So on exports of 4 MMb/d oil accounts for ~200 billion, or $50 billion per 1MMb/d of export. A new pipeline would bump our GDP by $50 billion per year, or take oil from 7.7% to ~9.5%. So that's what a pipeline is worth. $50 billion a year or 1.8% of GDP.

We can debate the importance of that, and what it means for Canada without it, but I think the facts are enough to show this isn't REQUIRED for Canada to survive as a country. Open to corrections or additions here if I missed anything big.

https://energy-information.canada.ca...5-section6.pdf
https://www.cga.ca/natural-gas-stati...ral-gas-facts/
https://www.aer.ca/data-and-performa...anadian-select

Trade surplus. Trade deficit.

[Mr.Coffee]

Originally Posted by Slava

So, using those numbers, you build that pipe for sure. It costs you a year of revenue and you have the asset operation for decades. Say the lifetime of that asset is 30 years, purely to pick a number. You make your money back and then generate a trillion or two? I didn’t pull out a calculator here, but it’s not exactly debatable.

Other than what is starting to just look like hyper partisanship, what’s the argument against it is more what I’m very confused about.

[Fuzz]

Originally Posted by Slava

So, using those numbers, you build that pipe for sure. It costs you a year of revenue and you have the asset operation for decades. Say the lifetime of that asset is 30 years, purely to pick a number. You make your money back and then generate a trillion or two? I didn’t pull out a calculator here, but it’s not exactly debatable.

That's not quite how it works...Canada's GDP gets a boost by that amount, but the dollars aren't directly from the export applied back to the pipe alone. It's divvied up all along the way from the producer, their costs, purchases, profits, etc. If it was that straight forward every pipeline company would be proposing 100 pipelines. TMX payback is measured in decades, not a year.

[Mr.Coffee]

You don’t build pipe and are beholden to USA economically. If that’s what Canadians want that’s fine, but that’s the reality. Based on your posts it doesn’t sound like that’s what you want though.

[Slava]

Originally Posted by Fuzz

That's not quite how it works...Canada's GDP gets a boost by that amount, but the dollars aren't directly from the export applied back to the pipe alone. It's divvied up all along the way from the producer, their costs, purchases, profits, etc. If it was that straight forward every pipeline company would be proposing 100 pipelines. TMX payback is measured in decades, not a year.

Yeah, and I recognize that, but the profit margin for companies like TC or Keyes is around 20%. So that would mean a payback of about five years (saying it’s $50b to build and $50b revenue). I mean it’s a no-brainer on paper. Even if that’s crazy and it’s a profit margin of 15-18%, it’s obviously well worth doing from a financial perspective.

Then you add in the points about Canadian sovereignty, nation building and self-determination, and it just makes this more sensible. I (like Mr. Coffee said), can’t even see the other argument. Even the Keynesians should be in favour of this.

[Fuzz]

Perhaps if your assumptions are true, it's a no brainer. But if that is the case, why are none of them showing much interest? Possible your assumptions are wrong? Sonya Savage was just on CBC saying without government funding, it's not likely to happen.


And I was just looking at these economic arguments, obviously the sovereignty reasons are a strong argument. And I guess I was mostly interested in the statements that claim Canada is dead without another pipeline. 1.8% of GDP doesn't sound like a death knell...and that's not to suggest it isn't significant.

[para transit fellow]

the biggest argument against another oil pipe is uncertainty of the oil market in 25 years

Alberta says "the world will always need oil." The question is "will oil be profitable in 2050?"

[Hockeyguy15]

Going to need some refineries for WW3.

[Whynotnow]

Originally Posted by Slava

Yeah, and I recognize that, but the profit margin for companies like TC or Keyes is around 20%. So that would mean a payback of about five years (saying it’s $50b to build and $50b revenue). I mean it’s a no-brainer on paper. Even if that’s crazy and it’s a profit margin of 15-18%, it’s obviously well worth doing from a financial perspective.

Then you add in the points about Canadian sovereignty, nation building and self-determination, and it just makes this more sensible. I (like Mr. Coffee said), can’t even see the other argument. Even the Keynesians should be in favour of this.

Pipeline companies do not make 20 percent, not even close. Regulated rates of return pull that closer to 10 percent.

Look this isn’t a no brainer economically, not even close. First you have to assume producers want to invest to come up with incremental production to fill the pipe, and right now they aren’t saying that. The next million barrels will be expensive on the production end. If that doesn’t happen then you are building a pipeline that scavenges existing exports and you aren’t that much better off.

Even if that happens the producers then also need the confidence to sign a 30 year take or pay deal based on actual costs of the new line, upwards of $30 billion, if not higher. The tolls plus shipping costs, plus the cost of developing new production makes the case very thin.

This has got a shot, but it’s a long one, and you still haven’t seen any motion in the private sector side to fill it or build it.

[opendoor]

Originally Posted by Slava

Yeah, and I recognize that, but the profit margin for companies like TC or Keyes is around 20%. So that would mean a payback of about five years (saying it’s $50b to build and $50b revenue). I mean it’s a no-brainer on paper. Even if that’s crazy and it’s a profit margin of 15-18%, it’s obviously well worth doing from a financial perspective.

What kind of math is this? Pipeline companies don't have 20% margins on the market value of the oil; if they have 20% margins it's be on their revenue which is only a small part of the final price.

There's a reason why TMX, which is capable of moving ~$50B of oil a year, will take decades to recover its $35B costs (if it ever does) and is only worth about half that figure to a private company.

In the long term it may work out OK, but right now it's only bringing in about $1.7B to the owner (the federal government in this case) each year with half of that being interest payments (so not actual net revenue for the government). No private company is going to accept that rate of return.

Originally Posted by Fuzz

Perhaps if your assumptions are true, it's a no brainer. But if that is the case, why are none of them showing much interest? Possible your assumptions are wrong? Sonya Savage was just on CBC saying without government funding, it's not likely to happen.

Because the returns aren't there if there are significant cost overruns.

There's probably a way to get a private company to build it, but the government is going to have to get creative and basically backstop the whole thing to protect against big losses. If it goes smoothly it could work out great, but if not it could be a debacle where the government is on the hook for billions of dollars to bail out a private project.

[Wolven]

Originally Posted by Mr.Coffee

The pipe is gonna need to be 100% backstopped by the feds, like, almost entirely risk free before you get competent midstreamers willing to step up.

I don’t understand why there is even any debate about a pipeline. This thing like just follow the old plans / ROW / previous routes and shoulda started construction last Feb under emergency federal order.

It’ll be interesting to see how Carney handles this after June, and we’ll have our answer then as to what he really thinks about the States and how much of a “threat” they are. I’m skeptical. It’s our only bargaining chip. No country is coming to save Canada without that pipeline.

hahahahahahahahahahaha

Is that the propaganda whirling around the oil patch now? Another pipeline is the only way to save Canada!! Wow, that is special. Of course, that means that if a pipeline is not built that Canada is doomed!!!!

I get that there are people who "love Alberta oil" and make it a part of their personality but to be so delusional as to think that a single resource is the key to protecting our nation, and that this "nation saving resource" is Oil, is over the top. Forget actual critical minerals like Lithium, Oil is the answer...

It is even better when so many of the traitors who are advocating for Alberta separation are the same clowns advocating for a pipeline. Maybe before we build a pipeline we should round up the traitors and deport them to the country of their desire? That would be a huge step toward protecting Canada's sovereignty and they can enjoy living our their days in an ICE detention centre.

Overall the concept of diversifying our trade partners away from America and de-integrating our economies as much as possible is the answer, but Oil is not the lynchpin that you think it is.

[Slava]

Originally Posted by opendoor

What kind of math is this? Pipeline companies don't have 20% margins on the market value of the oil; if they have 20% margins it's be on their revenue which is only a small part of the final price.

There's a reason why TMX, which is capable of moving ~$50B of oil a year, will take decades to recover its $35B costs (if it ever does) and is only worth about half that figure to a private company.

In the long term it may work out OK, but right now it's only bringing in about $1.7B to the owner (the federal government in this case) each year with half of that being interest payments (so not actual net revenue for the government). No private company is going to accept that rate of return.



Because the returns aren't there if there are significant cost overruns.

There's probably a way to get a private company to build it, but the government is going to have to get creative and basically backstop the whole thing to protect against big losses. If it goes smoothly it could work out great, but if not it could be a debacle where the government is on the hook for billions of dollars to bail out a private project.

Yeah, that's fair, but the margins are in that bracket and if you look at the margins for TC (for example) the gross margin is around 50%, with the net around 20-23% (some years better some worse, and it's somewhat lumpy because it's energy). Obviously this wasn't n in-depth analysis and we're talking about made up numbers, so you can't read anything into this. It's a wild shot in the dark saying the pipeline would cost $50b, and it would have revenues of $50b a year. That was entirely from the post Fuzz made earlier.

[edslunch]

Originally Posted by Mr.Coffee

The pipe is gonna need to be 100% backstopped by the feds, like, almost entirely risk free before you get competent midstreamers willing to step up.

I don’t understand why there is even any debate about a pipeline. This thing like just follow the old plans / ROW / previous routes and shoulda started construction last Feb under emergency federal order.

It’ll be interesting to see how Carney handles this after June, and we’ll have our answer then as to what he really thinks about the States and how much of a “threat” they are. I’m skeptical. It’s our only bargaining chip. No country is coming to save Canada without that pipeline.

Just the Feds? How about Alberta kicks in too...that's where most of the benefit lands.

[Fuzz]

Originally Posted by Slava

Yeah, that's fair, but the margins are in that bracket and if you look at the margins for TC (for example) the gross margin is around 50%, with the net around 20-23% (some years better some worse, and it's somewhat lumpy because it's energy). Obviously this wasn't n in-depth analysis and we're talking about made up numbers, so you can't read anything into this. It's a wild shot in the dark saying the pipeline would cost $50b, and it would have revenues of $50b a year. That was entirely from the post Fuzz made earlier.

Woaa, don't misrepresent me! I said nothing about cost, and I absolutely did not say revenue was $50 billion. I said for each million BPD of oil export it generates $50 billion on GDP. based on our current 4MMBPD of oil exports. And as I pointed out, that's going to be cumulative along the way from exploration to export, not $50 billion profit for whenever puts it in the ground.


And these aren't "made up numbers," they are based on data. If you want to refute or discuss what I did, go ahead. Happy to have input on it. Frankly it sounds from your first post you are out of your depth on this. That surprises me a bit, but it seems pretty basic to know that GDP increases are not just revenue for the pipeline alone.

[Slava]

Originally Posted by Fuzz

Woaa, don't misrepresent me! I said nothing about cost, and I absolutely did not say revenue was $50 billion. I said for each million BPD of oil export it generates $50 billion on GDP. based on our current 4MMBPD of oil exports. And as I pointed out, that's going to be cumulative along the way from exploration to export, not $50 billion profit for whenever puts it in the ground.


And these aren't "made up numbers," they are based on data. If you want to refute or discuss what I did, go ahead. Happy to have input on it. Frankly it sounds from your first post you are out of your depth on this. That surprises me a bit, but it seems pretty basic to know that GDP increases are not just revenue for the pipeline alone.

Well my thoughts on this are biased because I think the only way it happens is if the government builds it. I have a hard time thinking a private corporation will take the risks, and while the government could backstop this or provide some guarantees, that remains to be seen. So, yeah I pulled the $50b cost because it’s a nice round number and a good piece more than what was spent on TMX. The other $50b figure was yours and just me using that lazily as a revenue figure.

[Titan2]

Putting the numbers aside, think we can agree that the impact on GDP is relatively minimal? The objections to it are not economic but philosophical on a variety of topics. If this were truly a project of national importance, the federal government would already have built it.

Let's say hypothetically that, if there were such a pent-up demand for a pipeline, building it would have a HYPOTHETICAL impact of 25% on GDP; it would be built. Full stop. Ottawa would run it like a utility and recoup its costs through the fees it charges to use the pipe. That is simple math. Also, in that case, many companies would be willing to build it. None of that is the case, though.

The primary beneficiaries of a new pipe, as it stands, are the oil companies. That is a strong lobby in Edmonton, but not so much in Ottawa. If Ottawa can gain votes in BC by supporting them against Alberta, they will. The way Carney has played it is quite brilliant. He says he will help build a pipe if Alberta finds a company to build it. As the economics are iffy, companies are not coming forward. If I were him, I would continue to play this game. Sure, we can fast-track approval if Alberta meets the conditions we have already laid out. He gets to say yes. Smith gets to say she got him to say yes. And, because the conditions are next to impossible to meet, the project does not proceed, keeping BC happy.