Ed Stemlach is on Channel 52

[Cowboy89]

Originally Posted by peter12

What was that Trudeau guy all about? Or Mulroney? Or Chretien?

WTF? Jean Chretien had the style and grace while speaking in either official language of a truck driver on figure skates.

[Beefcake]

Conventional Oil: Current royalty rate maximum of 30-35%. Royalties will now be on a sliding scale with a maximum rate of 50% at CDN $120/bbl oil.

Natural Gas: Current royalty rate maximum of 5-35%. Royalty rates will now be on a sliding scale from 5-50%, with rate caps at CDN $16.59/GJ gas.

Oil Sands: Pre-payout rate is currently 1%. The new royalty rate will start at 1% and increase for every $1 oil is priced above CDN $55/bbl, to a maximum of 9% at CDN $120/bbl oil.

Post-payout rate is currently 25%. New royalty rate will start at 25% and increase for every dollar oil is priced above CDN $55/bbl, to a maximum of 40% at CDN $120/bbl oil.

There will be no grandfathering of existing oil sands projects. The government is currently negotiating with Syncrude and Suncore, with negotiations expected to close in the next 90 days. Unspecified "other measures" will be taken by the government if an agreement cannot be reached with these companies.

Upgrading/Refining: The government will not be offering a 5% credit as incentive to build upgraders or refineries in Alberta (as suggested by the Royalty Review Panel). Other measures will be taken to provide incentives to refine/upgrade in Alberta.

[Cowboy89]

http://www.energy.gov.ab.ca/Org/Publ...alty_Oct25.pdf

Here's the official pdf link.

[burn_this_city]

Originally Posted by Slava

The oil companies don't have a reason to lay off employees....oil prices are at historical highs, and most companies make piles of money with oil at $50/barrel. How they can justify lay-offs is disgraceful.

Well considering outside the oilsands the majority of production is natural gas, which its not exactly trading at an all time high.. Plus the cost pressures already seen in the industry province wide will only be increased based on the new structure... That coupled with the cosmic rise in the canadian dollar, we have already seen a large errosion of the margins these companies were seeing last year.. Hence the drop in profits, which might I add are typically re-invested into the resource base.. The piles of money that you speak of don't really exist.. 1.7 billion divided by 2 million people works out to $85 each.. I hope this is really worth it in the end...

Edit: I just wanted to add that I think these new royalties are workable.. It just depends how high the canadian dollar rises and how much the price of oil fluctuates.. I don't see the massive layoffs happening with the sliding royalty system.. Just slower investment over the long term..

[Thunderball]

Originally Posted by Slava

The oil companies don't have a reason to lay off employees....oil prices are at historical highs, and most companies make piles of money with oil at $50/barrel. How they can justify lay-offs is disgraceful.

What the price of West Texas Crude is not exactly the price Edmonton crude sells at for one.

Second, operational costs are also at record highs. They will likely claim that between the royalty jump and the high operational costs, that they will have to cut X% of jobs in certain departments.

Third, with the CDN$ worth $1.03USD, they no longer have that currency conversion to make them money. They sell their product in US$ and pay their costs in CDN$.

I'm not agreeing with it, but this is their likely response.

[Thunderball]

Originally Posted by burn_this_city

Well considering outside the oilsands the majority of production is natural gas, which its not exactly trading at an all time high.. Plus the cost pressures already seen in the industry province wide will only be increased based on the new structure... That coupled with the cosmic rise in the canadian dollar, we have already seen a large errosion of the margins these companies were seeing last year.. Hence the drop in profits, which might I add are typically re-invested into the resource base.. The piles of money that you speak of don't really exist.. 1.7 billion divided by 2 million people works out to $85 each.. I hope this is really worth it in the end...

Edit: I just wanted to add that I think these new royalties are workable.. It just depends how high the canadian dollar rises and how much the price of oil fluctuates.. I don't see the massive layoffs happening with the sliding royalty system.. Just slower investment over the long term..

Well, its a little better than that...

$1.4 billion divided by 3.25 million ends up being about $430 a head. About the same as the Ralphbucks. Which backs up your point still... is this really worth the headaches its gonna cause if they were just giving the equivalent away not even two years ago?

It won't be massive, catastrophic layoffs, but mark my words, a lot of people are going to lose their jobs and many projects are not going ahead. Less projects = less payouts. In the end, even farmers, ranchers and other landowners are going to suffer a little.

[Azure]

5 years from now we'll all be going 'way to go Ed!'

The screw over was appreciated.

[burn_this_city]

Originally Posted by Thunderball

Well, its a little better than that...

$1.4 billion divided by 3.25 million ends up being about $430 a head. About the same as the Ralphbucks. Which backs up your point still... is this really worth the headaches its gonna cause if they were just giving the equivalent away not even two years ago?

It won't be massive, catastrophic layoffs, but mark my words, a lot of people are going to lose their jobs and many projects are not going ahead. Less projects = less payouts. In the end, even farmers, ranchers and other landowners are going to suffer a little.

I hope my boss doesnt see my inital math... I hate trying to use the windows calculator for quick calculations..

[First Lady]

Originally Posted by Juventus3

His true public speaking ability (or lack there of) became apparent today at the PC. He was uming and awing the entire time at the mic. Whatever happened to political leaders with a bit of charisma?

I was thinking the same thing. He was like that at his acceptance speech too, but that was nearly a year ago. He does not come across as being very confident.

[La Flames Fan]

Lost my vote Eddy.

[vodafone_b]

I think this could be the start of a recession.
People need to understand how the royalty system works. I've heard people saying, the O&G belongs to the Albertans, we want our share of money.. raise royalties now..

Okay.. with a rise in royalty, do you really think the extra money going to the government now, will end up in your pocket? Seriously? You really think the government will just cut you a cheque and there's your share of the royalty? How can some people be so naive.. you really want more money to go to the government? (who knows how they going to spend this, probably just more funding for their big fat pensions) Do people understand O&G companies spend big money here, to invest in equipments/plants and creating jobs, in order to earn big money?? Do Albertans understand that the wealth the O&G comapnies are making, are actually creating wealth for the rest of us too?

Alberta can be seen as the not so profitable place anymore for many of the big oil and gas companies. And I am really upset over this government, especially Ed. How can this guy be our premier? I wonder if he understands the industry at all, and I wonder how he will sleep at night when many people loses their jobs in the future because of this really short-sighted decision for a temporary gain. The government may have won now, but we will see who really won this battle couple of years after when Alberta spiral towards a recession.

[kremb]

Originally Posted by First Lady

I was thinking the same thing. He was like that at his acceptance speech too, but that was nearly a year ago. He does not come across as being very confident.

I liked that he answered every question that was asked to the best of his ability. When he didn't know the right answer he got the energy minister to respond. As soon as I heard the nervousness in his voice I know he was going to get Albertans their fair share! The media seemed pretty hostile. They smelled blood but Ed didn't cave.

I'll take an honest leader over a pretty leader any day.

BTW Vodaphone - Oil is hanging in around $90 per barrel right now heading for a $100 real quick. But you may be right about the recession, it just won't be Eds fault.

[OracleOfCalgary]

By Christmas you will start to hear stories of layoffs in the O&G industry and in housing. Starting next week, it will be impossible to sell a house in this city. Full housing sector collapse next spring when the spring market fails to materialize. So predicts the Oracle.

[moon]

Originally Posted by kremb

I liked that he answered every question that was asked to the best of his ability. When he didn't know the right answer he got the energy minister to respond. As soon as I heard the nervousness in his voice I know he was going to get Albertans their fair share! The media seemed pretty hostile. They smelled blood but Ed didn't cave.

I'll take an honest leader over a pretty leader any day.

I'll take a competent leader over an honest leader. (In Ed's case I'll take a half competent leader).

My 10 month old son is honest. I don't want him running my province.

Also don't see how Albertans are "getting our fair share." Certainly doesn't feel to like I will be anywhere close to better after this decision.

[vodafone_b]

BTW Vodaphone - Oil is hanging in around $90 per barrel right now heading for a $100 real quick. But you may be right about the recession, it just won't be Eds fault.[/QUOTE]

Do you really think 90 dollars a barrel is a true representation of the oil prices today? the 90 dollars it sits at right now contain many elements, and sadly politics is one of them.

Lots of people are saying this is a plan for the future. This is not for the future. What if the future, people do not need oil anymore? What if, alternate fuel becomes the main stream in 20 years time? What will happen then? Yes, we will still have our oil reserves, but for what? if nobody's going to use it anymore.

The opportunity is right in front of us. Right now. This opportunity is for all of us to exploit right now and make the best out of it. Thats how the economy runs itselfs. If every opportunity are saved for our "future", our economy will be staying at the same place forever without moving forward.

[tvp2003]

Alright CP. I need some help trying to figure out what this all means. I have pretty superficial understanding (relatively speaking) of the issues and after reading some of the reactions on other websites (from "the sky is falling, Ed has doomed Alberta by increasing royalties" to "Ed sold out to big oil by not increasing royalties enough"), I have lots of questions:

1) Will we see layoffs? Just in the oilpatch or more widespread effects?

2) Will Albertan's at large see the benefits of the increase? (what I've read is that we'll be getting a larger portion of a smaller pie; I guess there has also been no announcement about where this money will go).

3) The first home I bought last year "after" the boom -- am I screwed? (maybe not NEP type stuff with foreclosures left and right, but I'm guessing this will negatively affect housing values down the road)

4) Related to #1 -- if there is a downward spiral of layoffs, will we start seeing an influx of laid-off employees seeking jobs in the service industry currently held by grossly underqualified teenagers (I'm stereotyping, I know)?

5) If you've got the cashflow... good time to invest?

Obviously many of these questions are extremely broad and/or speculative; however, I'm curious as to what the astute members of CP have to say on these subjects...

[Cowboy89]

Originally Posted by vodafone_b

BTW Vodaphone - Oil is hanging in around $90 per barrel right now heading for a $100 real quick. But you may be right about the recession, it just won't be Eds fault.

$90 a barrel as expressed in US dollars. Keep in mind if you standardized that in Euro's or Canadian Dollars the price didn't actually move much. The commodity doesn't have as much traction as people think. Also keep in mind that Alberta royalties are based off of Edmonton prices expressed in Canadian dollars.

A big problem that leads to huge bubbles of mispricing is a general feeling among the unwashed public that prices will head northward forever. Just ask someone who lost their home to foreclosure in the US how that logic served them in the US housing bubble. We live in the commodity bubble right now. It's poor public policy to count on favorable pricing long-term.

[Cowboy89]

1) Will we see layoffs? Just in the oilpatch or more widespread effects?
-Yes, mostly oilpatch. I wouldn't go so far to say that many people in other industries will Lose their jobs, but I'd imagine that there won't be as tight a labor market

2) Will Albertan's at large see the benefits of the increase? (what I've read is that we'll be getting a larger portion of a smaller pie; I guess there has also been no announcement about where this money will go). I would venture to agree with your logic. It's a larger piece of a pie that will be smaller than it would have otherwise been.

3) The first home I bought last year "after" the boom -- am I screwed? (maybe not NEP type stuff with foreclosures left and right, but I'm guessing this will negatively affect housing values down the road) Only if you levered up entered into one of those 5% down mortgages. I imagine that prices should remain somewhat stable

4) Related to #1 -- if there is a downward spiral of layoffs, will we start seeing an influx of laid-off employees seeking jobs in the service industry currently held by grossly underqualified teenagers (I'm stereotyping, I know)?
No, the initial cost cutting probably would be middle manager types that make a lot of cake. They'll mostly end up doing a similar job for less money somewhere else.

5) If you've got the cashflow... good time to invest?
I imagine that the stocks will overreact in the short term and slowly start to reflect the proper valuation from the announcement as companies announce their 2008/2009 plans.

Most of the whining is more about 'opportunity cost', the province will still prosper, but it would most likely have grown better had the old royalty structure continue to proceed. People tend not to notice lost economic upside and thus ignorance is bliss.

-My opinion anyway.

[Option84]

Stelmach screwed up big time. We needed a raise but 20% is too much. Not to mention he broke the trust by breaking contract with Syncrude and Suncor. He should have let them keep their grandfather clause.

[Slava]

Originally Posted by OracleOfCalgary

By Christmas you will start to hear stories of layoffs in the O&G industry and in housing. Starting next week, it will be impossible to sell a house in this city. Full housing sector collapse next spring when the spring market fails to materialize. So predicts the Oracle.

I think that we're all shocked by this prediction.