April 23 2012: Alberta Provincial Election

[Senator Clay Davis]

Predictions are a funny business. Weren't we supposed to be vacationing on the moon by now?

[Cowboy89]

Originally Posted by Makarov

The only thing that you are omitting however is the fact that Alberta's petroleum reserves are finite. Once they're gone, they're gone. So its a delicate balance between maximizing production and maximizing benefit to Albertans of every last drop of oil.

I don't purport to be any sort of expert on royalty structures, but it is important that we maximize benefit to Albertans (and Canadians) of this limited resource.

Bitumen will be absolutely worthless in 100 years. It's the most marginal barrell of production in the world. Meaning it's the least economic, and the first to be displaced in lower price scenarios. We have much more than 100 years worth of Bitumen at any development schedule. Higher royalties will leave more of it in the ground forever at a financial benefit to no one either government or industry. It's not like a piggy bank where we can choose when to make a withdrawl.

[First Lady]

EDMONTON: The Canadian Taxpayers Federation (CTF) today released a list of each party’s election spending and taxation promises to date, along with their projected costs.

The governing PC Party is leading the pack of big spenders with nearly $3.4 billion in new spending promises. They are followed by the Alberta NDP at $1.9 billion in new spending promises, with the Alberta Liberals and Wildrose rounding out the pack with $770 million and $308 million respectively.

Source: AB: Provincial Election Spend-O-Thon

[Senator Clay Davis]

And that $3.4billion is just new spending promises, doesn't even count their current commitments. Yikes. Surprised the Liberal number is so low with their free education promise, I figured free education would cost a bit more.

[Tinordi]

Originally Posted by GP_Matt

Also, because you brought up fair returns for oil companies I am curious what you would consider fair returns. Is 1% profit ideal, 10%, 25% or some other number.

Well you could look at a non-differentiated rate of market returns over the entire economy and use that as your starting point then add a margin.

This type of practice is done all the time for natural monopolies and utilities. We aren't talking about something crazy.

The bottom line from the Plourde report on the royalty review was that an overwhelming amount of resource rents were flowing to private instead of public. Now that foreign investment from private firms has flooded oil production you can't even make the argument that these rents are flowing back to shareholders. I can't buy shares in Sinopec. So really we're basically giving away the value of resource owned by all Albertans for some idea of what we deem to be teh socially optimal rate of production.

SO I'll ask you then, what's the optimal rate of production to maximize the value of the resource to Albertans?

[Tinordi]

Originally Posted by Cowboy89

Bitumen will be absolutely worthless in 100 years. It's the most marginal barrell of production in the world. Meaning it's the least economic, and the first to be displaced in lower price scenarios. We have much more than 100 years worth of Bitumen at any development schedule. Higher royalties will leave more of it in the ground forever at a financial benefit to no one either government or industry. It's not like a piggy bank where we can choose when to make a withdrawl.

Yet you're the guy saying that the $300 dividend cheques are a good idea. Cognitive dissonance at it's best. If it's going to be worthless we damn well better be saving those resource revenues.

[MoneyGuy]

As an elected municipal official, I laugh at folks who say we're in this for the money. It's not the glory either, although most of us have egos. We take a lot of sh1t in our jobs. An awful lot. It's worse in provincial and federal politics. Everyone's an expert and we're all idiots. People go off have cocked and think they know best when they don't have the full information as we do. Lots of people tell me they admire us but they could not nor would not do what we do for any money. Then I think I'm 18 months from another campaign should I run again and we have to do it all over again. I wish it was like training camp and I could fake an injury to get out of it.

Next time you see him or her, give your elected official a big hug. These fine folks are generally well intentioned and deserve more respect than they get.

[SebC]

Originally Posted by Makarov

Keep in mind that petroleum is useful for more than just fuel. It is also used to produce things like plastics, etc. Indeed, there are likely uses for it that we cannot even imagine yet.

All true, but presently, fuel is absolutely the dominant source of demand.

[Cowboy89]

Originally Posted by Tinordi

Yet you're the guy saying that the $300 dividend cheques are a good idea. Cognitive dissonance at it's best. If it's going to be worthless we damn well better be saving those resource revenues.

You must have me confused. I'm not the $300 cheque cheerleader. I have repeatedly said in this thread that I would prefer hypothetical future surpluses saved in the Heritage fund vs. dividend cheques.

[longsuffering]

Originally Posted by crazy_eoj

I thought it was self-evident that one would want the province to abide by contract law/existing agreements.

However, that in and of itself means little. If your goal is to reform pensions, then you negotiate how that happens and what it means. You don't have to 'rip up contracts' or any of that nonsense. You follow the example that has been set decades ago by private industry. But continuing to allow public sector pensions to far outpace the average Albertan's is not only unsustainable but selfish.

Instead of money going to schools, teachers have taken billions upon billions of pension payments. Then they cry that education is underfunded. If they truly cared about the health of the entire education system they would have been seeking sustainable employment payouts a long time ago. But it's pretty easy to take free money when the PC's keep throwing it at you, and then cry about lack of funding on the other side.

I don't know if you've explained it at some point in the past but I am fascinated by your pure unadulterated hate of teachers and the education system.

What's up with that?

[MarchHare]

Browsing from my phone at work so I couldn't check the link, but why did the CTF not count the pledged $1B spending for Danidollars? I know it's based on a projected future surplus that may or may not be realized, but it's still a spending promise, no?

[Senator Clay Davis]

It technically isn't a spending promise though. They aren't spending tax dollars, rather they are distributing royalty dollars. Its a handout for sure, but not a taxpayer funded handout.

[MarchHare]

Originally Posted by Senator Clay Davis

It technically isn't a spending promise though. They aren't spending tax dollars, rather they are distributing royalty dollars. Its a handout for sure, but not a taxpayer funded handout.

That's purely semantics. It's still a campaign pledge to spend an estimated $1B worth of government revenue in a particular fashion. Plus, any surpluses will come from a combination of individual and corporate taxes, royalties, transfer payments from Ottawa, and all other revenue sources, not just royalty income.

[Senator Clay Davis]

I know its just semantics, which is why its not technically wrong. Language is a beautiful thing when you can work it to your advantage. Its essentially a spending pledge, but is technically not a taxpayer funded spending pledge, which were the numbers First_Lady gave us. Take the word taxpayer away and yes, it should be included.

[Maccalus]

Originally Posted by MarchHare

Browsing from my phone at work so I couldn't check the link, but why did the CTF not count the pledged $1B spending for Danidollars? I know it's based on a projected future surplus that may or may not be realized, but it's still a spending promise, no?

I'm pretty sure that is has to do with the Wildrose promises being conditional on a surplus. The PC's have worded theirs to be non conditional on surpluses. They didn't leave an out for themselves when they can't find the money for the new school or hospitals.

[zuluking]

Originally Posted by MarchHare

That's purely semantics. It's still a campaign pledge to spend an estimated $1B worth of government revenue in a particular fashion. Plus, any surpluses will come from a combination of individual and corporate taxes, royalties, transfer payments from Ottawa, and all other revenue sources, not just royalty income.

It is not semantics. The dividend is 10% of royalty revenue surplus only, not general revenues. No royalty revenue surplus, no dividend. And $1B only if the surplus is $10B. Completely variable. It could get worked into the calculations, but it would be purely hypothetical on either historicals or projections.

[Senator Clay Davis]

Originally Posted by zuluking

It is not semantics. The dividend is 10% of royalty revenue surplus only, not general revenues. No royalty revenue surplus, no dividend. And $1B only if the surplus is $10B. Completely variable. It could get worked into the calculations, but it would be purely hypothetical on either historicals or projections.

Right, but if the rest of the province has massive budget shortfalls, but the royalty revenues are enough to merit the $300 cheque, are they really gonna give everyone that check? Doubtful, and please God no, don't be that fiscally irresponsible.

[GP_Matt]

Originally Posted by zuluking

It is not semantics. The dividend is 10% of royalty revenue surplus only, not general revenues. No royalty revenue surplus, no dividend. And $1B only if the surplus is $10B. Completely variable. It could get worked into the calculations, but it would be purely hypothetical on either historicals or projections.

This seems like the most likely answer.
The Wildrose pledge can not be costed because it is based on a completely unknown number at some random time in the future. The PC numbers can be costed because they are based on a commitment to spend money on a definite time frame.

[GP_Matt]

Originally Posted by Senator Clay Davis

To the other point, there is far too much influence from the oil and gas lobby (more in the US obviously) to think that oil will disappear until we reach a crisis point, which we always have to do to actually change anything. I see oil being our primary energy resource for at least the next 15 years.

You seem to see a conspiracy everywhere you look. Governments have given out billions in dollars in subsidies to green energy projects. Do you really believe that if one of these projects could be designed to generate energy at a lower cost than oil then the developer would be shut down by the government backed big oil lobby? There is simply no common sense there. Especially as we live in a global world. Do you believe that the oil lobby sends spies into Germany to hold umbrellas over their solar panels to reduce the efficiency?

Or perhaps you have the opinion that there is a product already invented that provides cheap energy but that Exxon Mobil bought the patent and keeps it in their safe to prevent anyone from utilizing it. Exxon produces about 2.5 million barrels a day while the world consumes 85 million barrels a day. Do you honestly believe that Exxon has the technology to replace 85 million barrels a day but doesn't develop it because they don't want to cut into the profits from their existing 2.5 million barrels?

[MarchHare]

Originally Posted by zuluking

It is not semantics. The dividend is 10% of royalty revenue surplus only, not general revenues. No royalty revenue surplus, no dividend. And $1B only if the surplus is $10B. Completely variable. It could get worked into the calculations, but it would be purely hypothetical on either historicals or projections.

First, the WR proposed dividend is 20% of surpluses, not 10%. Second, there is no such thing as a "royalty revenue surplus". All government revenue goes into the same pot.