Official (Alberta) Oil Discussion Thread

[Frequitude]

Ok Red, I'll bite. But before I do, please note that the question you asked was regarding what the NDP has done to cost O&G companies money. Debating whether those changes are good or fair compared to other jurisdictions has nothing to do with the question you asked. Also please note my previously stated belief the price of oil is 90%-99% responsible for the current economic woes. The NDP are a drop in the bucket. But they are a drop and that drop consists of.

Cash Cost Impacts
These are items that immediately impact the bottom line of the income statement.
1. Increased corporate taxes
2. Increased carbon taxes

Financial Uncertainty
These are less easy to quantify but directionally they create uncertainty for capital markets. Uncertainty drives up yields to deploy capital which basically means less capital deployed or charging more to deploy it.
1. Allowing the spectre of royalty changes to loom for, what, 8 months. Then continually delaying the new framework.
2. Putting a severely underqualified person in the Energy Minister's chair (admittedly they didn't have much to choose from)
3. Actively campaigning against KXL and Gateway

Limiting Growth of the Oil Sands
1. Putting a 100MT cap on oil sands emissions.



Those are the ones that come to mind at least. I purposely left the minimum wage increase out of group 1 since it's probably a minor impact to energy companies. But directionally any upward pressure on wages in a jurisdiction creates upward pressure in all industries throughout it.

[peter12]

We are a generation out. Manufacturing has been dependent on government bail-outs since the 1990s, and the oil and gas industry was squashed by opaque regulations, unfriendly governments, and a federal government without vision.

We need infrastructure. While labour is cheap, we need to build pipelines, and rail to get this oil out of the province when the price comes back.

[peter12]

Originally Posted by rubecube

http://www.cbc.ca/news/canada/britis...%3DbVlWShlyWwc

Sorry, but what do statements like this actually mean?

Industry consulted with First Nations to the strictest extent possible under the current regulations. I know they did. I was there.

[rubecube]

Originally Posted by peter12

Sorry, but what do statements like this actually mean?

Industry consulted with First Nations to the strictest extent possible under the current regulations. I know they did. I was there.

Just from what I've read/heard from other sources, some tribes felt more included in the consultation process than others. I'd like to actually read the court's decision to find out their justification, but either way it's another huge hurdle for a project that is quickly looking like a longshot to get off the ground.

[CaptainCrunch]

Originally Posted by peter12

We are a generation out. Manufacturing has been dependent on government bail-outs since the 1990s, and the oil and gas industry was squashed by opaque regulations, unfriendly governments, and a federal government without vision.

We need infrastructure. While labour is cheap, we need to build pipelines, and rail to get this oil out of the province when the price comes back.

Pretty tough to build pipelines when they're basically being blocked in every direction.

Or you have provinces like BC and Quebec basically blackmailing Alberta to approve them.

Its not like Alberta can just ram them through.

I say that Alberta should buy several million railway tankers and semi's and fill em with products and overwhelm the road systems east and west.

[Frequitude]

Is anyone following MEG? Down about 35% over the last week. Textbook story of what happens when you lever up and prices go the wrong way. The highs are higher and the lows are lower. They're actually cash flow negative at current prices and will have to tap in to credit lines to service interest payments (i.e. using debt to service debt...like using one credit card to pay off another).

Whoever bends them over when they're forced to sell Access Pipeline is going to get one hell of a deal.

[peter12]

Originally Posted by rubecube

Just from what I've read/heard from other sources, some tribes felt more included in the consultation process than others. I'd like to actually read the court's decision to find out their justification, but either way it's another huge hurdle for a project that is quickly looking like a longshot to get off the ground.

Well, obviously some bands felt less included than others. They all wanted a pay-out. Do you know how ridiculously complex it is to create a consultation strategy when you are dealing with something as amorphous as a claim to have rights to a "traditional territory?"

Companies try to find bands that are directly, or significantly indirectly affected by the project impact. A community that exists 500 km away cannot make any real claim on this basis, but they do anyway, and the rent-seeking lawyers take that to court for another pay cheque.

[rubecube]

Originally Posted by peter12

Well, obviously some bands felt less included than others. They all wanted a pay-out. Do you know how ridiculously complex it is to create a consultation strategy when you are dealing with something as amorphous as a claim to have rights to a "traditional territory?"

Companies try to find bands that are directly, or significantly indirectly affected by the project impact. A community that exists 500 km away cannot make any real claim on this basis, but they do anyway.

The band in question's home territory is about 50 miles southwest of Kitimat (according to their website), so I think they would definitely have legitimate reasons to be worried about increased tanker traffic and potential spills.

[peter12]

Originally Posted by rubecube

The band in question's home territory is about 50 miles southwest of Kitimat (according to their website), so I think they would definitely have legitimate reasons to be worried about increased tanker traffic and potential spills.

Ok, I will say it another way. You can never, and you will never consult enough with these bands. There are no regulations tight enough to protect their environmental interests or whatever because that is not what the leadership is after.

[polak]

Originally Posted by Frequitude

Is anyone following MEG? Down about 35% over the last week. Textbook story of what happens when you lever up and prices go the wrong way. The highs are higher and the lows are lower. They're actually cash flow negative at current prices and will have to tap in to credit lines to service interest payments (i.e. using debt to service debt...like using one credit card to pay off another).

Whoever bends them over when they're forced to sell Access Pipeline is going to get one hell of a deal.

Wow. So happy I left there.

Who knew that quitting my job at MEG and blowing my down payment on travelling and taking the summer off would have actually been the better long term financial play then working there and buying a place I probably wouldn't be able to pay for at this point.

[rubecube]

Originally Posted by peter12

Ok, I will say it another way. You can never, and you will never consult enough with these bands. There are no regulations tight enough to protect their environmental interests or whatever because that is not what the leadership is after.

It doesn't look like that's necessarily what's at issue here anyways. Here's a bit more info on the decision. It looks like it basically came down to the BC Supreme Court saying that NEB's approval isn't a sufficient demonstration of consultation, and that the province is required to do its own consultation.

http://www.vancouversun.com/news/sup...#ixzz3xAYbn321

The Northern Gateway pipeline project is stalled after the B.C. Supreme Court ruled Wednesday the province can't rely on the National Energy Board for environmental approval and failed to consult First Nations.

The court ruling means that Enbridge must now apply for an environmental assessment certificate from the province of B.C., and the province will need to consult First Nations.

Coastal First Nations, the Great Bear Initiative Society and Gitga'at First Nation (collectively CFN) had asked for a judicial review setting aside an agreement between the B.C. government and the NEB to remove the need for an environmental assessment certificate.

B.C. Supreme Court Justice Marvyn Koenigsberg ruled the agreement invalid, saying it removes the need for the province to impose conditions, and that the province breached "the honour of the Crown" by failing to consult with the CFN, and the Gitga'at specifically.

[Regorium]

Why would the BC supreme court rule against Enbridge here? The NEB has very strict rules on first nations consultation. I'm very curious as to which rules the BC supreme court found to be lacking.

BC Supreme court vs. the NEB could get interesting.

[Bring_Back_Shantz]

Originally Posted by Red

Problem is, this is Alberta and people have no trust in any government other that the PCs. A review doesn't have to be a bad thing. It's likely that nothing changes.

And really, the uncertainty is the reason for capital withdrawal? The $30 WTI has 10 fold the impact. Just trying to keep things in perspective. In no way am I suggesting that the delays are a good thing.Or that the NDP are not gonna mess up etc. But they are not the reason why there is capital withdrawal right now. These decisions are not being made on a whim...

Originally Posted by rubecube

Can you say with any certainty that the delayed decisions would have actually been invested into Alberta if there had been no royalty review, or would they have just decided a lot more quickly not to do it?

Red.
Yes, in some cases, the uncertainty is the reason for the capital withdrawl.
Obviously $30 oil is the reason why so many companies are reducing their capital spending, no one is debating that, and no one is blaming that on the NDP (at least no one who is worth arguing about).
What that unceratintly has done, is make some companies reevaluate the risk of spending that limited capital in Alberta.
At a time when companies are being forced to limit their capital budgets, the NDP has done something (and dragged it out, no less), that has discouraged companies from commiting what limited capital they have available.
As I said before, when times are rough, what sense does it make to place unneeded uncertainlty on an already stained industry. Especially when it is the lifeblood of the province.

Rube,
Yes I can say with certainty that that is the case.
Companies that have options on where to spend their capital are looking at the uncertainty of the royalty review and deciding that for the time being their capital dollars are better spent elsewhere where they know for certain what they are getting into.

There are still projects that can fly at these low oil prices, but the margins are going to be razor thin, and when they are that thin, not knowing what a potentialy large cost of doing business is, makes those projects unattractive. Hence, the capital goes, and in some cases, already has gone elsewhere.

[puckedoff]

Originally Posted by Frequitude

Is anyone following MEG? Down about 35% over the last week. Textbook story of what happens when you lever up and prices go the wrong way. The highs are higher and the lows are lower. They're actually cash flow negative at current prices and will have to tap in to credit lines to service interest payments (i.e. using debt to service debt...like using one credit card to pay off another).

Whoever bends them over when they're forced to sell Access Pipeline is going to get one hell of a deal.

On the other hand, they have an untouched credit facility that could cover them for 5 years of negative cashflow so if they hit the wall it wont be for a few more years anyways.

[peter12]

Originally Posted by rubecube

It doesn't look like that's necessarily what's at issue here anyways. Here's a bit more info on the decision. It looks like it basically came down to the BC Supreme Court saying that NEB's approval isn't a sufficient demonstration of consultation, and that the province is required to do its own consultation.

http://www.vancouversun.com/news/sup...#ixzz3xAYbn321

No, that is what at issue here. Applying for an additional environmental assessment through BC means that millions of more dollars will have to be funneled to First Nations under the guise of consultation. It is a shakedown, pure and simple.

What is the honour of the crown, anyway? Wouldn't federal regulations qualify? It is absolutely unbelievable that we have allowed politics to get in the way of long-term economic growth in this country. The next generation of Canadians, and First Nations will suffer because we were misled into allowing our legal and political institutions to be used in such a way.

[Locke]

Originally Posted by Red

It's called a difference of opinions..some believe in trickle down economics and some don't. Some buy in to the fear that O&G companies will pack up and leave, others will believe that they will stay where the Oil is.
Just different trains of thought. Learn to accept that.

You are not very good at explaining your position. Rude and ignorant really...so yes, we are done here.

It's not a difference of opinion it's a difference in the understanding of facts.

First of all you didn't even know that he royalty review isn't ' a few weeks late' it was in fact bungled horribly. As soon as the NDP realized it was going to actually take some work they pledged to keep the current royalty regime in place for 2016. So they took an uncertainty and then guaranteed that it wouldn't change for over a year making things much worse. Something they've proven themselves adept at.

Companies look at that and don't say; 'Sweet! All is well!'

They see no viable method of determining a ling term cost/benefit analysis.

This isn't the Beverly Hillbillies, Albertans are not Ma and Pa Clampett where they shoot a 12 Guage into the dirt and voila! Oil! One year isn't stability in the terms of an investment in exploration it's the opposite. These projects are very long term and no one is committing to them unless there's a mutual commitment.

So it just gets scrapped. You may have heard something about the 100,000 layoffs? It's been mentioned here and there.

Rude? I'll grant you that, and I do apologize , but my position has been made clear over several threads. Further I've given out too many free economics lessons around here and I'm tired of doing it ad nauseum.

Ignorant though? It's cute that you are alleging that of me in light of your comments.

Everything is A-okay in your eyes? No one has suffered. Nothing wrong has happened. The NDP have things well under control.

[CaptainCrunch]

[Frequitude]

Originally Posted by Locke

Companies look at that and don't say; 'Sweet! All is well!'

They see no viable method of determining a ling term cost/benefit analysis.

This isn't the Beverly Hillbillies, Albertans are not Ma and Pa Clampett where they shoot a 12 Guage into the dirt and voila! Oil! One year isn't stability in the terms of an investment in exploration it's the opposite. These projects are very long term and no one is committing to them unless there's a mutual commitment.

Carefull, you're walking into the "NDP aren't responsible for $30 oil" reply trap. Which is true. They're a drop in the bucket but they're a drop nonetheless. I find it's best to stick with the "their policies and behaviors are directionally making things worse but I welcome you to contest that" message. It tends not to garner many replies from the other side though.

[Red]

Originally Posted by Locke

It's not a difference of opinion it's a difference in the understanding of facts.

First of all you didn't even know that he royalty review isn't ' a few weeks late' it was in fact bungled horribly. As soon as the NDP realized it was going to actually take some work they pledged to keep the current royalty regime in place for 2016. So they took an uncertainty and then guaranteed that it wouldn't change for over a year making things much worse. Something they've proven themselves adept at.

Companies look at that and don't say; 'Sweet! All is well!'

They see no viable method of determining a ling term cost/benefit analysis.

This isn't the Beverly Hillbillies, Albertans are not Ma and Pa Clampett where they shoot a 12 Guage into the dirt and voila! Oil! One year isn't stability in the terms of an investment in exploration it's the opposite. These projects are very long term and no one is committing to them unless there's a mutual commitment.

So it just gets scrapped. You may have heard something about the 100,000 layoffs? It's been mentioned here and there.

Rude? I'll grant you that, and I do apologize , but my position has been made clear over several threads. Further I've given out too many free economics lessons around here and I'm tired of doing it ad nauseum.

Ignorant though? It's cute that you are alleging that of me in light of your comments.

Everything is A-okay in your eyes? No one has suffered. Nothing wrong has happened. The NDP have things well under control.

Why do you assume that I didn't know about the review being a few weeks late? I am quite aware of how it got pushed and then delayed. That's why I thought of your comments as ignorant. You assume that people that have a different option than you do so because they don't know as well as you do. Newsflash, I live this every day as much as you do, so yes, different opinions.

Either way. I still stand by my opinion that the current government is not to be blamed for what's happening here right now. Carbon tax may be a big burden in 2020, but that's just speculation on what will happen and how it will affect us.

Realistically it's unlikely that the NDP will get reelected so the whole thing will likely be scrapped. Corporations account for that. They will take the bump in the road here and there and wait for next election. They aren't that short sided.

So again, not saying that the NDP is doing anyone any favours, but at the same time, they haven't done much damage at the moment if at all. That's why I asked the question on what they have done to date to hurt us so badly. Because people are freaking out and blaming them for last years layoffs etc.

[Teh_Bandwagoner]

Originally Posted by Red

And those are? I take it it's a long list of evil changes that are costing companies big $$$ right now....so let's have it.

I don't root for any party, I dislike them all equally. But listening to the PC crowd it seems like the NDP is really hurting us all big time and I don't see how. I must be missing a lot.

I voted NDP, so I have a part in this. I also previously backed PC. Would I back PC now? That's tough because I think if they were still in power, they may have made some better choices. But I think no, I still don't believe they should be back in power. I still believe they need some time wandering in the wilderness to learn from their arrogance. That being said, NDP was probably the wrong choice.

1. Implementing a royalty review, and then delaying it on multiple occasions is not a good way to promote stability.

2. Implementing a carbon tax, which likely has the greatest affect on the lower to middle class (of which many are now unemployed).

3. Raising the minimum wage when retail/food industries are also feeling the affect of the downturn.

It only looks like a list of three, but these are three biggest ticket items over a short eight-month span.

At this point, I feel there is no good option. I'm pretty sure much of the province is similarly scratching their heads at this point.