Alberta slashes Alberta Oil Sands Royalty

Alberta Government reveals Royalty Slashing

The worsening financial crisis has hurt many industries including the Alberta Oil Sands and their related companies. The recent postponing of many of the billion dollar projects by companies including Suncor, Husky Energy, BA Energy, and Petro Canada to name a few are forcing Alberta politicians to review their Royalty policy. A recent shift in their Alberta Oil Sands Royalty from 15% - 20% down to 5% shows how much the Alberta Government is willing to give in order to save jobs in Alberta. Read more about this online at Financial Post http://www.financialpost.com/story.html?id=1349060. The Alberta Government is facing a dire deficit of more than 1 billion dollars, its first deficit for more than 10 years. Despite the recent increase in the percentage of Royalty payments in 2008 when oil price per barrel was well over $100, the Alberta Government is in a worst position if no new jobs are created. With fewer oil wells as a result of a postponement in projects, royalty slashing is the only alternative in creating the right environment for Alberta Oilsands companies to continue to invest in Alberta rather than in other areas. The new royalty slashing plan in Alberta applies to 5% of the first 500,000 barrels of oil in the next year or 500 million cubic feet of natural gas.

Alberta Oilsands Royalty rates and the Alberta Oilsands Companies

The royalty rates charged by the Alberta Government allow it to share in the profits of Alberta oil sands companies. When the economy is doing well, Alberta oil sands companies will continue to invest despite a high royalty payment to the Alberta Government. As long as profits remain high, and they were at record levels of a few billion dollars per quarter, everyone will remain in business. However, the global financial crisis has created a bad environment for the Alberta oil sands companies. In a global financial crisis, it is impossible to borrow money from any bank. The major banks around the world provide the credit facilities required to fund Alberta oil sands companies operations and lines of credit facilities to operate efficiently. Without the support of the global financial system, the Alberta Oilsands companies run a high risk of running out of needed capital and going bankrupt from a lack of financial resources. While the big companies such as Suncor have large financial reserves, it is still unlikely to invest in times that are this uncertain. The royalty rates are a financial incentive to provide Alberta Oil Sands companies to continue to take risk despite the possibility of lower financial support.

Will the Royalty reduction work?

The beginning of 2009 has already seen a decrease of 27% in drilling activity from the major Alberta oil sands companies. This drastic reduction in activity means a drastic reduction in employment and an increase in unemployment for the province of Alberta. A royalty reduction will provide the financial incentive for Alberta oil sands companies to take the risk now to invest rather than wait a year and have to pay a larger percentage of their profits to Alberta oilsands royalty payments. But arguments of whether this will work include the financial stability of the Alberta oil sands companies have not improved. Without providing the financial stability taken away as a result of a weakening in the global major banks, the small Alberta oil and gas companies are still not able to make any new investments despite having a lower royalty. The main benefits of this royalty reduction would actually to go larger producers who have the financial reserves to produce even more and will be able to take advantage of a saving in royalty payments.

Alberta oil sands project cancellations

Over 200 billion to be lost in Alberta oil sands investment

As more and more projects are halted on a daily basis in the Alberta oil sands, estimates of $97 to $241 billion will be loss in investment. (read article: http://www.financialpost.com/story.html?id=1258599) A loss of this magnitude will affect the investment environment in Alberta and the Canadian economy. With a big loss will also come a reduction in the amount of labour employed by the Alberta oil sands companies and loss revenue to the province of Alberta. The figure of 200 billion may seem arbitrary but this would represent 1/3 of the proposed investments in the Alberta Oil sands over the next decade. Imagine the loss in revenue to the Alberta and Canadian government and all the well paid Alberta oil sands jobs that will never be started. Alberta oil sands investments may seem to be risky in light of this figure and the potential of even bigger numbers to come. Depending on the severity of the global financial crisis and the ability of Alberta oil sands companies to survive the Alberta recession, we may see Alberta oil sands investments become the jewel once again in Canada.

Alberta oil sands project cancellations

BA Energy became the first Alberta oil sands company to file for bankruptcy in 2009. Imperial Oil and Exxon and Husky Oil are all slowing down existing projects or have project cancellations and postponements. If a project cancellation occurs there is an indeterminate amount of time before it may be started. The effect on labour is huge as many existing workers are laid off and no new labour is required or forecast. This will inevitably lead to an Alberta Recession as the Alberta oil sands projects account for a significant share of the labour demand. Alberta oil sands project cancellations are not a bad thing on the other hand. If you think about it, the Alberta oil sands have been running at near full capacity for the last five years. The impact can be felt by the labour force through increased injuries and WCB claims and increased job dissatisfaction as a result of over work and too much stress. The other big impact is the environment and Alberta oil sands negative image as dirty oil or tainted oil. With a slow down in production the Alberta oil sands companies including the Alberta government now have the resources to invest in improving the processes that are used in developing the tarsands. Perhaps we will not hear the word dirty oil or tainted oil in the following decade.

US Oil Prices and Alberta oil sands

US oil prices have a big impact on the Alberta oil sands. It seems that no matter how high the price of US oil we all need to drive. When the price of US oil reached $4 a gallon there was a revolt in many parts of the World including the US. But people still drove their SUVs and trucks still delivered their goods. The oil companies made record quarterly profits silently in the background of all the outrage. With low US oil prices we see a shift in production of the Alberta oil sands and a reduction in production and new projects. The Alberta oil sands companies must make a profit as like any other business and when the profits are low or negative then it becomes survival mode. The large Alberta oil sands companies have been around for up and down markets and realize that the prices will fluctuate 2 to 3 times during the expected life of their projects. These Alberta oil sands companies keep large cash reserves and tightly guard this as their strategic weapon in times such as these. It is sometimes a blessing for them to be in a global financial crisis as they get to pick up distressed junior oil and gas companies without the financial resources at bargain prices.

Public views of Environmental impact of Alberta Oil Sands and Alberta Oil Sands Companies

What people think about Alberta Oil Sands

What do you think the public sees when they think of the Alberta Oil Sands? Is it that the Alberta Oil Sands image is one of only monetary gain at the expense of the environment? Or is it even worse and they believe that once the Oil Sands are without oil then the companies will leave a dirty oil legacy and not care about their environmental impact at all. Some people, especially the people who work in the Alberta oil sands, are working hard at dispelling any false beliefs and any wrong public opinions. Of course since the Alberta Oil Sands is so far north and only migratory birds get a birds eye view of the impact, this is a harsh uphill battle for the public relations people who work for these Oil Sand companies. Nevertheless, these Oil Sand firms will spend vast amounts of money documenting their success at reducing their carbon footprint while benefitting not only themselves but the communities and the great country of Canada. This article is about this view of the Alberta Oil Sands and firms that work in the oil sand fields.

What Alberta Oil Sands Companies are doing about their image

Whether we are in a recession or a market boom, Alberta Oil Sands companies are very concerned about what the public views of their operations and their environmental impact. Communities such as Fort McMurray in Northern Alberta are complaining that the big Alberta Oil Sand company is making their environment very dirty. These companies have changed the environment that they live in and will forever leave them with a legacy of dirty oil. This powerful environmental impact will be due to the greed of the Alberta Oil Sands Companies and will not benefit the communities at all. Of course when you talk with the Alberta Oil Sands Companies such as Imperial Oil or Shell you hear a whole different story. The large Alberta Oil Sands Companies’ opinions are that there is a large mistrust in their operations as a result of publics’ high dependence on the industry’s products but poor understanding of what it actually does. More importantly, they say people are viewing their companies from way up from space and only really see lights but not the real detail. In fact, the Alberta Oil Sands company has been doing a lot to counteract the effects of their operations on the environment and they would like to inform the public better of their actions on this front. Hopefully the future of towns such as Fort McMurray will have a positive attitude towards the growth and prosperity of their communities as a direct result of the Alberta Oil Sands companies. This is the image that public relations is working hard and spending a lot of money to achieve. Will it work or will it backfire on them, only time and perhaps the media can tell.

Recent poll of public’s opinion of Environmental Impact of Alberta Oil Sands

A recent poll taken by Alberta Oil Sands companies aimed at finding out public opinion on the environmental impact that the oil sands companies are having and what people really thought about this topic. The poll was a 60 question telephone poll and asked 425 people in Edmonton and an equal number in Toronto. The results of the poll drew similar conclusions including: the Alberta Oil Sands image problems are broader than any one company, that Canadians believe that it’s possible to develop the Alberta Oil Sands while protecting the environment, that they see technology as a large part of the solution, and that they are most concerned about the environmental impact of projects on the fresh water and greenhouse gas emissions.