Another Open Letter to Stelmach

Premier Stelmach:

I am writing this letter as one of many typical Albertans who were shocked by the recent Royalty Review report.

I am a 32 year old professional woman that was born and raised in Calgary, Alberta in a middle class family. My Dad was an accountant that worked his whole career in the energy sector, while my Mom stayed at home and raised my sister and myself. Growing up in Calgary was a wonderful experience for me. Here was a place where people worked hard (and played hard). It was a place where people were rewarded for their drive and ambition in the form of personal wealth, but it was also a place where this wealth (that was created by private industry/small businesses) was also shared in the form of taxes and charitable donations, allowing our public sector to also flourish.

Calgary was also a place where people flocked. Since the year of my birth, our city has doubled from about 500,000 to just over 1million people! And this doubling is mostly due to the many people that have emigrated here, with the hopes and dreams of building a better life for themselves and their family, and knowing that with some hard work and ingenuity, this could come to fruition. My personal history in the oilpatch has been a whirlwind of about 10 years. I still remember back to my first year in University when I was unsure of what I wanted to do for a living, but I knew even then that I wanted to stay in our Province and work in downtown Calgary; a vibrant and happening workplace. I remember my parents warning me of the ‘ups and down’ in the oil and gas industry- from the erratic nature of oil and gas prices, to high interest rates, to the Federal Governments National Energy Policy. But all these issues didn’t dissuade me from wanting to be a part of the oil patch; surely the Government had learned from the disastrous effects of the NEP?

So I decided to take Petroleum Geology in University at a time when oil prices were only $10/bb. I remember my first summer job working downtown for a small, publicly traded, start up. My boss at the time was 32 and I remember him telling me his personal story- when he graduated from University 10 years earlier, times were even tighter, and he wasn’t able to get a job in the patch right away. But he persevered. He ended up doing field work/mapping up North for a few years before coming back to Calgary, where he eventually got a job for an oil and gas company. Through his hard work and perseverance, he became the VP Exploration of a successful oil and gas company in a few short years. Stories like this, I later found out, were quite common. So common in fact that 10 years later, I am also a young professional woman working in a successful, publicly traded start up, that is investing about $50-60million a year in our economy, as well as paying millions of dollars in royalties to the Alberta and Federal governments. And all of this is accomplished with an average rate of return on a project of only 12% (which is amongst the lowest rates of return in the world).

For these reasons, I was appalled and concerned by the panels report, and their recommendations. From a monetary perspective, these changes would be devastating to the energy sector- many analysts that have read and understood the report in its entirety are saying that the current value of the oil sands projects will be reduced by 13% (or US $26 billion); and that conventional oil and gas, especially higher rate wells, would be hit even harder than the oil sands projects (especially at higher oil and gas prices). The panel talks of the importance of stability, but the changes they are proposing are radical, and would be devastating to the entire Alberta economy.

The Report shows an extreme lack of foresight from the Panel. First of all, land payments to the crown were NOT included in the Panel’s calculations. Last year, land bonus payments contributed $3.43 billion to provincial government coffers, which is approximately one third to one half of Alberta’s total royalty revenue! Anyone with a little bit of common sense should see that the proposed higher royalties would be offset by a sharp reduction in land sale prices- companies will be paying much less for the mineral rights at land sales as the economics of their projects will be much worse with the new royalty rates. So, the extra $2 billion/year the Government expects from the new taxation could easily be offset by the reduction in land bonus payments. The extra $2 billion/year will also be offset by the fact that the same level of activity (drilling, completions, seismic, etc) will NOT happen! Many existing projects will no longer be economic under the new regime. And in the end, no one will profit. The Government will not see the extra $2 billion a year, and the damage to the Alberta economy will be irreparable.

These recommendations, if passed, will affect EVERYONE. 1 in 6 Albertans works directly for the energy sector, but countless others are employed indirectly. Take the Tim Horton’s worker up in Fort McMurray that is making $20-25 an hour…..do you think this salary would be realized throughout the rest of the country?? This higher than average salary is a direct result of the oil sands activity up in Fort McMurray.

The Panel seems hell bent on increasing the Royalty rates and taking more money from the private sector, but where will all this additional money be spent? I think anyone who has been up to one of our hospitals in the last year can plainly see that the entire Health care profession is understaffed and underpaid. Does the panel propose to spend this extra capital on our Health Care system? Or do they propose to give every man, woman and child in our Province a $400 government check at the end of the year? I think it’s pretty obvious that there was a surplus of money last year! The government didn’t even know what to do with all the extra cash and so they gave every Alberta resident a $400 check!

But of course we all know that money doesn’t buy happiness, peace of mind, and freedom, and so it is for these reasons that I am truly worried and concerned by the recommendations. The panel is proposing no ‘Grandfathering’, which effectively means that currently producing projects should be subject to the higher proposed royalties along with the new projects. Do signed agreements/contracts mean nothing to the panel? Does confiscation of private property without compensation mean nothing? Do we not live in a Democracy? What the panel is proposing is essentially STEALING.

I strongly urge the Alberta government and Premier Stelmach to denounce what the panel is proposing. If these recommendations are passed by the government, it would be a sad day in Alberta’s history.

Sincerely,


Megan Huckvale