Another Perspective / Open Letter

An open letter to Premier Stelmach

Premier:

I am writing this letter as one of many typical Albertans who have been blindsided by the recent report from the Alberta Royalty Review Panel. I think it is important to give you some personal history so that you may fully appreciate the context of my thoughts.

Like many Albertans, including my amazing wife, I am a young professional who was born, raised, and educated in another Province. In the Province of my birth, I grew up very close to the Nation’s Capital, where the primary business was, and is, government. In my youth, I was constantly exposed to inside stories about the destructiveness of the Federal Government’s decisions on the wealth generation potential of the country, as well as the related deleterious effects on the drive, energy, optimism, and ambition of those who tried to make a career in the bureaucracy. In contrast, I saw the hard work and dedication leading to productivity and employment displayed by small business entrepreneurs, including small store owners and farmers.

As a child, I also learned about the end-member of government intervention in people’s lives, as my family packed food parcels to send to relatives behind the iron curtain in Poland. I could see the continuum between arbitrary confiscation and intervention in the National Energy Program, and the body and soul destroying state actions in communist Poland, under the guise of creating a worker’s paradise.

Upon graduation, I was lucky enough to get a summer job with Amoco Canada Petroleum Limited in Calgary. My first ever exposure to Alberta was a revelation. Here was a place where people worked hard, played hard, respected newcomers and new ideas, and most of all, had an enormous respect for the place of private industry in creating all forms of wealth for society. A place where people earned their way through brains or brawn, or both, and shared their hard-earned wealth and knowledge through Canada’s highest rates of charitable donations, both time and money. A place where respect for agreements and political stability was the cornerstone of building a wealthy society for all. A place where one could understand the rules of the game, play by them, contribute wealth to society through taxes and other spinoffs, and build a life and career with certainty that the government would not even dream of arbitrarily confiscating an individual’s property.

Times were still tight in the oilpatch then, a short decade ago, and after the summer placement was over I was forced to take a job elsewhere. After a short stint in a bureaucratic and stultifying job in the mining industry, the very antithesis of the wealth generating vibrant oilpatch, I quit my job and hit the road for the 30 hour drive back to Calgary. Like many emigrants to Alberta, I had less than nothing (a negative net worth, thanks to student loans) and no job to look forward to when I arrived. But I had confidence – confidence that I would have a place in Alberta’s progressive, growing economy and society.

Thanks to several professionals and managers at the Alberta Energy Company, who understood their role in mentoring and grooming the next generation, I was able to land a full-time job. After several formative years there, I was anxious to take the plunge and become an entrepreneur. At the age of 29, I quit my job, to start a company from scratch with several like-minded people, who happily were many years my senior in experience. Only my confidence in Alberta’s respect for business and property allowed me to take this huge leap of faith, risking my limited wealth and income while planning a family.

Three and a half years later, I am proud to be an officer in a TSX-listed company, which is investing $50-60 million dollars per year in the Alberta economy. We have directly and indirectly created employment for many talented individuals across the Province, and pay millions in royalties and taxes to the Alberta and Federal Governments. I am particularly proud, and continually amazed, at how effective the current system is at delivering wealth and value to the citizens of Alberta via our company’s exploitation of hydrocarbon deposits that would be considered non-commercial in most of the world.

A little over a year ago, my wife and I were blessed with our first child, born in Alberta. With both sets of grandparents living thousands of miles away, there was reason to question our commitment to living so far from our home Province. Still, the tradeoffs were worth it, as I wanted my son to benefit from growing up in a place where agreements were honoured and governments understood their role in helping business create value for society.

Given this background, you will now understand why I was appalled and saddened by the release of the report from the Panel. Apart from the flawed analysis perpetrated by the Panel which is beginning to be discussed by the public, I was floored that any group of learned Albertans could blandly put forth a proposal that included confiscation without compensation. Whatever narrow legal excuse is used to dodge the subject, make no mistake – at its heart, the proposed changes include confiscation of private property without compensation. A similar proposal, recently enacted in Venezuela, at least contained an implicit recognition of a company’s rights via the offer of compensation. This proposal does not even do that.

The Panel tries to say that there is, in fact, no confiscation, since companies don’t own the resource – only the People of Alberta do. Companies merely lease the right to produce the oil and gas from the People. This is disingenuous in the extreme. Here’s a simple analogy – a car dealer leases a car to a consumer. The dealer and consumer make an agreement, whereby the consumer gets full use of the car, while the dealer gets agreed-upon cash payments. The consumer makes her first payment, and drives home. Upon arriving home, the consumer has a message on her voicemail. The dealer has arbitrarily decided that while the payments will remain the same, the consumer can only drive the car 20 days out of each month. His reasoning is very simple – as the owner of the car, he has an absolute right to dictate new terms to the consumer. The consumer doesn’t own the car, what rights does she have? The signed agreement? Enforcement of the contract through the courts? What naïve thoughts! She must think that we live in a liberal Democracy, where agreements are respected and enforced.

Unfortunately, she has another problem thanks to the dishonest car dealer. Her Canadian Chartered Bank has lent her money to start a small business, for which she needs her car all month long. She has already spent this money, as she had been working very hard to start the business and hire a couple of people. Her Bank, a conservative institution with a remarkably good understanding of Canadian legal principles, was willing to lend her this money because it understood that her 30-day car use agreement was binding. Surely, a Canadian Chartered Bank would not have lent her this money if it had perceived that her right to the car was not a legal contract, enforceable by the courts?

The bottom line is – whatever narrow legal argument the Panel tries to use (similar to other more despotic regimes legalistic excuses), this proposal is confiscatory in nature. The fact that the Premier did not immediately and harshly denounce the report as un-Albertan came as a total shock to me. I am now questioning all my basic assumptions about this Province and its current leadership. I would hate to think that many of my eastern-dwelling friends and family were right all along – that Alberta really is led by small-minded ignorant people, who truly do not welcome the presence of my family here. If this proposal is enacted in anything even remotely resembling its present form, I would think that this Province will be facing an exodus of people like me – with the Canadian dollar at parity, I think I would be more welcome, and feel more at home, elsewhere. Remember that hard working people who came to Alberta can just as easily leave for greener pastures, if the very reasons they came here are quashed.

Damage is already being done as we speak, but there is still time to reverse it. Please take the time to consider the true consequences of what is being proposed, and denounce it unequivocally. While people like me will not be blindsided again so easily, we will warily continue to build our lives in this great Province and Nation secure in the knowledge that cooler heads can indeed prevail.

Sincerely,

Dan Polley,
Vice President, Exploration.
Breaker Energy Ltd.

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From: Sent: Wednesday, September 26, 2007 4:05
RE: An Open Letter to the Premier regarding the Royalty Review Report - please pass on

Hello all,

I am sure you already saw this but here is a website that will apparently accept comments. Polley, if you haven’t already, you should definitely make sure you send you analogy to this website and I would also encourage you to send that analogy to the papers as well –you had an excellent analogy to put it in perspective for the average person.

http://www.alberta.ca/home/598.cfm

I must say from my own personal experiences that the oil and gas industry right now is not a fan favorite among people who right now do not think they are directly benefitting from it (although they are obviously discounting some of the things that they do enjoy as a result of the already quite large royalty income from the province). For a personal example, when I went home at Easter in 2006 and went to Midnight Mass at the local church, I literally had a line of people from the small towns in and near where I grew up standing in line to ask me questions about the industry, because I was in “the oil” and from Calgary, and I was amazed at some of the questions that I was getting asked. It was quite apparent that there is a lack of transparency about the industry from many of the companies doing business out there and their lack of communication has the ability to paint the entire industry in bad color. I even got the story of the surface landman for rent attempting to railroad a farmer to put a location near his farmhouse, telling him that the company he represented could not afford to drill a directional well after pulling up to the farmhouse in a bright yellow hummer. Needless to say, when people portray themselves and the industry they represent in this manner, it can lead to many misconceptions and distrust in the industry as a whole. But as we are all aware, it is the stereotypes that are perpetrated by certain individuals that lead to negative impressions across a lot wider board. I have also been involved in meetings in oil companies where a VP was strategizing about how they could outsmart the stupid farmer, and got quite ignorant when I pointed out to him that he obviously had no knowledge about what it look to survive economically as a farmer in this economic farming environment, so like all things these are two way streets. I laugh in a very sad way when people are outraged now about the price of grain, and how it has doubled and now bread prices go up, and how there is no realization of exactly how much wheat is actually in a loaf of bred (it may actually be 15 cents max actual cost) and that it is more than likely the middleman and distributer who are profiting the most by far, using the price of grain and greedy farmer as an excuse.

I think that in ways, what has been happening to lead to this study being done has been perhaps a very bad PR campaign on the part of oil and gas, because we all know that the truth behind the ins and outs of working in this environment today. I also think that in this day and age of companies being so busy with just the mechanics of trying to make a successful company and career, that we forget that image is also a big factor in the oilpatch. This is not only with the investment houses, but also in the general public, and some big slick advertising campaign is probably not the way to do this. I am not sure how to reach the general masses, but I know in the area I grew up in Southern Alberta it is more by education and even open houses hosted by people who don’t think they are better than everyone else.

One other comment: The booming economy – blessing for some and for others it makes trying to do everything more difficult.

And now back to running some numbers for a budget that may get severely decreased in the not too distant future.