Bill Hunter: "We're not a bunch of morons"

Ummmm........... OK Bill............... We'll all just take your word on that!

http://www.canada.com/calgaryherald/news/story.html?id=92e8ab7f-a6c1-421c-9263-c393b4c37904


'We're not a bunch of morons': royalty panel boss

Members defend report after energy industry criticism

Jason Markusoff, Calgary HeraldPublished: Thursday, September 27, 2007

Alberta's royalty review panel fired back Wednesday at industry critics of its report, arguing that its call to hike Alberta energy royalties by 20 per cent is very reasonable by global standards and is based on sound data provided by the oilpatch itself.

Since issuing its report to the Stelmach government last week, the panel, led by Bill Hunter, has been accused by some in the energy sector and investment community of basing its report's controversial conclusions on flawed math that doesn't reflect reality.

Hunter and fellow panelists said the industry's arguments distort the real picture as they see it.

"We're not a bunch of morons, as is indicated by some of the folks who are fighting against us," Hunter said in a group interview with Edmonton Journal columnists and reporters Wednesday.
Premier Ed Stelmach has promised to formally respond to the Hunter report by mid-October, after the government does its own technical analysis of the panel's recommendations and figures.

This week, he named deputy premier Ron Stevens to deal with the industry, which has opposed major changes it fears will hurt profit margins and returns for investors, especially for the already struggling natural gas sector and high-cost, high-risk oilsands projects.

The review panel focused much of its rebuttal on arguments made earlier in the week by the Canadian Association of Petroleum Producers, the leading advocacy group for oil and gas companies.

Panel members also said it's fairly predictable that the industry would protest the notion of paying more of its energy incomes to government at a time of spiralling construction and operation costs.

"In my entire 34-year career as fiscal adviser to governments, I have never had an oil executive indicating to me that it was the right moment to increase royalties," argued Pedro van Meurs, an international expert on royalties who assisted the six-member, government-commissioned review panel in producing the report, and defending it Wednesday.

Panelist Andre Plourde, head of the University of Alberta economics department, disputed critics who said the panel underestimated costs in the oilsands sector -- CAPP said by as much as half.

He said the review got its figures from Alberta government royalty filings and checked them against the data of energy consultant Wood Mackenzie, as well as regulatory sources, industry documents and reports to shareholders.

Plourde also noted that some more recent cost escalations and project costs have incorporated contingencies for construction that would accommodate future oilsands expansions. However, the panel acknowledged it's difficult to get good cost estimates, mainly because there's no transparent and verified statistical report on oilsands projects -- something it has urged Alberta Energy to compile and release annually.

Greg Stringham, CAPP's vice-president, said in an interview that contingencies might well be spent if costs keep soaring, and he said older cost data is less valuable than newer and upcoming project forecasts.

"This is what we are hearing from everybody," he said. "If we look forward, everyone I talk to on the oilsands side of the business says these things are costing them $100,000 per daily barrel or $10 billion to $11 billion per project."

To bolster its argument that its proposals are globally reasonable, the panel pointed to a new report by Wood Mackenzie.

It said that Alberta's oilsands regime is currently the world's 11th most financially attractive jurisdiction out of more than 100 analyzed, while it would become 44th if the report's recommendations, such as a new oilsands surtax and higher post-payout royalties, were fully implemented. That still puts it in the top half, and leaves Alberta 10 percentage points behind the global average for government take, Wood Mackenzie reported.

That analysis also predicted a $26-billion or 13 per cent total drop in value for current and future oilsands plants if Alberta follows the entire report. Hunter said the panel acknowledged in its report some slowdown in oilsands expansion would result.

Van Meurs said most Albertans already believe there is an uncontrolled boom in development.

"Putting development on a sustainable long-term track -- is there anything wrong with that? I don't think so."

Hunter said if high costs and higher royalties make some technologically daunting oilsands or gas plays unfeasible, companies can cut costs or "leave it in the damn ground" until they are more economical.

© The Calgary Herald 2007