22 April 2015

Canadians (and others interested in energy policy) MUST watch this

A Norwegian* delivers a brilliant, clear and complete critique of Canada's Alberta's failure to manage oil in the interests of its people instead of corporations. (Related: my thoughts on Alberta's tar sands tailing ponds and their risk to the environment.)



Bottom Line: Companies are not going to leave if you raise their tax burden (from $4/bbl to $50/bbl as in Norway): It's not like they can get oil anywhere in the world!
* With Canadian work experience!

H/T to CD

4 comments:

  1. This blog is one of a half-dozen must reads. Normally the insights and perspectives enhance my understanding of natural resource issues and educates. But this “MUST watch” video is an exception. While the appeal of a primarily state owned company is enticing, it has not worked as well in practice. Mr. Wiborg’s spin is every bit equal to or greater than the two politicians he disparages.

    “Does anyone really believe companies will go elsewhere”? Yes. This is exactly what happened in Alberta. I've personally discussed the Alberta “government take” with two members of the 2007 “Fair Share” commission. Even as investment was leaving the province they defended the changes which were scaled back because of the deleterious impact on natural resource investment.

    “Taxes are better than royalties” Yes, Mr. Wiborg is correct; especially with the immediate deductions for most cap and op costs like in Norway and the UK. This is a much better path forward for most States and is the primary reason for Norway’s endowment; not the state ownership of Statoil.

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    1. You are surely more qualified than I as a commenter, and I agree that there's no reason why the company must be state-owned. But, do you disagree that Alberta could make more money, especially given its low royalties (paid AFTER cost recovery)? Or do you think that the "goes elsewhere" is really hollow? Is it "worth" Alberta's future to give away oil too cheap (public royalties?) or too dear (pollution?)?

      As every oiler will tell you, it's good to run down the reservoir slow, to maximize profits, but that takes patience. Do Albertan politicians have that patience? Perhaps not, if they came to the province seeking fast oil money...

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  2. Alberta oil sand producers must pay both a gross and net royalty -- plus provincial and national corporate income tax rates. Mr. Wiborg conveniently forgot to include these components of “government take” when he posted his $4/bbl claim. Both Alberta and Norway have carbon taxes.

    I'm only commenting on the fiscal burden. While Alberta’s fiscal burden for oil sands production is probably not at the apex of the Laffer curve, I believe it is already close.

    Norway’s tax-only based fiscal system fully shares risk with the producer. No profit, no revenue for the Norwegian public. Because cap and op expenses are immediately deductible the Norwegian system promotes continued investment. There are few politicians in any country (UK & Norway are the current exceptions) that have the patience to move to a tax-based fiscal system where the risk is fully shared with the producer.

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    Replies
    1. That brings up a good question. Without exploration risk, there's only price risk. Why shouldn't AB "share risk" for greater revenues?

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