Chicken Little still hasn't got it right
Royalty review recommendations evoked much sound and fury -- apparently signifying nothing
Gary Lamphier
The Edmonton Journal
Saturday, September 22, 2007
EDMONACAS, Albertazuela - Sadly, the party may be coming to an end. At least, that's the ominous warning from Big Oil.
A stunned silence is said to have descended on downtown Calgary, as shell-shocked energy execs ponder the potentially devastating implications of this week's royalty review report, which calls for a $2-billion -- or 20 per cent -- increase in the province's annual oil and gas take.
The very future of Alberta's $140-billion oilsands megaboom -- the province's primary economic driver -- now hangs in the balance as Ed Stelmach's neophyte Tory government stares down the powerful oil lobby, and considers whether to adopt the royalty panel's recommendations.
Why, the well-coiffed salesmen at Calgary's Bentley dealership must be tossing and turning in their sleep, fearing a slowdown in luxury car sales.
Talk about drama. Talk about high stakes.
Talk about a world-class gusher of ridiculously overblown rhetoric.
Welcome to Albertazuela -- or "Albertastan" as one overheated energy analyst dubs it -- where the fear mongerers want you to believe that any talk of updating the province's royalties (especially the decade-old oilsands royalty regime) is merely the first step toward embracing the extremist, nationalist policies of Venezuelan strongman Hugo Chavez. Give me a break. What complete and utter nonsense.
Of course, the oil lobby will never admit this in public. The suits are well paid, thank you, to represent the interests of their shareholders, and that's just what they'll do.
Damn the facts.
As the review panel's 104-page report confirms in exhaustive detail, the Alberta government's resource take now lags that of many other jurisdictions around the world -- including several (obviously communist-infiltrated) U.S. states.
While oil prices have quadrupled since 1996, when the oilsands royalty regime was adopted, Alberta has stood pat as other jurisdictions hiked their royalty rates. No wonder the number of multi-billion-dollar oilsands projects in this province has mushroomed in recent years, despite the huge cost overruns.
And no wonder Pedro Van Meurs, one of the world's top experts in royalty rates, regards the self-serving rhetoric of Calgary's oil companies -- many of which racked up record-level profits in 2006 -- as entirely predictable.
"The reaction from the oil industry is always 'don't do it, leave it alone,' " he told Journal reporter Archie McLean, after the royalty report was released Tuesday.
"Obviously, that is what they're supposed to say." Right.
Ironically, several industry reps who attended the review panel's hearings referred to a decade-old Van Meurs study, showing Alberta ranked high in terms of the overall government take. But they conveniently ignored a Van Meurs study done earlier this year, which came to the opposite conclusion.
"The (review panel's) recommendations are entirely reasonable. If I was premier I would implement them in their entirety," says Van Meurs. Full Stop.
Needless to say, oil and gas stocks, especially those most exposed to the oilsands, have been savagely crushed since the review panel released its report, and the hysterics in Calgary began screaming from the rooftops.
Why, the Toronto Stock Exchange's lead energy index plunged a staggering, ah, 2.7 per cent in value over the past three sessions. One has to reach all the way back to mid-August, when the index fell 4.5 per cent over three days.
Sure, most oilsands stocks took a slight hit on Wednesday, and many were down again Thursday -- no doubt partly driven by the alarmists themselves, who were doing their best to scare the daylights out of investors.
But by Friday, the correction was already over, and virtually every oilsands stock on the board was back in gear.
Moreover, although major players like Suncor and Canadian Natural Resources hit all-time record highs on Tuesday, not a single newspaper reported this Wednesday, when the stocks fell. It didn't fit the prevailing narrative of doom and gloom, I suppose.
What matters is whether Stelmach has the guts to stand up to Big Oil.
Although the premier told reporters he wouldn't be "intimidated" by the oil lobby the day after the report came out, he sounded much more conciliatory by Thursday, telling reporters at a business conference in Banff that he's ready to discuss the report with industry.
Meanwhile, Murray Edwards, vice-chairman of Canadian Natural Resources was busy damning the report's "draconian" proposals and "shrill" tone.
I'm guessing Edwards was feeling considerably more sanguine by the close of trading Friday. Canadian Natural's shares jumped $1.64 or 2.2 per cent on the day, leaving the stock within four per cent of its all-time high. Looks to me like investors already smell a deal coming.
glamphier@thejournal.canwest.com
© The Edmonton Journal 2007
