Alberta Federation of Labour
Alberta’s $2.9-Billion Drilling Stimulus:
Where did the money go?
Introduction $2.9 billion Drilling Stimulus:
no new jobs decreased drilling
Royalties siphoned off through a government-sanctioned “grey market”
Costs
(in millions)2009
Estimated Cost (one year only)
Actual Cost (over two
years)
% Differenc
e
Drilling Credit $466 $1,688 262.2%
New Well Royalty Reduction
$1,040 $1,205 15.9%
Total $1,506 $2,893 92.1%
(Source: Ministry of Energy)
What Albertans were promised“For that investment, what we get is jobs. We
get jobs for Albertans, we generate some wealth in the province of Alberta. We will generate additional royalty revenue and
production over 10, 20, maybe 30 years.“
Energy Minister Mel KnightGovernment of Alberta
News Release, June 25, 2009
Alberta Oil & Gas Extraction andSupported Activities Jobs 2008-2010
(Source: Statistics Canada, CANSIM Table 383-0010)
2008 2009 20103000
13000
23000
33000
43000
53000
63000
73000
Oil & Gas Extraction Support Activities
Conventional Spuds by Month 2006-2011
(Source: Alberta Energy)
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
-
500
1,000
1,500
2,000
2,500
Conventional Spuds by Month
Percentage Change in Well Completions and Oil Prices
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
AlbertaBCSaskatchewanOil Prices
(Sources: Drilling data from the Canadian Association of Oilwell Drilling Contractors, Oil prices [Canadian par spot price] from U.S. Energy Information Administration)
Capital Expenditures, Alberta Oil & Gas Extraction
$0
$5,000,000,000
$10,000,000,000
$15,000,000,000
$20,000,000,000
$25,000,000,000
$30,000,000,000
$35,000,000,000
$40,000,000,000
$45,000,000,000
Capital Expenditures, Alberta Oil & Gas...
(Source: Statistics Canada, CANSIM Table 290-005)
Net Profits for Canadian Oil & Gas Extraction
-10,000,000,000
-5,000,000,000
0
5,000,000,000
10,000,000,000
15,000,000,000
Net Profits, seasonally adjusted
(Source: Statistics Canada, CANSIM Table 187-0002)
An unregulated, yet legal, market for buying and selling royalty credits
“The licensee of any eligible well must allocate a drilling royalty credit to any one
or more royalty payers, such that the entire royalty credit if allocated.”
Drilling Royalty Credit Regulation 4(1)
Grey Market for Royalty Credits
$10 million in surplus credits
Grey Market for Royalty Credits
Company X
has$12
million incredits
$10 million in surplus credit sold
to company Y
for $?
$0 royalties
owed
Uses $2 million in credits against
royalties owed
Company Y
reduces royalties owed to
the public by
$10 million
Alberta Drilling Royalty Credit Exchange
Grey Market - Daily Oil Bulletin
Grey Market - Lawyer
“Except as provided under the regulations, no person shall communicate or allow
to be communicated any record, return or information obtained under
this Act to a person not legally entitled to that information or allow any person not legally entitled to that record, return or information to have
access to any record, return or information obtained under this Act.”
Section 50, Mines and Minerals Act
Mines and Minerals Act
Open the books on the $2.9-billion Drilling Stimulus
Public Accounts Committee should review the program
What We’re Calling For
Deadline to buy and sell drilling royalty credits was June 30, 2011
Ministry of Energy has a list of which firms bought and sold credits
Minister of Energy can restart the program at any time
Why Now?
Government Share of Total Market Value, Combined Oil Gas and Oil
Sands 1970-2009
(Source: Canadian Association of Petroleum Producers)
19701972
19741976
19781980
19821984
19861988
19901992
19941996
19982000
20022004
20062008
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Gov't share of oil, gas and oil sands value
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