"We expect oil prices to soften slightly from the 2006 level to around $55 US per barrel based on West Texas Intermediate (WTI) during the 2006 to 2011 period. Prices at these levels are sufficient to sustain long-term growth in oil sands development. Oil sands development decisions are very long-term decisions and not impacted by short-term price fluctuations (pg. 127, Investing in our Future: Responding to the Rapid Growth of Oil Sands Development).” There are no financial reasons to postpone upgrader construction based on the recent price reduction for oil.
The oil companies have run the old bait-and-switch after they convinced the people of Alberta to vote for Stelmach with the promise of upgrader construction. The upgraders are still economically viable except in competition with the American upgraders. This so-called cost reversal of commitment to build Albertan upgraders is due to allowing the export of bitumen via pipeline. Royalties are reduced for bitumen as opposed to synthetic oil. No pipelines have been cancelled due to world economic realities and you can bet if Alberta refused to ship bitumen out of the province, all of the upgraders would be going forward.
"After 2008, integrated operators are expected to exercise an option to pay royalties based on bitumen output. This will significantly reduce royalty payments from oil sands operations from 2008 forward (same report, pg. 40).” The Big Oil buddies are legally being assisted by our provincial government to reduce Alberta's royalties and export jobs out of Alberta. The Conservatives’ claim that no one could have predicted the increase and then consequent decrease in the price of oil is either stupidity or a lie. Volatility in oil prices is such common knowledge that the Bank of Canada doesn't include it in their calculation of core inflation. Adopting a windfall tax component into royalties would have captured the increase in profits for Alberta, and kept the oil companies from contributing to the provincial inflation rate, instead of allowing oil companies to abscond with billions of Albertan dollars in excess windfall profits. There is a need for increasing the current rate of royalties and reducing the amount of bitumen exported.
Now that Privacy Commissioner Fred Work has been bypassed through the paramountcy clause in the Mines and Minerals Act, Big Oil can do what is best for them without public scrutiny while our provincial government does what is best for the Conservative political party.
Don McGregor, St. Albert
