"They're making a killing, & they're making it with our oil,"
Royalty review prompts $1B warning
Stelmach unmoved by EnCana's threat to shift investment out of Alberta
Jason Markusoff, edmontonjournal com
EDMONTON ? Premier Ed Stelmach appeared unmoved today by EnCana's threat to shift $1 billion in capital investments from Alberta next year if the province accepts recommendations to hike royalties.
?My message to everyone is let?s just calm down. Take a deep breath," Stelmach told reporters after a University of Alberta digital library opening.
"We?re analyzing all of the recommendations? if somebody has factual good hard evidence that may challenge any of the recommendations, we?ll certainly look at it."
EnCana Corporation, North America?s largest natural gas producer, said its reduced spending would be the ?tip of the iceberg? in potential job and investment losses if the Stelmach government implemented changes that would hike its royalty revenues on oil and gas production by $2 billion.
"If the royalty panel?s recommendations are adopted in full, many of Alberta?s new and emerging resource plays will simply not be economically viable,? the Calgary-based company said in a news release.
Encana is the first energy producer to announce it would cut spending in Alberta in the wake of the Sept. 18 panel report. Premier Ed Stelmach has said he would announce the government?s response next month.
EnCana is not identifying which particular projects around Alberta are in jeopardy.
"We have done analysis of of our operations and investment opportunities, but at this point, it's not about the specificity of areas," company spokesman Alan Boras said in an interview. "What it is about is that we're looking to work with the province to see the solution that balances more royalty revenue with maintaining a competitive investment climate."
Alberta's wells provide half of EnCana's overall gas activity and nearly 80 per cent of its Canadian production.
The company also has significant investments in the province's oilsands. While it made no mention of those projects in today's announcement, Boras said some of its threatened pullout would come from the oilsands.
Stelmach refused to comment on the potential impacts of a $1-billion flight of capital, arguing the energy giant took a firm position without even knowing how his government will act.
?We need the time to review. Whatever is being said is not going to sway me from the total review and again, finding that balance," the premier said. He has repeatedly insisted his government's decision will be fair to Albertans who deserve "economic rent" from natural resources, and to companies who want Alberta to remain a globally competitive market for energy development.
Stelmach also noted that the energy industry issued similar threats of pullouts when Alberta upped its government take in the 1970s, but despite those changes its petroleum economy remained vibrant and competitve.
Frank Atkins, an economics professor at the University of Calgary, said EnCana?s announcement is ?necessary posturing? aimed at putting pressure on Stelmach to water down the panel?s recommendations.
Alberta?s economy will continue to be driven by oilsands projects since the panel told the government to keep royalties low on such projects until companies recover their investments, he told Bloomberg News.
?Any time your taxes change for the worst, you?re going to scream. It?s their job to get their argument out there,? Atkins said in a telephone interview. ?I can?t see a great deal of capital flight coming out of this.?
Companies including EnCana, Royal Dutch Shell and Exxon Mobil Corp. have few options in finding stable countries where they can boost output and profit from record crude prices, Atkins said.
?Where are they going to go?? Atkins said. ?They can?t turn their backs on the oilsands, it?s still too big of a play.?
NDP Leader Brian Mason called EnCana's threat political blackmail.
?They?re making a killing, and they?re making it with our oil," he said. "And they don?t want us to eat in to their massive profits, so they?re threatening to walk away? I don?t believe them.?
If EnCana leaves the resources behind, other companies will fill the void, Mason predicted.
But Randy Eresman, EnCana?s president and CEO, said the company will be forced to ?move investments to other areas in Canada and the U.S. that are more economically attractive. As a further consequence, Alberta natural gas production will continue to fall.
"We do not want this to happen. This does not need to happen. The consequences would be far reaching. We are open to changes to Alberta?s royalties ? changes that reflect the economic realities of volatile commodity prices, higher costs and the appropriate risks and rewards of long-term capital investments. A royalty system can be developed that achieves Alberta?s objectives without so severely damaging the province?s future."
The company said it had planned to spend $2.5 billion to $3 billion in Alberta in 2008. The proposed cut would reduce its capital spending by 30 to 40 per cent. The royalty panel?s recommendations ?would effectively double? EnCana?s costs at current prices.
EnCana said the proposed royalty hike would bring widespread job losses in the industry and the communities where it operates.
?There will be fewer wells drilled, completed, pipelined, operated and serviced. There will be fewer hotel bookings, vehicle purchases, landowner lease payments, restaurant meals and lower property taxes in the areas where EnCana operates, and that is just about every corner of Alberta, from the smallest towns to the biggest cities. More importantly and over the long term, well-paying, permanent jobs will not materialize across Alberta,? the company said.
However, it assured investors the company will ?continue to thrive? by moving spending to British Columbia, Saskatchewan, Colorado, Wyoming and Texas.
EnCana posted a profit of roughly $6.5 billion in 2006, the largest full-year results in Canadian corporate history.
I'm sure that Alberta taxpayers are incensed that EnCana would make such a threat without explaining how ECA plans on paying down their portion of the stolen BILLION$$$$$$$$$$ through inappropriate, misleading and illegal accounting. If you and I stole from taxpayers like that we would be hanged for treason.
Those who are responsible should do jail time. Don't expect ECA bagholders to be held accountable for deliberate treason, these fat cats should have to pay for their own defense costs if they're charged with this crime. Assume huge corporate fines as a future deterrent for this crime too.
ECA bagholders will be the losers when ECA is forced to restate earnings for years of royalty theft. ECA's pumped up PHONEY revenue should also include appropriate readjustement for the clawback of extra option$$$$$$ that were doled out to swindlers because of those phoney revenues.
I'm sure Albertans are thinking of the additional Ralph buck$$$$$$$$$$$$$ that should be in their pockets now. Here come the pickets outside of ECA's corporate office tower, 'EnCana RIPPED OFF my Ralph Buck$$$$$$$'
If your nimble enough, SHORT ECA
My Opinion only! MOO! MOOOOOOOOOOOOOOOOOOOOOOOOOOOOOooooo!