Comments on: Poll Numbers Show Albertans Want an Increase in Royalties http://www.davidswann.ca/blog/2007/10/03/poll-numbers-show-albertans-want-an-increase-in-royalties/ David Swann is the elected member of the Alberta Legislature for Calgary Mountain View and the Liberal Opposition critic for the Executive Council (Premier's office) and Health & Wellness. Fri, 29 Apr 2011 20:57:45 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Richard Kellett http://www.davidswann.ca/blog/2007/10/03/poll-numbers-show-albertans-want-an-increase-in-royalties/comment-page-1/#comment-14895 Richard Kellett Wed, 24 Oct 2007 02:23:06 +0000 http://www.davidswann.ca/blog/?p=269#comment-14895 Dear David, I am a geoscientist working for a mid-size international oil company. I live in "The Bridges" complex of NE Calgary. Before joining the oil and gas industry I worked for 7 years in the environmental industry, mapping contaminated soil and groundwater in Alberta, and other parts of North America. The majority of this work was around oil field facilities but it also included urban industrial facilities, and intensive livestock operations. In my opinion, all Albertan's are responsible for the erosion of the quality of our environment. Every Albertan has a role to play in protecting our natural environment and resources. Here are my comments to the Alberta Government's web-site concerning the current discusion on royalties. ------------------------------------------------------------------------------------------------------- In my opinion the issue that is most important here is not the dollar value or the percentages of the royalties, but how can we maximize the benefit that Canadians derive from Alberta's oil and gas resources? Oil and gas is a non-renewable resource and it is in a state of rapid decline in western Canada. We don't have that long to get it right! The resource is valuable but it also costs a lot of money to extract. The Alberta Government derives income from the activities of the oil and gas industry in a number of ways (e.g. royalties, land sales, corporate income tax, and personal income tax). I think the government and the oil industry needs to consider the following items in addition to a review of the royalties : 1) Improve efficiency of exploration for new oil and gas resources. The current system of land sales and land activity has resulted in a fragmentation of the exploration lands ultimately reducing the effectiveness of any exploration effort and the squandering of money to drill for poorly studied exploration targets. Short term gains to the government from rapid turn-over of land and unrealistically high land prices have created a monster that the government cannot control. I think a system similar to offshore or international exploration regions needs to be considered where blocks are large, exploration commitments are significant and realistic, the bid process is open, and land sales are more carefully planned. 2) Drill fewer wells. Drilling 15,000 - 20,000 wells a year for such small returns is a gross waste of money. The government should encourage more effort to be put into planning wells to succeed rather than relying on a lot of wells to be drilled to keep the economy buoyant. The Western Canadian Basin is over-drilled but under-studied. 3) Commitment from government to provide technical incentives for new exploration. The Alberta Government needs to get serious about research and development and have technical input on geoscience and engineering problems faced by the oil and gas sector. I look to counties like Norway and Australia were they have large technical institutes designed to provide the government with the knowledge to review commercial activity and also to provide the country with a competitive edge in attracting exploration spending and developing oil and gas resources. Currently the EUB and Alberta Energy are grossly under-funded and are not able to provide the oil and gas industry with any technical support. Research and development is left to the universities and they are similarly ill-equiped to do this effectively. Invest some of the income generated from oil and gas on positioning Alberta for a long future in oil and gas technology (domestic and international). 4) In-order to understand the oil and gas business you need to be in the oil and gas business. Canada\Alberta should set up a National\Provincial Oil Company that participates fairly in all of the activities of the oil and gas industry. Models such as AEC and PetroCanada did not work. Government agencies such as the federal NEB and GSC, or the provincial EUB and AGS cannot provide information to the government on the time scales needed to make fast business decisions. Let’s look at some other examples around the world of state owned enterprises that work in the oil and gas sector (eg Statoil) and come up with a creative solution. In conclusion, we should be paying more for the resource, but the flip side is the government should be doing more to make sure we have a legacy from the resource that continues long after the oil has gone. This legacy should not just be millions of abandoned wells to clean up. Sincerely Dr Richard Kellett P.Geoph. Senior Geophysicist, Exploration Dear David,
I am a geoscientist working for a mid-size international oil company. I live in “The Bridges” complex of NE Calgary. Before joining the oil and gas industry I worked for 7 years in the environmental industry, mapping contaminated soil and groundwater in Alberta, and other parts of North America.
The majority of this work was around oil field facilities but it also included urban industrial facilities, and intensive livestock operations.

In my opinion, all Albertan’s are responsible for the erosion of the quality of our environment. Every Albertan has a role to play in protecting our natural environment and resources.

Here are my comments to the Alberta Government’s web-site concerning the current discusion on royalties.
——————————————————————————————————-
In my opinion the issue that is most important here is not the dollar value or the percentages of the royalties, but how can we maximize the benefit that Canadians derive from Alberta’s oil and gas resources? Oil and gas is a non-renewable resource and it is in a state of rapid decline in western Canada. We don’t have that long to get it right!
The resource is valuable but it also costs a lot of money to extract. The Alberta Government derives income from the activities of the oil and gas industry in a number of ways (e.g. royalties, land sales, corporate income tax, and personal income tax). I think the government and the oil industry needs to consider the following items in addition to a review of the royalties :

1) Improve efficiency of exploration for new oil and gas resources. The current system of land sales and land activity has resulted in a fragmentation of the exploration lands ultimately reducing the effectiveness of any exploration effort and the squandering of money to drill for poorly studied exploration targets. Short term gains to the government from rapid turn-over of land and unrealistically high land prices have created a monster that the government cannot control. I think a system similar to offshore or international exploration regions needs to be considered where blocks are large, exploration commitments are significant and realistic, the bid process is open, and land sales are more carefully planned.

2) Drill fewer wells. Drilling 15,000 – 20,000 wells a year for such small returns is a gross waste of money. The government should encourage more effort to be put into planning wells to succeed rather than relying on a lot of wells to be drilled to keep the economy buoyant. The Western Canadian Basin is over-drilled but under-studied.

3) Commitment from government to provide technical incentives for new exploration. The Alberta Government needs to get serious about research and development and have technical input on geoscience and engineering problems faced by the oil and gas sector. I look to counties like Norway and Australia were they have large technical institutes designed to provide the government with the knowledge to review commercial activity and also to provide the country with a competitive edge in attracting exploration spending and developing oil and gas resources. Currently the EUB and Alberta Energy are grossly under-funded and are not able to provide the oil and gas industry with any technical support. Research and development is left to the universities and they are similarly ill-equiped to do this effectively. Invest some of the income generated from oil and gas on positioning Alberta for a long future in oil and gas technology (domestic and international).

4) In-order to understand the oil and gas business you need to be in the oil and gas business. Canada\Alberta should set up a National\Provincial Oil Company that participates fairly in all of the activities of the oil and gas industry. Models such as AEC and PetroCanada did not work. Government agencies such as the federal NEB and GSC, or the provincial EUB and AGS cannot provide information to the government on the time scales needed to make fast business decisions. Let’s look at some other examples around the world of state owned enterprises that work in the oil and gas sector (eg Statoil) and come up with a creative solution.

In conclusion, we should be paying more for the resource, but the flip side is the government should be doing more to make sure we have a legacy from the resource that continues long after the oil has gone. This legacy should not just be millions of abandoned wells to clean up.

Sincerely

Dr Richard Kellett P.Geoph.
Senior Geophysicist, Exploration

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