April 2012 – Rescuing the frog

Refine it where you mine it?

April 21, 2012 by Andrew

The question of what, if anything, Alberta should do to encourage more upgrading or refining in the province will be an important one regardless of which party wins the election on Monday. This question is pressing as, within the next decade, the province expects to receive about 300,000 barrels per day in bitumen as royalty payments (PDF), and to date have signed a single agreement to process (PDF) for 37,500 barrels per day, with Northwest Upgrading (NWU).

Should the bitumen be provided below market prices to local refiners? Alternatively, as in the NWU deal, should the province contract with merchant upgraders and/or refiners to process the bitumen? If so, should we only consider refineries located in Alberta, or should we be prepared to look more broadly? Or should Alberta simply market the bitumen to the highest bidder?

The #climate and GHG question I would have asked

April 16, 2012 by Andrew

In today’s Edmonton Journal/Calgary Herald on-line leaders debate (a great format, BTW), the leaders were asked the following question:

Do you believe in climate change? What should be the provincial government’s response to climate change, or should the provincial government wait for a plan from the federal government?

Differential royalties for upgraded vs. non-upgraded bitumen

April 15, 2012 by Andrew

Tonight, I am looking for some informed opinions on a topic about which I do not know much. I spent some time this evening looking into whether a differential royalty regime for oilsands bitumen based on its eventual use would survive a challenge under either the NAFTA or the WTO. This inquiry was was motivated by a line in the Alberta NDP platform which commits to, “develop a differential royalty system on bitumen and upgraded products that encourages value added in Alberta.” While the NDP are the only party proposing a differential royalty regime, other parties are proposing various measures with the desire to drive more upgrading in Alberta.

My question is this – when, and under what conditions, would such a policy survive a NAFTA or WTO challenge? I think the answer is clear – a differential royalty rate for exports would not stand up in almost any form.

Your oilsands royalty primer

April 14, 2012April 14, 2012 by Andrew

Bitumen royalties accounted for 10% of total Alberta government revenues in 2010-2011, and that is expected (according to the most recent Alberta Budget) to climb to approximately 20% of total government revenues, or $9.9 billion dollars by 2014-2015. Both royalty revenue estimates and royalty rates make for contentious subjects in Alberta, and this post is intended to provide a primer into how the royalty regime works and how it impacts investment decisions. My hope is that every Albertan will become more engaged in how this resource is managed, and the first step in that direction is understanding how it’s managed now, so here you go.

Questions I’ll be asking #abvote candidates

April 4, 2012 by Andrew

What will determine my vote on April 23rd? I suppose it will surprise no one that I will vote based on the energy and environmental policies of the parties. My key issue list includes 5 categories: 1) Savings, transparency, and accountability; 2) Market access; 3) Local environmental management; 4) Global environmental credibility; and 5) Getting the most value for our resources. Here are some of the questions I’ll ask the candidates who visit my house during the campaign, and some context for why I’m asking them. How does your party line up?