Citizen Action Monitor

Ottawa’s bogus claim that building more pipelines will create economic benefits for Canadians

“The fact of the matter is that industry keeps 96 cents of every dollar,” says researcher Regan Boychuk.

No 2353 Posted by fw, August 16, 2018

Regan Boychuk

“Boychuk said the entire case being made by government and industry that new pipelines will guarantee higher prices and better returns is “pretty debatable” given that Albertans still only receive a tiny fraction of the value of the oil. … “The fact of the matter is that industry keeps 96 cents of every dollar,” Boychuk said. “If we marginally increase the size of the pie, we’re still only getting four per cent of it.”James Will, The Narwhal

In an August 15 article in the National Observer, Canada’s Natural Resources Minister Amarjeet Sohi was reported to have said this about the Kinder Morgan pipeline project:

“We remain committed to working with provinces, territories and Indigenous peoples to ensure a strong economy while taking leadership on the environment. Our goal now is to ensure this project moves forward to create economic benefits for Canadians. We would not have approved this project if it were not in the national interest.”

Regan Boychuk, it seems, would strenuously disagree with the Minister. And he has the facts to back up his opposing viewpoint.

Boychuk, is an independent researcher and member of Alberta’s 2015 Oil Sands Expert Group, which helps Alberta’s Royalty Review Advisory Panel to understand and work through the technical issues in the current royalty framework that relate to oil sands. Part of the group’s role is to consider the strengths of the current royalty structure.

Below is my repost of an abridged article by James Will. In this post, I focus solely on the introduction and closing section of the piece, subheaded: How much does increasing production benefit Albertans?

To read the entire article on The Narwhal’s website, click on the following linked title.

**********

New data shows owners of one of the world’s largest oil deposits are getting cut out of the deal by James Will, The Narwhal, August 14, 2018

[Introduction]

An analysis by The Narwhal of new data released by the province raises questions about whether Albertans are collecting a fair share of the wealth created by oilsands development. Royalties are the price charged by a resource owner — in this case Albertans — for a producer to extract and sell a non-renewable resource. Alberta has long been criticized for having royalty rates among the lowest in the world and failing to save for future generations.

A much-maligned review of Alberta’s royalty system in 2015 came to the conclusion that the “current share of value Albertans receive from our resources is generally appropriate.”

The Narwhal analyzed 2017 royalty data published by Alberta Energy and federally mandated Extractive Sector Transparency Measures Act (ESTMA) reports to investigate whether that is truly the case.

Alberta’s 30 most productive oilsands projects accounted for more than 95 per cent of oil produced in 2017, generating $53.5 billion in revenues.

The companies producing that oil — including Suncor, Cenovus, Canadian Natural Resources Limited and Imperial Oil —  made $10.14 billion in profits, while Albertans collected $2.37 billion in royalties.

That means the biggest oilsands companies paid a total royalty rate of 23.37 per cent of profits.

 

 

*****

How much does increasing production benefit Albertans?

Boychuk said the entire case being made by government and industry that new pipelines will guarantee higher prices and better returns is “pretty debatable” given that Albertans still only receive a tiny fraction of the value of the oil.

In 2017, the province was paid 4.5 per cent of the oil’s value in royalties. Even when all taxes and fees are combined with those royalties, governments only received six per cent of revenue: $3.21 billion in total.

At last count, the Alberta Energy Regulator estimates it will cost at least $23.2 billion to clean up the oilsands tailings ponds. Environmental Defence reports that it may be double that, with its online counter now nearing $50 billion in largely unfunded liabilities.

All in all, the royalty regime combined with these unfunded liabilities calls into question a central argument of building more pipelines: that increased oilsands production will mean significantly larger revenues for schools, hospitals and roads.

“The fact of the matter is that industry keeps 96 cents of every dollar,” Boychuk said. “If we marginally increase the size of the pie, we’re still only getting four per cent of it. Four per cent of a marginally bigger pie amounts to a rounding error.”

FAIR USE NOTICE – For details click here

%d bloggers like this: