Royalty review just good business [Canadian journalist: "The Americans are frothing at the mouth."]

The National Post (Canada) ^ | 22SEP07 | Diane Francis

[familyop]

Diane compared apples to oranges. It's not only "the Americans," as companies from other countries are also victims of Alberta's bait-and-switch scheme. ..."royalties," taxes--same thing in this case. And it appears that Diane is proud of what her province will probably have in common with Venezuela soon.

[familyop]

Ping! This should be interesting. Alberta's wanting to hike taxes on oil sands companies to ~ 64%, IIRC.

Info:

Diane Francis
dfrancis@nationalpost.com

[thackney]

conventional oil and gas royalties and taxes in the U.S. average 67%

~ ~ bump ~ ~

[PeteB570]

67%

I don’t think it’s “Big Oil” that is gouging people.

[familyop]

Sometimes, we have to dig in order to see the differences.

U.S. Has Royalty Plan to Give Windfall to Oil Companies
By EDMUND L. ANDREWS
The New York Times

Excerpt:
"WASHINGTON, Feb. 13 — The federal government is on the verge of one of the biggest giveaways of oil and gas in American history, worth an estimated $7 billion over five years."

[USFRIENDINVICTORIA]

Royalties aren’t the same as taxes. They are payments made for the resources extracted. If the land, and all sub-surface rights were sold outright, the cost wouldn’t be mistaken for a tax. Like a sale, royalties are a payment for a transfer of property rights.

That said, a deal is a deal. Existing active leaseholders should be exempted from any increase in royalties.

[familyop]

...adding important info to that excerpt.

U.S. Has Royalty Plan to Give Windfall to Oil Companies
By EDMUND L. ANDREWS
The New York Times
February 14, 2006

Excerpt:
"WASHINGTON, Feb. 13 — The federal government is on the verge of one of the biggest giveaways of oil and gas in American history, worth an estimated $7 billion over five years. New projections, buried in the Interior Department's just-published budget plan, anticipate that the government will let companies pump about $65 billion worth of oil and natural gas from federal territory over the next five years without paying any royalties to the government."

[thackney]

A gift from the Clinton Administration. Poorly written contracts are still contracts.

[familyop]

"That said, a deal is a deal. Existing active leaseholders should be exempted from any increase in royalties."

...agreed!

I'm partial to Canada, BTW. But it seems that the news should be seen more in the US and other countries before we hear a decision from Stelmach rather than afterward. Gradual market changes are safer than sudden ones following surprises to the investment herds.

[ASOC]

I wonder how this will play to Sara’s new ACES tax hike?

[bruinbirdman]

"Sometimes, we have to dig in order to see the differences."

Thanx for ping.

Today, Prime West Energy Trust (PWI), a Canadian trust company traded on NYSE has agreed to be acquired by Abu Dhabi's state- owned energy company for $2.4 billion plus the assumption of debt. Full disclosure, I own it. Well, sale effective sometime in November.

The deal was made the day after the Canadian dollar (I love that, DOLLAR) reached parity with USD.

The price, $27, is a 30% premium to Fridays close.

:I am OK with this sale. Think I will buy a new computer.

yitbos

[familyop]

I have no pertinent investments and only have public news information, but it’s great to see friends do well! :-)

[Enchante]

All those “tar sands” would be worth less than zilch without mega-billion dollar investments to mine and process the stuff.

It’s ridulous to make a straight-up comparison to other locales where the cost of extraction/processing is far lower.

[bruinbirdman]

"Gradual market changes are safer than sudden ones following surprises to the investment herds."

Well, the last "Canadian trust news" was a PM who wanted to renig on deduction of trust payouts on profits. He wasn't going to do it 'til about 2011. All trusts tanked.

To me 5 years is long term. Buy low.

These new pronouncements will be overcome. Alberta says it will increase royalties and Abu Dabi buys Canadian oil company. Does that tell you something about Canadian oil?

I prefer to own oil and gas processing, transmission, and distribution companies.

yitbos

[bruinbirdman]

"It’s ridulous to make a straight-up comparison to other locales where the cost of extraction/processing is far lower."

Security of physical assets is worth bucks.

yitbos

[familyop]

"These new pronouncements will be overcome. Alberta says it will increase royalties and Abu Dabi buys Canadian oil company. Does that tell you something about Canadian oil?"

Yes. That's the kind of probable consequence that I had in mind. Thank you for that information.

[SAJ]

Oh, I don't know. Owning the CanRoy trusts has been nothing but a winner since 1999. I said late last year, in writing on marketforum.com, that after Harper's betrayal on the tax code the CanRoys would go straight on the auction block and the C$ would soar. So far, so good. Made a tasty little profit on the Loonie, too.

They just bought out my second one (PWI) today, one left to go. You might have a look at Harmony Energy Trust, cash-rich, someone ought to pick it up shortly. (full disclosure: I do not at this time own any units of Harmony, but am thinking about buying some).

[bruinbirdman]

"They just bought out my second one (PWI) today"

PWI was at about $31 a year ago when Harper renigged on his campaign promise. Now sold to $ rich Arabs for C/US $27.

Can't complain about those dividends while I have it. One more to come before November.

yitbos

[untrained skeptic]

Royalties aren’t the same as taxes. They are payments made for the resources extracted. If the land, and all sub-surface rights were sold outright, the cost wouldn’t be mistaken for a tax.

Kind of true. However, ownership of the oil is socialized. The government owns all the oil, and is collecting royalties on oil production. It is a tax, it's socialism. The government owns the resources and manages them for "the common good".

However in effect, the government can give itself a raise at the expense of cost of economic growth by taking a larger percentage of the profits. The effect of a 20% increase in royalties is exactly the same as adding a 20% tax on the oil.

What is the difference between an income tax and a royalty payment to the government on earnings?

You can change the name but it still has an identical effect as a tax increase, so you're just arguing semantics.

[USFRIENDINVICTORIA]

To be technical, in Canada the resources are held by the Crown. Or, in the case of the oil sands, the Crown in Right of Alberta. Now, that would be arguing semantics!

Royalties are paid for the franchise to extract resources owned by “the people” (or the Crown, or the Soviet, whatever). They are a cost of doing business for the miner. If a company wants a resource, it pays for it — same as if it needs office space, it pays for that.

We all know what a tax is.