Alberta Federation of Labour

Alberta’s $2.9-Billion Drilling Stimulus:

Where did the money go?

Introduction $2.9 billion Drilling Stimulus:

no new jobs decreased drilling

Royalties siphoned off through a government-sanctioned “grey market”

Costs

(in millions)2009

Estimated Cost (one year only)

Actual Cost (over two

years)

% Differenc

e

Drilling Credit $466 $1,688 262.2%

New Well Royalty Reduction

$1,040 $1,205 15.9%

Total $1,506 $2,893 92.1%

(Source: Ministry of Energy)

What Albertans were promised“For that investment, what we get is jobs. We

get jobs for Albertans, we generate some wealth in the province of Alberta. We will generate additional royalty revenue and

production over 10, 20, maybe 30 years.“

Energy Minister Mel KnightGovernment of Alberta

News Release, June 25, 2009

Alberta Oil & Gas Extraction andSupported Activities Jobs 2008-2010

(Source: Statistics Canada, CANSIM Table 383-0010)

2008 2009 20103000

13000

23000

33000

43000

53000

63000

73000

Oil & Gas Extraction Support Activities

Conventional Spuds by Month 2006-2011

(Source: Alberta Energy)

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

-

500

1,000

1,500

2,000

2,500

Conventional Spuds by Month

Percentage Change in Well Completions and Oil Prices

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

AlbertaBCSaskatchewanOil Prices

(Sources: Drilling data from the Canadian Association of Oilwell Drilling Contractors, Oil prices [Canadian par spot price] from U.S. Energy Information Administration)

Capital Expenditures, Alberta Oil & Gas Extraction

$0

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

$30,000,000,000

$35,000,000,000

$40,000,000,000

$45,000,000,000

Capital Expenditures, Alberta Oil & Gas...

(Source: Statistics Canada, CANSIM Table 290-005)

Net Profits for Canadian Oil & Gas Extraction

-10,000,000,000

-5,000,000,000

0

5,000,000,000

10,000,000,000

15,000,000,000

Net Profits, seasonally adjusted

(Source: Statistics Canada, CANSIM Table 187-0002)

An unregulated, yet legal, market for buying and selling royalty credits

“The licensee of any eligible well must allocate a drilling royalty credit to any one

or more royalty payers, such that the entire royalty credit if allocated.”

Drilling Royalty Credit Regulation 4(1)

Grey Market for Royalty Credits

$10 million in surplus credits

Grey Market for Royalty Credits

Company X

has$12

million incredits

$10 million in surplus credit sold

to company Y

for $?

$0 royalties

owed

Uses $2 million in credits against

royalties owed

Company Y

reduces royalties owed to

the public by

$10 million

Alberta Drilling Royalty Credit Exchange

Grey Market - Daily Oil Bulletin

Grey Market - Lawyer

“Except as provided under the regulations, no person shall communicate or allow

to be communicated any record, return or information obtained under

this Act to a person not legally entitled to that information or allow any person not legally entitled to that record, return or information to have

access to any record, return or information obtained under this Act.”

Section 50, Mines and Minerals Act

Mines and Minerals Act

Open the books on the $2.9-billion Drilling Stimulus

Public Accounts Committee should review the program

What We’re Calling For

Deadline to buy and sell drilling royalty credits was June 30, 2011

Ministry of Energy has a list of which firms bought and sold credits

Minister of Energy can restart the program at any time

Why Now?

Government Share of Total Market Value, Combined Oil Gas and Oil

Sands 1970-2009

(Source: Canadian Association of Petroleum Producers)

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Gov't share of oil, gas and oil sands value