In this episode, we discuss the Alberta oil and gas industry s relationship with the federal government, and the benefits and drawbacks of government support for the industry. We discuss the benefits, the drawbacks, and some of the things the government has done in order to support the industry, as well as the things they could have done better.
00:00:00.000An area that a lot of people aren't necessarily familiar with, but I think some of those numbers get pulled out of that with claims of subsidies as well, is like the tax deferral for capital investments in the oil sands.
00:00:11.360But I mean, if you go on a real stretch, you can say that's a benefit the government's offering, but I wouldn't call it a subsidy.
00:00:19.040Yeah, well, I think that's what they did.
00:00:20.560I mean, these international reports, there was a report a few years ago that got a lot of play about how many billions of dollars worldwide were given to the industry.
00:00:28.960But, you know, I took time to read that report and it was, it redefined what I think the layman thinks of subsidies.
00:00:36.220I mean, I would say for the average person, a subsidy is the government actually writes you a check or the government gives you a, you know, everybody else is paying 40% tax, but you're only, you know, but you're going to get, no, you're going to get zero tax for five years.
00:00:52.240I think the average person thinks those are subsidies.
00:00:54.700Things like I went and bought some equipment and I was allowed to write it off.
00:01:00.380Most people don't think that's a subsidy.
00:01:02.180And by the way, what industry doesn't get to write off its capital investment over time?
00:01:06.400And things like, you know, police protection of your property and the government having to rescue a pipeline that they themselves torpedoed.
00:01:14.700Most people wouldn't consider those to be subsidies, but, but these reports, they consider it subsidy.
00:01:21.660The other, the other thing that reports did was, you know, they, they made their own assessment of what royalty should be.
00:01:30.540And if your royalties weren't at what the UN said they should be, well, that was another subsidy.
00:01:35.320And it didn't really take into account that profit margins on oil sands is less than profit margins on natural gas, which is less than profit margins on light oil.
00:01:44.860And so it, in Alberta, it makes sense that we, we have different royalties for different types of products.
00:01:51.500But that was another thing they called a subsidy.
00:02:26.020Well, I would say in all honesty, there's the one, one place where I would say that there was a subsidy that, and I, and I disagree with it, was during COVID that Alberta government said, Hey, the industry is in real trouble.
00:02:43.300I mean, there's, there was that one day where oil actually sold for less than zero.
00:02:47.280Um, and so, you know, I, I think every company during the height of the COVID crisis, which was also a energy, you know, an energy crisis and an economic crisis, you know, I think there was a sense that I, I know me leading my company.
00:03:01.560I said, well, I, I, I don't know how I got maybe six to 12 months.
00:03:05.760So, uh, during that time, the government was saying, Hey, like, like every other industry that you're giving all these supports to the airline industry and others, could we have some support for the oil and gas industry?
00:03:17.840And what they were, what we were mainly asking for was just some liquidity support to make sure that our banks didn't call our lines in the middle of the, of the, of the, of the crisis.
00:03:27.960What the government gave instead, and this was, I think, more a federal government decision, not a Alberta government request, said, well, we'll give you some money for well reclamation.
00:03:39.880Um, I, uh, that's, that's not really what we needed, uh, by the time that, by the time the money came through for well reclamation, our liquidity crisis was over.
00:03:51.400It didn't help the problem we were looking for.
00:03:53.440And in the end, uh, I, I think for, for, for my, and I, and I won't, not everybody in the industry is going to agree with me on this point, but, but I, I think that it is bad for our, you know, our reputation as an industry, as responsible,
00:04:08.600as a responsible industry and responsible companies, uh, I, I don't think we should take any subsidies to clean up our wells.
00:04:16.100And to the extent companies go bankrupt, we have a industry funded orphan well program, and I think the industry needs to be responsible to keep it funded.
00:04:23.840So that, that's, that's my, that's my strong view.
00:04:27.360Not everybody agrees with me as you can imagine, but so I guess I would say from my perspective, I think there was a subsidy there.
00:04:33.420It wasn't what we asked, it wasn't what I asked for my company and it didn't come in time to help me.