Alberta must show oil sector who’s in charge by Don Braid, September 29, 2007, Calgary Herald
EnCana, if you’re going to pull $1 billion out of Alberta and plunge the province back to the Great Depression, would you at least re-open that damned city block downtown? A frivolous request, but no more ridiculous than EnCana’s bombastic entry into the royalty debate. The main impression you get, reading the company’s statement, is of a terrific corporate swelled head.
These people seem to think that if EnCana pulls up stakes, Alberta’s entire tent will collapse. EnCana paints an apocalyptic vision of devastation if the royalty report is implemented whole. “There would be fewer hotel bookings, vehicle purchases, landowner lease payments, restaurant meals . . . in the areas where EnCana operates, and that is just about every corner of Alberta, from the smallest towns to the biggest cities.” A bleak picture indeed. We can imagine oil and gas executives trudging around in rags, while tumbleweeds roll past idle LRT cars converted to planters . . .
Well, not quite. But EnCana is scaremongering. The company that made more than $6 billion in profit last year is telling us how much we’re going to suffer if it’s forced to withdraw investment. EnCana’s scenario presumes no other company will step in to take up its natural gas action. But some will — that’s how it works in Alberta. There would be life after EnCana, even if the company’s management finds it hard to imagine.
EnCana even alludes to the friendly places that could get the vanishing investment — B.C., Saskatchewan, Colorado, Wyoming and Texas. Those places “offer continued growth and potential strong returns for our shareholders.” Is that so? Page 25 of the royalty review shows that even with the proposed royalty changes, companies would still pay less on natural gas in Alberta than they do in New Mexico, Texas, Wyoming, and Colorado. Today, Alberta’s deal is the best by far. With the changes it would still be the most favourable, almost exactly tied with California. The report doesn’t deal with royalty regimes in B.C. and Saskatchewan, but EnCana is being downright churlish to invoke them as examples.
EnCana would not exist without the Alberta government generosity that created it. If another company got those breaks today, EnCana would be the first to call it socialism. EnCana’s main precursor was Alberta Energy, formed in 1973 and sent out into the world with rich leases from the government. This was a favoured company, birthed and nurtured by government to create an industry. Thousands of Albertans, backed by cheerleading cabinet ministers, bought discounted shares.
Much later, Alberta Energy joined with PanCanadian, which had access to favoured lands along Canadian Pacific Railway rights of way, thanks to federal largesse. Merged as EnCana, they now sound like spoiled kids who threaten to leave home because the allowance might be cut.
There’s no will in the Tory caucus to impose the whole report just to teach a company like EnCana a lesson. Nobody wants to impose hostile conditions that would destroy the industry. But the industry does not run Alberta. The government has to show who’s in charge — and it’s not EnCana, no matter how rich, powerful and forgetful this company has become.