Royalty Panel's Report Flawed; Industry Committed to Working Constructively with Government



    CALGARY, Sept. 24 /CNW/ - The Canadian Association of Petroleum Producers
(CAPP) welcomes Premier Stelmach's decision to consult with Albertans on the
Royalty Review Panel's final report.
    "We are committed to staying focused on the facts and working
constructively with government throughout this process," said Pierre Alvarez,
CAPP President. "Every Albertan wants their government to have all of the
facts, the best possible analysis and all sides of the story in making this
important decision."
    The panel's report promises a future that the oil and gas industry sees
as unrealistic. It calls for significantly higher royalties and taxes, but
suggests there will be no overall impact on industry investment, activity and
growth. "The basic assumption is that the size of the 'pie' will not change,"
said Alvarez. "Past experience, in this country and around the world, just
doesn't support the panel's view."
    Industry will be sharing its concerns with government during the
consultation process. Some of CAPP's concerns are:

    
    -   The panel acknowledges increased royalties and taxes will slow oil
        sands investment and activity, but suggests this will be balanced by
        an upswing in conventional oil and natural gas activity. The panel
        claims that 82% of gas wells will actually pay lower royalties under
        their approach. This is only true at low and uneconomic prices. At
        prices expected over the next year, all gas wells will pay higher
        royalties (see Attachment 1) which will only make the current
        drilling downturn worse.

    -   The panel points to a single report to back its argument that
        Alberta's share of revenues is low in comparison to other
        jurisdictions. This report was not raised for discussion during the
        public hearings. In fact, the report was only released after the
        close of public hearings. Reports prepared by other independent and
        qualified consultants are readily available. One report that was
        given to the panel shows Canada providing the lowest return on oil
        and gas investment (see Attachment 2). It appears this side of the
        story was not considered by the panel.

    -   The panel ignores the real costs facing the industry. For example,
        the costs for a typical oil sands project are stated to be
        $5-6 billion by the panel, but the actual costs are $10-11 billion.
        These costs, such as the price of steel, are largely driven by global
        factors and are not within control of the industry.
    

    "This debate is often painted as industry versus government or the
public," said Alvarez. "The truth is that we are all in this together. One in
six Albertans work for or alongside the industry. Industry revenues are
reinvested in the economy, generating further prosperity and growth. We all
know this issue is too important not to get right."

    The Canadian Association of Petroleum Producers (CAPP) represents 150
companies that explore for, develop and produce natural gas, natural gas
liquids, crude oil, oil sands, and elemental sulphur throughout Canada. CAPP
member companies produce more than 95 per cent of Canada's natural gas and
crude oil. CAPP also has 130 associate members that provide a wide range of
services that support the upstream crude oil and natural gas industry.
Together, these members and associate members are an important part of a
$100-billion-a-year national industry that affects the livelihoods of more
than half a million Canadians.





For further information:

For further information: or to schedule an interview, please contact:
Taryn Albizzati, Public Affairs Advisor, Canadian Association of Petroleum
Producers, p: (403) 267-1151, e: albizzati@capp.ca, Attachments: Visit
www.capp.ca

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