Albertans collect lower revenues from heavy crude oil than war-torn African nation

Calgary – Albertans are getting less for our heavy crude oil than other nations with comparable resources, according to Alberta’s Department of Energy.

In a report obtained by the Alberta Federation of Labour, government analysts compared royalty and tax rates for heavy crude oil and found that Alberta charges significantly less for their resource than other nations with comparable heavy crude such as Norway, Russia and Angola.

“Oil companies in Alberta benefit from the political stability, first-world infrastructure and an educated workforce,” AFL president Gil McGowan said, noting that some of the nations in the report are known for civil turmoil. “Royalty and corporate tax rates have an impact on the lives of everyday Albertans. Higher oil royalties have helped Angola turn a budget deficit of 8.6 per cent of GDP in 2009 into a surplus of 12 per cent of GDP in 2012. The country is improving, in part thanks to reasonable oil royalties.”

Angola suffered more than 1.5-million casualties during a 27-year civil war that ended in 2002. Despite ten years of landmine clearing efforts, according to United Nations estimates the country is littered with 10-20 million landmines, or about one landmine per person living in the country.

According to the internal government document, Alberta offers an extreme value to this long-lasting resource by reducing the otherwise high risk premium in some regions of unrest.” Research from the World Bank shows Angola having a far greater degree of political instability and presence of violence than Alberta.

“Companies operating in Alberta don’t have to deal with landmines. That has to be considered a competitive advantage,” McGowan said. “But we only collect 54 to 58 per cent of the value of our heavy oil in royalties. We’re 25 per cent behind Norway, 13 per cent behind Russia, and more than 22 per cent behind Angola.”

Norway, which is ranked highly by the United Nations for its stability, peacefulness and infrastructure, collects about 80 per cent of the value of its resources in royalties. Russia, where police corruption and violence are cited by the U.N. as obstacles to oil extraction, collects 73 per cent. Angola, which is eighth in the world in child mortality and whose citizens boast a life expectancy of 54.5 years, collects 71 per cent.

“The negative implications of our irresponsibly low royalties are clear: we have paltry savings in the Heritage Fund and we’re slashing the public services that Albertans need and value,” McGowan said. “If we didn’t give away our resources, we would be doing much, much better.”

The research, which was presented to the Energy Minister in April 2011, is included in the government report “Oil Sands Fiscal Regime Competitiveness Review.” The report includes a comparison of Oil Sands and Conventional Oil Government Share, which is a measurement that includes corporate taxes, royalties and other government fees.

AFL Backgrounder: Oil Sands Royalties

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MEDIA CONTACTS:

Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email orokne@afl.org.