July 2011: Tories give billions of dollars and thousands of jobs away; Alberta Dubai of the North; ethical shopping website; CETA
Alberta Tories give away billions of dollars and thousands of jobs
- The Alberta Progressive Conservative government's management of the energy industry and provincial finances has come under fire from the AFL. Firstly, the AFL showed that the current government gave $2.9 billion to oil and gas companies in a failed scheme to boost employment, while a $100-million education shortfall was allowed to cause more than 1,000 teachers and support staff in the province to be cut for K-12 schools. Secondly, more AFL research revealed that Premier Ed Stelmach is failing on his promise to upgrade more raw bitumen in this province, which will allow thousands of good jobs to be shipped down the pipeline to the U.S. For more ...
Alberta become Dubai of the north with 'guest worker' program
- New figures from the federal government reveal that Alberta employers are using to Temporary Foreign Workers (TFW) program to fill jobs while long unemployment lines continue to plague other parts of Canada. "While unemployment is in the double digits in other parts of Canada, and more than 25 per cent for young workers in some provinces, it's becoming increasingly apparent that the TFW program is becoming the first choice for many employers rather than a tool of last resort, especially here in Alberta," says Gil McGowan, president of the Alberta Federation of Labour. For more ...
Ethical shopping website launched for Albertans
- Want to be a consumer with a conscience but don't know where to shop? The Alberta Federation of Labour and United Food and Commercial Workers Local 401 have launched a website for discussion on shopping ethically and to provide the information you need to make more ethical shopping decisions. For more information ...
Join the fight to stop the Canada-European Union trade deal
- Negotiators for the Canadian government and the European Union are working on the Canada-EU Comprehensive Economic and Trade Agreement (CETA) - a deal which could cost Canadians $2.8 billion in prescription drug costs, lead to the privatization of public services and weaken democracy by transferring decision making from local governments in Canada to multinational corporations. Municipal governments are being kept in the dark on these negotiations, but you can fight back and get your local councils involved. For more information ... Watch these videos on the dangers of the CETA deal: http://www.youtube.com/watch?v=xQPh_YSnkVI and http://vimeo.com/26354593
Urgent Action
- Please shop at these two Sobeys - We are STRONGLY encouraging consumers to shop at two Sobeys stores. They are Rosslyn Sobeys in North Edmonton and Forest Lawn Sobeys in Southeast Calgary. No other Sobeys stores are currently recommended as they have not met ethical standards. For more ...
Events
- August 8-12: AFL Kids Camp
- August 9: International Day of the World's Indigenous People
- August 12: International Youth Day
- September 4: Calgary Pride Parade
- September 5: Labour Day, CDLC and EDLC Labour Day BBQs
- September 8: International Literacy Day
- September 15: International Democracy Day
- September 16: International Day for Preservation of Ozone Layer
- September 21: International Day of Peace
Did you know ...
- Municipal services, public utilities and prescription drug costs are among the things at stake in the Canada-EU Comprehensive Economic and Trade Agreement (CETA)
- An Environics Poll shows that 81 per cent of Canadians trust the public sector more than the private sector to provide drinking water treatment and delivery
- Canadian municipalities could lose Canada-only tendering rights and local-preference policies
- EU demands could mean $2.8 billion in increase prescription drug costs for Canadians
Alberta bitumen upgrades fall short
The Alberta Federation of Labour says the Premier needs to live up to a five-year-old promise to upgrade more of the province's bitumen, right here in Alberta.
Figures from the AFL released Monday show the amount of bitumen upgraded here will drop to about 52 per cent in 2016, not the 72 per cent Ed Stelmach promised for that same year.
The group's president, Gil McGowan, tells The Calgary Herald the figures show this is one of the biggest about-faces in Alberta history and wants the province to focus on building more upgrading facilities and not more pipelines.
A University of Alberta professor says it hasn't been economically viable for companies to build upgraders here, something the Premier's office echoed, saying the high Canadian dollar makes such a move uneconomical.
660News, Tues Jul 19 2011
Alberta-based bitumen upgrading is plummeting, new figures show: ERCB projections demonstrate that Tories have turned their backs on promises to keep oil sands jobs in the province, says...
New figures released today by the Alberta Federation of Labour show that the percentage of oil-sands bitumen upgraded in the province will drop to 52 per cent by 2016 – a far cry from the 72 per cent that Premier Ed Stelmach previously identified as his target.
"The provincial government has quietly completed one of the most significant about-faces in Alberta history," says Gil McGowan, president of the Alberta Federation of Labour.
"During the last provincial election, Premier Stelmach said shipping raw bitumen to refineries in the U.S. instead of upgrading it here was like a farmer selling off his topsoil. He subsequently said his target was to be upgrading 72 per cent of bitumen within the province by 2016. But now, instead of promoting Alberta-based upgrading and value-added job creation, he and his ministers have spent the past year and a half promoting massive bitumen export projects, like the Keystone XL and Gateway pipelines."
"The results of this betrayal can be seen in the projections from the ERCB: Thousands of well-paying jobs that could have been created here in Alberta will instead be lost down the pipeline."
The figures on projected trends in bitumen upgrading were obtained from the Energy Resources Conservation Board (ERCB) as a result of an inquiry from the AFL. The projections, which have not been made public in any ERCB documents, project that the percentage of bitumen upgraded in Alberta will decline from 61 per cent in 2011 to 52 per cent in 2016, hitting 50 per cent in 2017. This is a far cry from the two-thirds of bitumen that have traditionally been upgraded in the province.
"This happened on Ed Stelmach's watch, but the switch to a bitumen export as opposed to bitumen upgrading strategy was supported – against the wishes of a majority of Albertans – by a wide range of prominent conservatives, including current Energy Minister Ron Liepert, former Finance Minister Ted Morton and current leadership front-runner Gary Mar, in his capacity as Alberta envoy in Washington," says McGowan.
"This appears to be just the latest example of the Tories caving into pressure from big oil companies, many based in the U.S. When Albertans want to keep oil-sands jobs in the province and energy companies want to send them down the pipeline, guess who wins?"
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MEDIA CONTACT: Gil McGowan, AFL president, 780-218-9888
Click here for accompanying table and graph
A true national energy strategy has to be about more than building bitumen export pipelines
Alberta Energy Minister Ron Liepert has billed the meeting as a potentially historic gathering at which politicians will begin long-overdue discussions towards the creation of a truly pan-Canadian energy strategy.
But are Liepert and other members of the Alberta government really interested in using the meeting in Kananaskis to develop an energy strategy that works for Canadians in all regions of the country?
Or is this whole exercise an elaborate attempt on the part of the Alberta government and its patrons in the oil patch to win support from other provinces and the federal government for their controversial plans to build bitumen export pipelines to the U.S. Gulf Coast and the port of Kitamat in B.C. (the "gateway" to China)?
It's clear that some groups involved in the process are sincerely committed to a wide-ranging discussion about what's really best for Canadians when it comes to energy policy (the respected and even-handed Canada West Foundation is particularly notable in this regard).
But it's also clear that a number of extremely influential individuals and groups have already made up their minds: they want bitumen pipelines, no matter how many good jobs in upgrading, refining and petrochemical production those pipelines might end up exporting to the U.S. and China.
Unfortunately, Minister Liepert appears to fall into the category of pipeline salesmen rather than the category of big-picture policy thinkers.
The same can be said for the Canadian Council of Chief Executive Officers and EPIC, a new think tank created by a coalition of major oil companies, which have both recently released reports calling for – you guessed it – more bitumen export pipelines and quicker approvals for oil and gas projects in general.
Instead of slapping together a plan for a couple of questionable pipelines and calling it an energy policy, Canada's energy ministers should set their sights much higher. Here are a few issues that cannot be ignored if federal and provincial politicians are serious about doing more than putting a bow on the status quo and declaring their work done.
Value-Added Jobs: Former Alberta Premier Peter Lougheed is right when he says that, when it comes to the oil sands, the real jobs are in upgrading and refining. According to a study done by the forecasting firm Informetrica for the Communication, Energy and Paperworkers union (CEP), if the volume of raw bitumen expected to be sent down the Keystone XL pipeline were instead upgraded here, it would create more than 40,000 direct and indirect Canadian jobs. It would also generated hundreds of millions of dollars in additional tax and royalty revenue for Canadian governments – revenue that could help pay for services that Canadians value like education and health care.
Now that the world is teetering on the verge of yet another recession, we simply can't afford to lose so many jobs and so much potential revenue "down the pipeline."
In order to avoid this fate, Lougheed has been exhorting Albertans to "think like owners" and demand long-term job creation as a condition of development in the oil sands. Unfortunately, our current policy makers continue to focus on "ripping and shipping" our resources instead of finding ways to move up the value chain. In fact, if you add up the bitumen export capacity of the XL pipeline and the existing Keystone and Alberta Clipper pipelines, energy companies will be able to export ALL of the expected increase in oil sands production for the next 20 years. In other words, we'll be closing the door on a real value-added strategy for a generation.
The big question from the Canadian labour movement's perspective is this: once the construction jobs on pipeline and extraction-only oil sands projects are complete, where will the jobs for Canadians come from? A real Canadian energy strategy simply must have an answer to this question.
Energy Security: Like it or not, we live in a world that runs on oil. For the time being at least, individuals and businesses simply can't make do without the stuff. Yet Canada is the only major oil producing jurisdiction in the world that doesn't have a coherent national strategy that puts their interest of its citizens first.
The results are perverse. Despite our status as a net energy exporter, Ontario, Quebec and the Maritime provinces import roughly 700,000 barrels of crude oil a day from places like Saudi Arabia, Algeria, Nigeria and Venezuela. In fact, Quebec and the Maritime province import more than 80 percent of the oil they use from outside Canada. Why? Because almost all of our pipelines run north-south. Shockingly, we don't have the infrastructure to send western oil to our fellow citizens in the eastern half of the country.
Minister Liepert and others are right when they say we should be looking for new markets for our oil: after all, demand from our biggest costumer, the U.S., is stagnating and quirks of the U.S. distribution system mean we're not getting world price for what we sell.
But if new markets are what we're looking for, doesn't it make more sense to build pipelines connecting west and east within our own country before building pipelines to supply refineries in Texas and China? Building pipelines to supply the Canadian east as opposed to the Far East also has the benefit of keeping the jobs, profits and tax revenue associated with upgrading and refining within Canada.
Economic Impact of Oil: Driven by massive investment in the oil sands, Alberta's energy sector has become the driving force behind the Canadian economy. This has been great news for Albertans and the hundreds of thousands of other Canadians who have flocked to our province to participate in the boom. But from a national perspective, by relying too heavily on the energy sector, we run the risk of developing what economists call Dutch Disease. This is an economic condition in which a booming energy sector drives up the currency and oil-related investment but, in the process, drives down investment, profits and jobs in other sectors, particularly manufacturing.
Any national energy strategy worth its salt would recognize this threat and take steps to deal with it. One possible solution is the one offered by former Alberta premier Peter Lougheed: set a slower pace for development in the oil sands. By proceeding with five or ten projects at a time (instead of the sixty-plus that are currently on the books) we would reduce the likelihood of developing a full-blown case of Dutch Disease. As added benefits, a more reasonable pace for development would also make it easier to address cumulative environmental impacts and it would reduce (perhaps eliminate) the need to bring thousands of temporary foreign workers into the country to supplement the domestic construction labour force. In other words, a slower pace for development would ensure that it would be Canadian workers who would benefit most from the construction of major Canadian resource projects.
Royalties: Royalties are not taxes. They are the price that forestry, mining and energy companies pay to develop resource assets owned by Canadian citizens. The good news is that royalties generate billions of dollars each year, especially in resource-rich provinces like Alberta, Saskatchewan and Newfoundland. This is money that we use to build need infrastructure and fund vital public services like education and health care. The bad news is that we don't always (or even often) get the best possible price for the sale of our assets. In Alberta, for example, under the Stelmach government we're actually collecting fewer royalties as a share of our overall energy oil and gas sector's revenue than the Social Credit government did in the late sixties (and less than a third of the proportion that was collected under Lougheed). To rectify this problem, and ensure Canadians get the best possible price for the sale of their assets, a national energy strategy could introduce a truly national process for setting and bargaining royalty rates, so that energy companies could no longer play one jurisdiction against the other. The bottom line is this: in an environment characterized by historically high oil prices and rapidly declining options for oil companies in other parts of the world, provinces like and Alberta, Saskatchewan and Newfoundland hold all the cards. By cooperating, we can play those cards more aggressively and successfully. Energy companies won't fold or leave the table, because they have nowhere else to go.
Transition: A post-carbon economy is years away, but make no mistake: it's coming. It's coming because the science around global warning is real and frightening; because a global political consensus has emerged in support of a greener economy; and because, more practically, the world is running out of oil (at least cheap oil).
This doesn't mean that we should stop developing our oil resources. The oil sands are one of our countries most valuable assets at the moment and it would be foolish not to exploit them. However, what the coming of a post-carbon economy does mean is that we're going to have to start looking at the oil sands in a different way. In particular, we should very consciously start thinking of the oil sands as a transitional resource: a resource that will help provide us with the revenue necessary to build the next, greener economy in Canada.
If Alberta can agree to a national energy strategy that uses the oil sands as a bridge to a better future for the entire country, then not only will our countriy's economic prospects be brighter, we may also be able to manage the "politics of envy" that inevitably come from one province having so much more wealth than other.
In the end, Minister Liepert is right about one thing: the meeting in Kananaskis has the potential to be historic. But that will only happen if he and other provincial energy ministers dare to think and dream big. Most importantly they have to understand that a true national energy strategy has to be much more than a plan to build a couple of pipelines that export jobs along with our oil. We can do so much better. In fact, for sake for future generations of Canadian, we need to do much better.
Gil McGowan is president of the Alberta Federation of Labour. The AFL represents 145,000 unionized Albertans, including about 25,000 who work in energy related jobs in Alberta.
An edited version of this column appeared in Calgary Herald, Tues Jul 19 2011Unions urge energy ministers to keep oil-sands jobs in Canada instead of shipping them “down the pipeline” to U.S. and China: “A true national energy strategy has to be about more ...
Is the meeting of energy ministers currently underway in Kananaskis a real attempt to develop an energy strategy that works for Canadians in all regions of the country?
Or is it an elaborate attempt on the part of the host Alberta government and its patrons in the oil patch to win support from other provinces and the federal government for their controversial plans to build bitumen export pipelines to the U.S. Gulf Coast and the port of Kitimat in B.C. (the "gateway" to China)?
That was the question that prompted Alberta Federation of Labour president Gil McGowan to send an open letter to all energy ministers attending the conference asking them to embrace an energy strategy that focuses on long-term job creation as opposed to the short-term desire of many energy companies to "rip it and ship it."
"Canadians have a choice to make. We can either remain 'hewers of wood and drawers of water,' or we can move up the value chain, where the real money and real jobs are," wrote McGowan. "Currently, we're moving down the value ladder, not up. And the Keystone XL and Gateway pipelines would only accelerate that process. The bottom line is that the world wants our energy: So let's give them energy. But let's keep the jobs, the profits and the extra tax revenue here. It's our oil, so it should be our choice."
McGowan also suggested that a national energy strategy befitting Canada's new position as a global "energy superpower" would have the following components:
- It would help knit the country together by encouraging the construction of east-west pipelines so that Quebec and the Maritimes would no longer have to rely on countries like Saudi Arabia, Algeria and Venezuela for more than 80 per cent of their oil needs. Shockingly, there is currently no infrastructure in place to take western oil to the eastern half of the country.
- It would ensure Canadians get the best possible price for the sale of their collectively owned energy assets by introducing a truly national process for setting and bargaining royalty rates, so that energy companies could no longer play one jurisdiction against the other.
- It would look at the oil sands as a transitional resource: A resource that should be developed in as an environmentally sustainable way as possible and which will – very explicitly – be used to help provide us with the revenue necessary to build the next, greener economy in Canada.
"In the end, Alberta Energy Minister Ron Liepert is right when he says the meeting in Kananaskis has the potential to be historic," concluded McGowan. "But that will only happen if all of Canada's energy ministers dare to think and dream big. If Canada is to become a global energy superpower, then we need a strategy that ensures that power is used to the benefit of all Canadians, not just those who own large oil companies or are lucky enough to work in the energy sector."
McGowan is in Kanansakis today attending sessions at the energy minister's conference. He is available for interview on site or by phone.
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MEDIA CONTACT: Gil McGowan, AFL president, 780-218-9888
Oilpatch stimulus hit dry hole: union Provincial AFL head wants MLAs to probe 'outrageous misuse of government funds'
Alberta's program to stimulate drilling during the recession cost taxpayers $2.9 billion and failed to create promised jobs, new wells or new investment in the oilpatch, says the Alberta Federation of Labour.
AFL president Gil McGowan said Friday the program merely padded the profits of oil and gas companies while depleting the treasury of revenue that could have been used to fund health care and education.
He has passed on AFL's findings to Alberta's auditor general and also requested the all-party legislature public accounts committee investigate the program.
"When Albertans learn about this, they will see this for what it is, which is an outrageous misuse of government funds," he said.
Hugh MacDonald, the Liberal MLA who chairs public accounts, said he will canvass the 17 members of the committee to determine whether they wish to call a special meeting to examine the program.
Conservatives have 13 seats on the committee.
MacDonald suggested the auditor general's officer might have a better mandate to determine whether the program met its goals.
But Auditor General Merwan Saher tossed the ball back, noting his office has audited the program.
"At this moment, I don't have a compelling reason to launch a particular audit," Saher said.
He said McGowan's request for a public accounts review is "a legitimate request."
"He is asking the public accounts committee to do what public accounts committees do -examine how policy is being put into effect and whether Albertans are getting value for money."
McGowan said someone should investigate where the royalty tax credits went because a loophole in the program created a "grey market" that enabled companies that had more credits than they needed to sell them to other companies. The program allocated $200-per-metre drilling credits on a sliding scale based on how much the companies drilled in 2008.
Companies that purchased extra credits were able to defray the amount they paid in royalties owed to Albertans without having to hire more workers or drill new wells, McGowan said.
But Albertans won't know who cashed in the credits because Alberta Energy keeps that information secret, he complained.
Edmonton Journal, Sat Jul 16 2011
Byline: Darcy Henton
Stelmach's drilling push cost taxpayers $2.9B: Labour group seeks probe into 'misuse' of funds
Ed Stelmach's program to stimulate drilling during the recession cost taxpayers $2.9 billion and failed to create promised jobs, new wells or new investment in the oilpatch, says the Alberta Federation of Labour.
AFL president Gil McGowan said Friday the program merely padded the profits of oil and gas companies while depleting the treasury of revenue that could have been used to fund health care and education.
He has passed on AFL's findings to Alberta's auditor general and also requested the all-party legislature public accounts committee investigate the program.
"When Albertans learn about this they will see this for what it is, which is an outrageous misuse of government funds," he said.
Hugh MacDonald, the Liberal MLA who chairs public accounts, said he will canvass the 17 members of the committee to determine whether they wish to call a special meeting to examine the program. Conservatives have 13 seats on the committee.
MacDonald suggested the auditor general's office might have a better mandate to determine whether the program met its goals.
But Auditor-General Merwan Saher tossed the ball back, noting his office has audited the program.
"At this moment, I don't have a compelling reason to launch a particular audit," Saher said.
He said McGowan's request for a public accounts review is "a legitimate request."
"He is asking the public accounts committee to do what public accounts committees do -examine how policy is being put into effect and whether Albertans are getting value for money."
McGowan said someone should investigate where the royalty tax credits went because a loophole in the program created a "grey market" that enabled companies that had more credits than they needed to sell them to other companies. The program allocated $200-per-meter drilling credits on a sliding scale based on how much the companies drilled in 2008.
Companies that purchased extra credits were able to defray the amount they paid in royalties owed to Albertans without having to hire more workers or drill new wells, McGowan said.
But Albertans won't know who cashed in the credits because Alberta Energy keeps that information secret, he complained.
The AFL produced charts showing the number of new wells being drilled decreased steadily during 2009 and 2010 and over the same period the province lost about 8,000 jobs.
Capital investment in the oil and gas industry swooned, but industry profits increased, the AFL said.
Alberta's rate of well completions for that period mirrored Saskatchewan and B.C., which didn't have programs as generous, and seemed to climb and fall with the price of oil, despite the drilling stimulus program, the AFL reported.
University of Alberta energy economist Andrew Leach said the program was likely not as successful as the government claims and likely not as dismal as the AFL contends, because it can't be determined how many more jobs might have been lost without it.
"I think the truth is probably somewhere in the middle," Leach said. "What you really need is an account of what would have happened in Alberta in the absence of the program."
But Leach said the provincial government has an obligation to be open and accountable to Albertans since they own the resource.
"I think the government should be providing information on who is drilling and what they are paying in royalties," he said. "I can't really see a downside in releasing those numbers."
Alberta Energy spokesman Derek Cummings said the steps to encourage energy investment in Alberta "undoubtedly worked."
"Drilling activity declined from an all time high with the price collapse but would undoubtedly been even lower had it not been for the royalty credit," he said.
He said giving companies the ability to sell the credits ensured that new companies and companies with small production volumes would be able to participate in the program to drill wells and employ Albertans.
"The program also encouraged new technologies such as horizontal drilling that have played a large role in the increased activity today," he said.
Cummings pointed out that the province set records in petroleum and natural gas land sales for the last fiscal year.
Travis Davies, a spokesman for the Canadian Association of Petroleum Producers, said the programs were successful at keeping drilling rigs working during the downturn in the economy.
Hours of operation for drilling rigs jumped from 47,000 hours in 2009 to 76,000 hours in 2010, he said.
"I don't know how that equates to reduced employment in the oil and gas sector," he said. "If you increase operational hours, I don't understand how you have reduced employment."
Calgary Herald, Sat Jul 16 2011
Byline: Darcy Henton
AFL finds evidence of huge royalty giveaway: "Grey market" trading of royalty credits bleeds Treasury of billions
"It is staggering to me that this government is putting the education of our students in jeopardy because it says that it cannot afford to fund schools at an appropriate level, while it literally gives away billions of dollars to companies that are already very profitable," says McGowan, noting that 55 per cent of the government deficits for the 2008/09 and 2010/11 fiscal years were because of the $2.9-billion Drilling Stimulus.
"Albertans were told that for $2.9 billion, we'd get new jobs and increased oil and gas drilling," says McGowan. "The $2.9-billion Drilling Stimulus did none of these things. It did not create jobs – jobs in that sector declined over the run of the program. It did not stimulate new drilling – new well starts declined with the stimulus."
The Drilling Stimulus Initiative created a "grey market" – a legal, unregulated market - where companies could buy and sell royalty credits used to reduce payments to the Crown with no strings attached. This grey market allowed companies owing royalties to the Alberta public to reduce what they owed by simply writing a cheque: No new jobs or drilling required.
Where the $2.9 billion in drilling stimulus cash went is secret. Under Section 50 of the Mines and Minerals Act, this information is confidential except for the Minister of Energy and a handful of government staff.
"We are calling on the Alberta Legislature's Public Accounts Committee, who has the authority to review and report all public accounts of the province of Alberta, to convene a special review of this program," says McGowan. "$2.9 billion of public money simply vanished without any of the promised outcomes and without any public accountability. This is simply unacceptable, particularly when we are in an era of record government deficits.
"We have often said that the reason that the government is cutting our important public services is not because they cost too much, but rather because the government is not collecting enough revenue to pay for them," says McGowan. "This is a classic example of the government mismanaging public money and the ones who pay the consequences are average Albertans. This fall it will be our school children who will be suffering because of this government's misguided decision making.
"It's time that the Progressive Conservatives realize that they are meant to be working for the people of Alberta, not profitable private industries."
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MEDIA CONTACT: Gil McGowan, AFL president, 780-218-9888
- Alberta's $2.9-billion Drilling Stimulus: Where did the money go? (report)
- Alberta's $2.9-billion Drilling Stimulus: Where did the money go? (fact sheet)
- Alberta's $2.9-billion Drilling Stimulus: Where did the money go? (powerpoint presentation - July 15, 2011 Press Conference, Chateau Lacombe, Edmonton)
Royalty program a $2.9B failure: union
Over the last two years, oil and gas companies have used $2.9 billion of public money to boost profits under a royalty credit system with little in return for the province, the Alberta Federation of Labour said.
During that time the industry lost almost 8,000 jobs, a study by the group found.
AFL president Gil McGowan said the program was a "colossal waste of money."
"It did not create jobs. It did not stimulate increased capital spending or drilling," he said.
The Drilling Royalty Credit program, which expired on March 31, 2011, was a short-term, two-year stimulus designed to offset the global economic slowdown.
New oil and gas wells were eligible for the credit for one year, which would reduce royalty payments according to a sliding payment scale based on production.
An official with Alberta Energy discounted the findings of the AFL, saying the programs helped Alberta survive the economic downturn.
"Those programs undoubtedly worked," Derek Cummings said. "The Alberta economy is expected to lead Canada and that's largely based on increased oil and gas activity."
McGowan said he wants the provincial legislature's public accounts committee to look into the program.
CBC News, Fri Jul 15 2011
Alberta drilling incentives padded oil firms’ pockets, labour group charges
EDMONTON — Ed Stelmach's program to stimulate drilling during the recession cost taxpayers $2.9 billion and failed to create promised jobs, new wells or new investment in the oilpatch, says the Alberta Federation of Labour.
AFL president Gil McGowan said Friday the program merely padded the profits of oil and gas companies while depleting the treasury of revenue that could have been used to fund health care and education.
He has passed on AFL's findings to Alberta's auditor-general and also requested the all-party legislature public accounts committee investigate the program.
"When Albertans learn about this they will see this for what it is, which is an outrageous misuse of government funds," he said.
Hugh MacDonald, the Liberal MLA who chairs public accounts, said he will canvass the 17 members of the committee to determine whether they wish to call a special meeting to examine the program. Conservatives have 13 seats on the committee.
MacDonald suggested the auditor general's officer might have a better mandate to determine whether the program met its goals.
But Auditor General Merwan Saher tossed the ball back, noting his office has audited the program.
"At this moment, I don't have a compelling reason to launch a particular audit," Saher said.
He said McGowan's request for a public accounts review is "a legitimate request."
"He is asking the public accounts committee to do what public accounts committees do — examine how policy is being put into effect and whether Albertans are getting value for money."
McGowan said someone should investigate where the royalty tax credits went because a loophole in the program created a "grey market" that enabled companies that had more credits than they needed to sell them to other companies. The program allocated $200-per-meter drilling credits on a sliding scale based on how much the companies drilled in 2008.
Companies that purchased extra credits were able to defray the amount they paid in royalties owed to Albertans without having to hire more workers or drill new wells, McGowan said.
But Albertans won't know who cashed in the credits because Alberta Energy keeps that information secret, he complained.
The AFL produced charts showing the number of new wells being drilled decreased steadily during 2009 and 2010 and over the same period the province lost about 8,000 jobs.
Capital investment in the oil and gas industry swooned, but industry profits increased, the AFL said.
Alberta's rate of well completions for that period mirrored Saskatchewan and B.C., which didn't have programs as generous, and seemed to climb and fall with the price of oil, despite the drilling stimulus program, the AFL reported.
University of Alberta energy economist Andrew Leach said the program was likely not as successful as the government claims and likely not as dismal as the AFL contends, because it can't be determined how many more jobs might have been lost without it.
"I think the truth is probably somewhere in the middle," Leach said. "What you really need is an account of what would have happened in Alberta in the absence of the program."
But Leach said the provincial government has an obligation to be open and accountable to Albertans since they own the resource.
"I think the government should be providing information on who is drilling and what they are paying in royalties," he said. "I can't really see a downside in releasing those numbers."
Alberta Energy spokesman Derek Cummings said the steps to encourage energy investment in Alberta "undoubtedly worked."
"Drilling activity declined from an all time high with the price collapse but would undoubtedly been even lower had it not been for the royalty credit," he said.
He said giving companies the ability to sell the credits ensured that new companies and companies with small production volumes would be able to participate in the program to drill wells and employ Albertans.
"The program also encouraged new technologies such as horizontal drilling that have played a large role in the increased activity today," he said.
Cummings pointed out that the province set records in petroleum and natural gas land sales for the last fiscal year.
Travis Davies, a spokesman for the Canadian Association of Petroleum Producers, said the programs were successful at keeping drilling rigs working during the downturn in the economy.
Hours of operation for drilling rigs jumped from 47,000 hours in 2009 to 76,000 hours in 2010, he said.
"I don't know how that equates to reduced employment in the oil and gas sector," he said. "If you increase operational hours, I don't understand how you have reduced employment."
Calgary Herald, Fri Jul 15 2011
Byline: Darcy Henton