Thu, May 6, 2004 
Source: http://www.canoe.ca/NewsStand/Columnists/Edmonton/Neil_Waugh/2004/05/06/448447.html

There's no money for any gasoline rebate
By NEIL WAUGH -- For the Edmonton Sun

I doubt whether many Albertans - unless it's their job to know - can tell you what the price of crude oil is on any given day.

But Martha and Henry sure know the cost of gasoline. And with prices of regular unleaded hitting more than 82 cents a litre this week the Alberta Tories suddenly have a political issue on their hands, especially with the May long weekend looming and the summer driving season just around the corner.

"There's a problem," Premier Ralph Klein admitted. "People complain when the prices are high.

"And the bad news is, analysts are predicting that prices will go higher throughout the summer," he sighed.

Some are even talking about a buck per litre. With the benchmark West Texas Intermediate crude up in the $39-US-a-barrel range, that's possible.

"People are asking why Albertans are paying such high prices when the province has so much oil," Klein said.

And the premier confessed the pressure to do something is already building for some kind of relief at the pumps.

"Depending on what the political mood is," Klein revealed. "I will undertake to have a discussion on the matter in cabinet and caucus."

Yesterday, he went so far as to say: "We're looking at it."

Energy Minister Murray Smith eventually came around to Ralph's way of thinking and fixed the natural gas rebate program, which had been a dysfunctional joke.

But the motor fuel rebate will be a far more difficult program, mainly because when natural gas prices go up, the provincial treasury is awash in royalty windfalls. But Alberta's conventional oil reserves are all but gone. Finance Minister Pat Nelson has only booked $558 million in royalties this year.

There's not much slack there to cut a meaningful rebate.

Considering booze will bring in $551 million and VLTs over $1 billion, oil is no big deal any more. And synthetic crude is even worse: Nelson booked only $100 million in syncrude royalties.

It's not that the tar sands companies aren't rolling in dough. "Cash flow from operations set a new milestone, increasing 45% to more than $2 billion," whooped Suncor Energy chief financial officer Ken Alley in his 2003 annual report. Average production from Suncor's Fort McMurray plant was 216,600 barrels a day. Yet Albertans are only getting a pittance in royalty payments because of the deal that Klein struck where the companies get to pay off the capital on their plants first. It's basically free oil until then.

Despite all the good news and his sweet royalty deal, Alley was still fuming. He told shareholders how Suncor brass are "disappointed with the government's decision."

Instead of allowing Suncor to apply the royalty holiday they reckon they had coming because of their Firebag expansion to their entire operation, the premier made the wise decision to force the company to start paying a portion of Crown royalties again.

Out of $2 billion in cash flow, $200 million in royalties will have to be paid in 2004, which is still not enough for the government to fund a gasoline rebate.

Ironically, some of the companies that are boasting about massive cash flow are the very same ones that have raised retail gasoline prices through the roof.

This has not been lost on Albertans. Or on the premier for that matter. "We couldn't let Suncor continue to reap a royalty of only one per cent," Klein said bluntly.

"The problem is an agreement was reached by industry, the federal government and the province," the premier continued. "I think it would be an act of bad faith to go back and amend the agreement."

But then he added that it would be "enticing."

"For every upside there is a downside," Klein said. "And I'd like to look at the downside."

It's certainly a warning to the gas retailers. Paying a dollar for a litre of gas is not politically acceptable.

And if they don't toe the line and heed Klein's warning, a cap on royalty-free syncrude is not out of the realm of possibility.

Or to use Klein's own own words, "enticing."

Because, when all is said and done, it's Alberta's oil.