Dear Premier
Congratulations on your decisive and historic election victory. I wish you well in leading this amazing Province over the next several years.
I am sincerely reaching out to you in what I hope will be a productive dialogue, but want to make it clear that I am not generally supportive of NDP ideology.
My hope though, shared I think by many Albertans, is that your government will be ruled more by pragmatism than ideology. Past NDP governments in Saskatchewan have blazed this trail, and managed to keep a good relationship with industry which allowed robust investment and related employment growth. The key to this good relationship was stability, and earnest communication.
This is an area where I think I can help.
I am a representative example of "small oil". I am President and CEO, and significant owner, of a small oil and gas producing company. We recently produced approximately 700 barrels of oil per day, mostly in Alberta with a small percentage in Saskatchewan. We have nine fulltime employees sharing an office in a condo space in the "lower rent" side of downtown Calgary. Even with our small size, we are large contributors to Alberta's coffers, and I am proud that we help pay for all Albertans' Education and Health Care. Through royalty payments ($1.1 million) and corporate tax ($1.4 million) my company directly paid $2.5 million to the Province of Alberta in 2014. That is an outsized contribution of approx. $275,000 per full-time employee, and does not include payroll taxes, or an additional $1.3 million of corporate taxes paid federally and in Saskatchewan.
We employ many more people, as contractors, when we are actively investing and drilling. Several of them are old colleagues and close friends. One of the great joys of being an entrepreneur is creating meaningful, well paid jobs for new friends and old. I can say that several of my old friends and contractors are currently unemployed, and are very concerned that the current politically-driven uncertainty will keep them that way. This is not an idle concern or threat — my company's largest outside investor was recently quoted in the Financial Post as calling the election result "completely devastating" for energy companies and investors in Alberta. How easy will it be for me to convince him to place additional investment in my company to employ Albertans to drill new wells?
The CAODC estimates 20 direct and 115 indirect jobs created, for each active drilling rig. My company drilled 7 wells in Alberta last year, for a total of 56 days of active drilling. This represents a total of 21 people employed for the equivalent of a whole year, directly related to our capital investment in the Province last year. Please help me by delivering the business stability I need to attract capital, employ Albertans, and drill new wells which also deliver significant royalty and corporate tax revenue to the Province.
How can you deliver the stability business needs to invest with confidence, while also delivering on the other elements of your platform? I have one simple and powerful idea for you to consider. By far the most uncertain element in your platform, which is currently holding back significant investment, is the promised royalty review. Having been through a similar process under Premier Stelmach, industry is feeling like we have seen this movie before, while outside investors are firmly in a "fool me twice" kind of mood.
Frankly though, I am quite sympathetic to your wish for a review. The royalty file was so visibly mishandled by the previous government, and is now so complicated (even to those of us who live with it every day) that a review is perfectly reasonable and understandable. However, the uncertainty a review entails, together with the history of the Stelmach era, will rightfully scare investment away, unless there is an offsetting commitment to create some investment stability.
The simple idea to create this stability is to state — unequivocally — that there will be no changes to the royalty rules for at least the first two years of your mandate. That would allow investment, drilling, and employment to go forward this year with confidence that at least a year or two of revenues will partially pay back the (often very risky) capital investment. It will also give you enough time to consult widely with experts and industry players, and compare Alberta's royalty regime with our closest neighbours, before proposing any changes.
I would suggest that this combination of guaranteed stability in the short term, coupled with a meaningful, timely royalty review including broad consultation, meets the needs of all Albertans and fits nicely in your platform. In such a scenario I would be happy to volunteer my services to the review panel to represent the viewpoint of "small oil", which like small businesses everywhere are the main drivers of employment growth in the Province.
Sincerely,
Dan Polley, President & CEO, Broadview Energy Ltd
