Friday, October 26, 2007

New Canadian Oil Sands Royalties Who Cares!

Alberta's premier announced yesterday a new royalty regime. For those of you who do not know Alberta is a Canadian province that has a great deal of petroleum. Much of this petroleum is gladly sold into the US. Many people still do not realize that there may be more oil in Alberta than the Saudi's have.

The Canadian Oil is primarily in the oil sands and the extraction process is unique onto itself. This means it is expensive and unconventional. The industry has been threatening the end of the world if these royalties are enacted. Of course who wants to pay more taxes.

In true political style the politicians have slipped in the increase gradually. Now everyone who has seen the numbers is yawning because the increase is incrementally small. Major participants Suncor (SU)and Canadian Oil Sands Trust (TSE:COS.UN) all appear to be unaffected.

So do we go back to business as usual? We have all forgotten about the federal government. If the province increases its royalties it bumps the Federal government down in their revenue take. Federal governments probably will not take this lying down. (Even if the same political party is in power federally and provincially) Its not about the money its about being marginalized as a power player.

The current provincial premier is about to go to the polls and run an election campaign. If he is perceived to be weak watch for the Fed's coming in to re-assert themselves with a new revised royalty regime.

Oil is a political commodity.