ReturnToTheTarSands

Often overlooked, Saskatchewan is Canada’s second largest oil producer (after Alberta) and produces about 17 percent of Canada’s total oil production. While Alberta is said to contain the only three major known economical oil sands deposits (Athabasca, Peace River, Cold Lake), oil sands in Saskatchewan have been observed near the Clearwater River Valley of the Northwest. Companies have been busy acquiring licenses and furthering exploration in the region ever since.

According to a report by the Conference Board of Canada, Saskatchewan is expected to be the best-performing western Canadian economy this year, at 4.3 per cent growth, with a more sustainable 2.8 per cent in 2008. By comparison, a slowdown in energy exploration will hold real GDP growth in Alberta to 3.4 per cent this year, and accelerate slightly to 3.6 per cent in 2008.

Last month, after months of deliberation and years of free riding by industry, the Alberta Government finally opted to raise royalty rates. Low royalty rates made sense at a time when tar sands oil was uneconomical. The tax scheme in the oil patch was originally designed to attract investment to the region. As the supply of conventional oil ran dry and its price per barrel crept upwards, the arguments in favor of low royalty rates were weakened. When a government sponsored commission rendered its decision in favor of increasing royalty rates, the government acquiesced and a new era of doing business in the tar sands was born.

The recently elected Saskatchewan Party government must now decide whether to raise royalty rates in line with its neighbor next door or seek to undercut it by maintaining rates at their current low levels in the hopes of securing new investment that Alberta’s hike in royalties is sure to attract .

In Saskatchewan, projects that commenced operation on or after April 1, 2005, are subject to a pre-payout Crown royalty rate of 1 percent of gross revenue. After payout, the Crown royalty rate is 20 percent of operating revenue.

While it’s still too soon to know for sure which road the new government will take, the writing might very well be on the wall. According to its election platform, a Saskatchewan Party will create Enterprise Saskatchewan, a new public-private (emphasis added) partnership between government, business, labour, First nations, municipalities, post-secondary institutions and economic stakeholders. Enterprise Saskatchewan will be Saskatchewan’s central economic development agency.

While the multi-stakeholder process is in itself commendable, the removal of natural resource development from public control is definite cause for suspicion.

Opposition to oil sands exploration in the province is already mounting. Last June, the Clearwater River Dene Nation in Northwestern Saskatwechan used heavy equipment to block the road running through its reserve and halt exploration on traditional territory. The decision to block the road was made after talks with the company Oilsands Quest broke off.

http://www.cbc.ca/canada/saskatchewan/story/2007/06/21/oilsands-dene.html

According to its website, Oilsands Quest Inc’s is leading the development of an oil sands industry in Saskatchewan with total land holdings of 707,770 acres, making it the largest contiguous land position in the oil sands.

With the arrival of the right leaning Saskatchewan Party after sixteen years of NDP rule, questions abound over the future development of the province’s energy resources.

Will the new Saskatchewan Government respect the wishes of its First Nations Peoples and their opposition to development on traditional territories? Will its regulatory bodies be steadfast in upholding environmental laws and regulations, or will they simply borrow the rubber stamp from their neighbor to the west? Will it have the foresight to pace development, thus spreading its benefits over several years, or will it instead engage in a game of monkey see, monkey do and emulate Alberta’s Go Big or Go Home approach?

Only time will tell.

Filed under: Commentary, Environmental Justice, Politics, TTTS on November 14th, 2007