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Gold/Mining/Energy : Oil Sands and Related Stocks -- Ignore unavailable to you. Want to Upgrade?

To: jimsioi who wrote (326)	3/21/2005 3:44:14 PM
From: Taikun	Respond to of 25575

jim, <What is meant by the "fiscal system"...> In order to spur development in the oil sands the royalty tax structure was changed to allow for a lower tax rate for companies that were investing in expansion. Actually, SU was one of the first oil sands plays (not sure about the majors like IMO, PCZ) to begin to pay royalties at the full rate. Then they announced a doubling of capacity and the effect of this increase in CAPEX will be again to reduce royalites. This document explains it: "One of the goals of the new oil sands royalty regime is to facilitate staged development, whereby projects can grow over time by increments that attain economies while keeping the incremental investment outlays as small as necessary." energy.gov.ab.ca This is probably a factor for SU: " In April, the Alberta government raised Suncor's royalty payments, saying it did not recognize the company's in-situ facility as an oil sands expansion project. As a result, royalty payments are expected to increase in 2004." sentryselect.com "Suncor Energy Inc., the second- largest oil-sands miner in the world, said first-quarter net income fell 38 percent after the company paid more royalties to the Alberta government. The company also said it will stop hedging oil-production." energybulletin.net Suncor is a good oil sands case study in how the royalties are applied. I wonder if the fact that the upgrader was not an expansion that reduced royalties was a factor in DCE's decision not to build an upgrader. Hope that helped. D