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Lethbridge Herald Newspaper Archives

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Lethbridge Herald, The (Newspaper) - April 17, 1974, Lethbridge, Alberta April 17, LETIIBIIIIHIE Oil surcharge prompts job, business loss By GARRY TAIRBA1RN KEGINA (CP) The Saskatchewan government has continued to rake in about million a month from its con- troversial oil surcharge but the province is paying a price for that revenue. The price has been lost jobs and lost businesses. Large oil companies have reacted to the surcharge leg- in cutting their Saskatchewan budgets. Those cuts have showed up in layoffs by the small companies that work for the large corporations. In some cases, the small companies have been moving out of the province. While expressing sympathy for the small operators, gov- ernment spokesmen minimized the long-term effects of the industry's initial reaction to the oil legislation. Mineral Resources Minister Elwood Cowley said the oil companies had been putting economic pressure on the pro- vincial government and not acting wholly for reasons of economic necessity. Premier Allan Blakeney, in remarks to a Swift Current meeting where members of the audience expressed concern about the industry, predicted that oil exploration and develop- ment will regain former levels if only because companies can get partial exemption from the surcharge when they spend ex- ploration money in the province. "If they don't spend it on exploration, they virtually give it to the provincial the premier said. Hastened decline Even if the oil companies decide to put more money into the province, it will be top late for hundreds of employees and dozens of firms. Oil activity had already been declining for four years and industry spokesmen said the new legislation has drastically accelerated the process Len Stem of Swift Current, spokesman for the Canadian Association of Oil Well Drilling Contractors, said in March that 30 companies and about 400 employees had left the area in four years and another 100 families may soon have to leave. Two weeks after his remarks, a delegation from Estevan visited the legislature to urge government help to stop the decline of the industry in their area. The delegates reported that employment in 130 area busi- nesses that depend on the oil industry dropped to 564 from 758 in the two months after the legislation was passed. They also said the legislation has caused cancellation of scheduled drilling, termination of operations by the only trucking company engaged in moving drilling rigs and re- duction in operations to half capacity or less among service rigs, general truckers and oilfield construction companies. Others threatened The delegation said six Saskatchewan-based companies have indicated they cannot survive another month under present conditions. Besides the legislation's immediate impact on jobs, there have also been the issues of the province's long-term oil supplies and of whether the oil industry should be nationalized. The New Democratic Party's special committee on Saskoil recommended last fall that the Crown corporation take over all future oil development in the province. And the radical Waffle group, which was part of the NDP until last year, is calling for nationalization of the industry. The NDP government has already allocated its surcharge revenues, plus greater sums from its share of the federal oil export tax, for a special fund to promote oil and gas exploration in the province. Difficult to estimate Revenues from the surcharge and the export tax are difficult to estimate because of uncertainty about the future of the federal tax. In theory, the province could get up to million a month in surcharges on the barrels a day it produces. That would come from the present surcharge of to a barrel, plus a possible increase to match the 40-a-barrel federal tax if that is removed. The principle behind the provincial surcharge is to take away everything except what the province feels the oil producers are entitled to. The problem is that the industry feels entitled to more than the average to the government would leave them. The industry says while that may be a good price for existing oil, it will not provide the funds needed for expensive exploration and development of new reserves. And unless new reserves are developed, government spokesmen say, Saskatchewan may have to cut production to conserve its own oil supply. The province produces about 85 million barrels of crude oil a year and consumes about 22 million. Virtually all the production, 10 to 15 per cent of Canada's total, is shipped to Eastern Canada and the United States while the province, for economic and technical reasons, imports Alberta oil for its own needs. Reserves running out Known oil reserves are only enough to last for eight or nine years at present rates of consumption. Even if Saskoil is after a time lag for fill the exploration gap left by the possible departure of the oil companies, industry spokesmen say that may turn out to be a wrong move. William Spicer, manager of the Saskatchewan division of the Canadian Petroleum Association, said; "The oil industry has a responsibility to provide oil for Canada and it doesn's matter where they find it. "Now, if they say the geological prognosis for Saskatchewan is poor, what would be the sense? "Would they be fulfilling their responsibility if they took all their profit from Saskatchewan and plunked it back into If Saskatchewan turned out to have no more economic re- serves of oil, a multi-million-dollar exploration drive in the province would be a waste of and oil companies might have to raise prices higher to finance exploration elsewhere. Profits in dispute But the issue of what oil profits actually are is a con- troversial one. Government spokesmen said when the oil legislation was under debate that the industry had invested billion in the province and taken out billion, for a cumulative profit over 20 years of million. They argued that the industry should thus not be allowed the benefits of "windfall" price increases provoked by the now- ended Arab oil embargo. But the industry countered that if 10 per cent is deducted a year for what the invested money could have earned in a safer field, the profit amounts to only million. Ultimately, the question whether the Saskatchewan government's allowable wellhead prices give the industry a reasonable profit may have to wait a year for an answer. If the industry can make reasonable profits with what the provincial government is willing to leave it, then presumably the near-freeze on exploration activity will be lifted by then. gallon for That's any four 40 fI. oz. bottles of Coke, Fanta, or Sprite. Mix and match at this special low price. Offer is good at participating dealers for a limited time only in the area served by your bottler of Coca-Cola. PURITY BOTTLING (1967) LTD. 2920 9th Avt. N., Distributor of Coca-Cola, Fanta and Sprite under contract with Coca-Cola Ltd. Both Coca-Cola and Coke are registered trade marks which identify only the product of Coca-Cola Ltd Fanta and Sprite also registered trade marks of Coca-Cola Ltd ;