The Importance of Achieving a Competitive Fiscal Regime: The Alberta Experience July 30, 2013

1. The Importance of Achieving a Competitive Fiscal Regime: The Alberta Experience July 30, 2013

2. Alberta Anchorage 2,277 km Alberta Vancouver 817 km Ottawa 2,847km Source: Government of Alberta London6,793 km Alberta covers 661,190km2,an area comparable to France. New York City 3,270 km • Population (2012) – 3.8 million • GDP (2012) – $306.7 billion • Economic growth (2012) – 3.9% • Unemployment rate – 4.6% (2012) • $7 - 10 billion per year non-renewable resource revenues • $25 - 40 billion per year in oil and gas industry investment Houston 3,018 km Mexico City3,973 km

3. World Oil Reserves Accessible Oil Reserves Canada’s Oil Sands 52% State owned or controlled Accessible 48% Other Accessible Reserves Alberta Crude Oil and Oil Sands Source: EIA, ERCB, CAPP, BP

4. Alberta’s Natural Gas ResourcesWorld’s 6th largest producing region (Canada combined is 5th) Alberta’s Natural Gas Industry is Well Placed with Abundant Resource Opportunities 3600 3400 ≈ ≈ 11 Source: Energy Resource Conservation Board, Petrel Robertson GIP: Gas in Place is the total gas volume believed to be contained in the reservoir.

5. Alberta’s Oil & Gas Competitiveness Review

6. Fiscal System Objectives Alberta maintains a competitive and effective royalty framework that encourages responsible resource development, provides a favourable climate for industry growth and maximizes benefits to Albertans. Tax and Royalty Revenue Jobs & Economic Opportunity Taxes & Royalties

7. Alberta Royalty Review Pre Shale 2007 Assumptions Source: http://permaculturenews.org • Ever Increasing Prices • Scarcity Rents

8. Unintended Consequences Great Recession Shale Gas Recognized as Game Changer 2007 2008 2009 2010 Our Fair Share Report Stimulus Program Announced New Royalty Framework commences Investment Competitiveness Review Royalty Increase of 20% or about $1.9 Billion for 2009 $2.4 Billion in royalty reductions for 2009 and 2010 Confidence Restored Activity is about 50% of 2007 levels

9. Oil and Gas Competitiveness Review

10. Western Canada Land Sales Percentage of Land Sales 1999-2008 Land sales are a leading indicator of future activity Alberta dominates in Western Canada Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan

11. Western Canada Land Sales Percentage of Land Sales January-October 2009 Values for 1999-2008 in parenthesis (11.07%) (58.08%) (30.85%) Investors indicated more confidence in the future prospects in BC than in Alberta. Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan

12. Western Canada Land Sales Percentage of Land Sales 2010-2012 Alberta once again dominant Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan

13. Competitiveness Where is the peak? Source: BP Statistical Review of World Energy

14. Emerging Resources are on the Margin

15. Royalty Targets Investment Distortions taxation of non-resource rents Uncompetitive Terms Innovation High graded resources Investment Taxation of Resource Rents Responsible Development Lack of Innovation Competitive Terms Aligned Interests Economic Activity Leakage of Resource Rents Stranded Resources

16. Measuring Performance • Goals are: • Maintain Alberta’s fiscal regime to be among the top 3 most attractive locations when compared to similar jurisdictions • Grow oil sands supply share of global oil consumption

17. Questions?