Alberta's Premier Alison Redford

Last night residents of Alberta were provided with an update from Premier Alison Redford on the upcoming April 1, 2013 provincial budget. Apparently an oil pricing situation in the province has become an issue to the government in terms of their ability to balance the books. And they announced that they may now be projecting a deficit of $3 billion Canadian for 2014. (The Alberta Government owns the majority of the mineral rights in the province on behalf of the Alberta residents.) This is news for a province that has traditionally been conservative in their spending and have run surpluses and have a variety of savings accounts that total at least $20 billion.

The issue apparently comes about as a result of the differential that the producers are receiving on their oil prices. West Texas Intermediate (WTI) is down to the low $90 range from what the Alberta Government projected of the low $100 range. Which is not material, however, since September 2012 the differential on Alberta production has grown to upwards of $40 so that producers are only receiving $50 for their oil production. This is as a result of the markets in the U.S. being satisfied with other imports and internal production and an inability to get the Canadian production out of the province.

We are all familiar with the Keystone XL pipeline issues and the delays in the approval by the Obama administration. Having this pipeline to the states would alleviate the problem and ensure that the producers received the WTI prices less the tariff for the Keystone XL pipeline. But I am not so certain that President Obama will approve the pipeline now that he has been re-elected. It was delayed on the belief that if he was re-elected that he would then approve it because he would not have to deal with his left wing base. I think he didn’t approve because he fundamentally doesn’t agree with the oil sands and will ensure that that oil doesn’t make it to the Gulf coast.

Irrespective of the situation in the states, the Canadian producers should never have put themselves in this situation. They learned in the mid-1990’s that take-away capacity in the natural gas business was what was required to increase the pricing for natural gas. When they built the Alliance pipeline this provided much relief to a congested production market. That same congestion is happening again in the oil markets on a much larger scale. They should have begun dealing with this situation earlier by attempting to get the Keystone XL built earlier, and, building pipelines to the west coast for markets in the far east. Hindsight is 20/20 however they have been advertising they have the second highest reserves of oil in the world. Is that their sole responsibility is the production end of the business?

We see with the recent termination of Mr. Randy Eresman, CEO of Encana Resources that he a) didn’t have the fight in him, and b) felt that the capital markets demand too much in the short term. This short term thinking is very prevalent that is for certain. Nothing focuses the mind like the quarterly demands for performance. But that does not preclude you from making sure that the long term perspective of the firm is taken care of as well. No one is excusing you from leaving the long term perspective alone. It must be taken care of as well. And that is something that the Canadian producers, as a whole, have let slide for so long it has become culturally ingrained throughout their part of the industry that no one concerns themselves with the long term. So projects like People, Ideas & Objects Preliminary Specification will, as it stands today, probably not have a Canadian component to it.

If the province is experiencing such a large hole in their financing I can only imagine what the Canadian producers are experiencing. The Premier said if the differentials continued it might cost the province $6 billion. Losing half of the revenue on any oil production for the oil and gas producers would most certainly put them into a loss situation. And the total loss in revenue could be in the tens of billions. More than enough to finance the development of People, Ideas & Objects Preliminary Specification from just the interest on those losses.

The Preliminary Specification Part I

For the next few months I want to talk about the output that the community will produce for the Preliminary Specification. Although I have hesitated in the past in making any comment about what the output would consist of, it may be appropriate at this time to offer some suggestions just to get the ball rolling. I don’t wish to limit in any way what the scope of the output would look like, only to offer a few suggestions as to how I might see the output of the Preliminary Specification. These posts will be able to be aggregated under the PS-Output label of this blog.

In general the first requirement of the Preliminary Specification is that it will have no consideration of any technology. It is all about the oil and gas industry and the people that will be using the application. Consideration of the technology is not valid in this project, technology will accommodate the needs of the users when the time comes. This means that the General Ledger, the Relational Database Management System, Java etc are not pertinent to the considerations of what is required in the Preliminary Specification. (Please note however that we have selected this Oracle Stack as the base of Detailed Specification.)

Secondly we are looking at the global scope of the energy industry. Or as been stated elsewhere, the producers, services industries, society and individuals. That’s maybe a bit broad and could use a bit more detail. What is intended to be included in these classification is as follows.

Producers

• Start-ups
• Junior
• Independents
• Integrated Oil Companies
• National Oil Companies

Services Industries

• Field Services 
• Research
• Development
• Operations
• Engineering
• Project Management

Societal

• Royalty
• SEC
• Tax
• Compliance
• Environmental

Individual

• Employment
• Entrepreneurial

As we can see the functionality and process management of the application modules will include organizations and individuals outside of the producer firm. Transactions, interactions and collaborations occur outside of the producer and these are being captured by the People, Ideas & Objects application and therefore will be used within the various firms, agencies and industries noted above.

The output of the Preliminary Specification will therefore include the needs of these other organizations and people in addition to the producer firms. Their inclusion in this process is not limited to just managing transactions. A thorough review of the Research & Capabilities and Knowledge & Learning modules reflects the needs of the producer and service firms transaction management are not the only aspect that needs to be considered.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

Perez The Role of Government Part II

In this second part of answering Professor Carlota Perez' question "What role does the Government play in this?" we discuss the more general nature of the economy. In the first part we noted the expanded role that software plays in ensuring compliance to regulations. And how the software vendor has ultimately had to bear these software development costs alone with no financial support from the government agency issuing the regulations. In this second part I want to expand on the concept of this expanded role of software in our daily economic lives.

Lets assume that we have an engineer that recently saw the opportunity of a lifetime pass in front of her eyes. To realize this opportunity she needs to establish herself as an oil and gas producer and acquire land within a certain geographic location. The land and the money to purchase it are available, as are the drilling and other service industry technologies necessary to exploit the idea. The one problem this engineer has is that she has no access to systems that are capable of meeting the necessary compliance requirements of the jurisdictions she operates in. And no ability to interface with the various economic actors necessary to make the idea real.

Suddenly, she realizes that she is eliminated from pursuing this opportunity due to the fact that she has no software in which to operate this firm on an ongoing basis. Is the Governor of Texas willing to accept that the barriers to entry into the oil and gas industry becomes access to the necessary administrative software? Certainly the ability to build this capability exists, at approximately $2 million / year in additional administrative overhead.

The question is what is the governments role in the new economy. A new economy that is driven by the Information & Communication Technology Revolution. Where the access and ability to function in the marketplace assumes the ability to be in compliance with 400 pounds of paper regulations. An economy where engineers pursue new ideas or an economy of accountants and lawyers.

And how is it that People, Ideas & Objects is able to offer this engineer with a good idea with no costs associated with using the software? That is to say until she has established production, her costs for 2010 have been set at $1.00 / barrel of oil per day per year. Certainly there will be representatives from the Community of Independent Service Providers (CISP) assisting her in these compliance requirements. But the question of whether to "hire people or run software to be compliant" has been solved through People, Ideas & Objects. This overhead associated with the CISP is on an as needed basis and is a small fraction of the $2 million otherwise needed.

Many within the governments got ahead of this discussion by establishing the rules and regulations are self assessing. Self-assessing systems include most royalty regulations and of course many tax systems. If you make a mistake in filing your returns, you go to jail. It is necessary that negligence is not an excuse for mistakes. And I see no reason to abandon the self assessing style of system, if the software exists in the marketplace to ensure compliance. Governments have a fiduciary responsibility to their tax payers to ensure that equality and fairness are achieved, and that all revenues are collected. One side note is that Royalties are not taxes, but for the purposes of discussing self assessing systems, there are minimal differences.

Back to the question of the governments role in the new economy. Is it to facilitate high levels of access to all who want to compete in the oil and gas industry? Economic access or the lack of it has become a barrier to entry for all but those who have adequate size to maintain the administrative overhead. Will the engineer in this scenario, knowing that she could go to jail for not filing the right form, really be bothered to pursue that opportunity? And lets be clear, Bernie Madoff had no aversion to filing any forms.

Today I received notice from the Alberta Government that they do not share in the concerns that I expressed in Part I of this discussion. I indicated that our policies were to not build any software to meet Alberta's royalty requirements. And they indicated that Mr. Peter Watson, Deputy Minister of the Energy department has received that message. This point was probably moot as I do not see the user community including any Canadian jurisdiction in the Preliminary Specifications scope. Regrettable, but true.

Join me here and lets work together in finding the right answers. If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

Technorati Tags: People's Budget Government Economics
 

Perez on the role of government

Back in 2005, when I first read the Strategy & Business Thought Leader Interview with Professor Carlota Perez. Professor Perez stated something that I found interesting and thought provoking. Her comment in the article was as follows.

S+B: What role does the government play in this?

Perez: A big role. I think that market fundamentalism today is as much of an obstacle to world economic growth in the next decades as state fundamentalism was in the 1970s and ’80s. Government needs to be reinvented, using as much imagination as it took to design the welfare state in the first place. It all seems impossible now, but things always seem impossible at this point in the surge. Between 1934 and 1946, a lot of economists believed that high unemployment was inevitable, because both industry and agriculture were shedding labor. But just after that, with an adequate institutional framework for mass production and consumption, the U.S. entered its biggest full-employment period in history.

Compliance frameworks have been how governments regulated business. Today, shareholders of firms have never felt more unable to deal with the businesses that they own. A systemic failure of the banking industry shows that boards of directors are powerless to deal with management. Bringing into question corporate governance and compliance as one of the premier issues that everyone would agree on.

This discussion about compliance may be about different perspectives on how compliance is achieved. I see compliance as a fallout of the transactions themselves. Net profits attract taxes. Oil and gas production incurs royalties. Stock exchanges impose transparency. In a transaction focused ERP software application as described in the Draft Specification. Where design of transactions is deemed one of the value adding attributes of a business, the Tax, Royalty and SEC requirements are not the driving attribute of the decisions being made. Or they shouldn't be. Granted interpretation of the regulations is the fine art that does generate substantial value for a firm. But these can be done on a global or overall firm basis after the fact. The point that is being made here is that compliance is a fall out of transactions. Secondly, compliance is a critical and inherent aspect of the transaction itself. Separation of compliance from the transactions is how Enron, WorldCom and Bernie Madoff achieved their scams.

In this post I want to propose a hypothesis of how things have became so disjointed. Based on Professor Perez' prompting us to rethink the role of government; have the software developers been the ones that fumbled the compliance football? Or has the lack of recognition of the importance of the role of software developers in ensuring compliance, been an inherent part of the breakdown?

In these past few days, when we have been discussing the compliance requirements of oil and gas producers. I have stated that the Compliance sub-frameworks of SEC, Tax and Royalty need to be aligned to the five frameworks of the Joint Operating Committee. The lack of alignment is part of the problem. I have also recently published the policies that People, Ideas & Objects has for compliance to royalties. That is we don't pay for the software development costs of any royalty framework. Since 1993 it has been my experience that producers won't pay for royalty compliance software development. It's 2010 and not one system exists to properly calculate a producers obligation. The evidence is in. Our policy is that the royalty holder will need to pay People, Ideas & Objects to develop the royalty compliant software. It's a compliance policy that is either 100 or 0% compliant. This is particularly valid when the Alberta Government is looking into it's sixth review of royalties since 2007.

The government's role in these situations has always been to pass legislation, enforce and administer the regulations. Why have they not funded the software that maintains the compliance for the oil and gas producers? Everyone at the table has someone who is paying their costs, except for the software developer. Governments toss these regulations out, expect compliance and its the lowly software developer who is required to fund the development of the software? We have no skin in the game, and are indeed hesitant to employ anything but the 0% solution. If compliance is such a large issue in today's business market. Why are the governments leaving it to a disinterested groups of software developers, who in turn have to sell what they did to uninterested investors or the producers themselves. This is a lose, lose proposition.

I think this is one of the areas where Professor Perez is correct. The software development costs associated with the compliance frameworks [royalty, tax and SEC] should be funded directly by the government agency that demands compliance. This is an area where government needs to think how they can be more effective in their responsibilities to their stakeholders. We are relying on an administrative framework that is a generation or two behind the fact that software is a critical piece of the compliance world.

Another point is that government's writing generic applications to maintain compliance won't work. The analogy of putting a 1956 Soviet Lada engine in a 2010 Ferrari is appropriate. Just send the cash. The JOC's decisions have compliance implications. Compliance needs to be natural elements of the processes, written by the same developers, in the same programming languages, designed by the same users. Therefore to integrate them, the software developers have to do the functionality and the compliance. For those governments that are concerned about funding several software firms, that's not my problem. Making the regulations more easily integrated might be an area where value could be generated.

People, Ideas & Objects face market, financial and technical risks. If we manage our cash in an effective manner. And are able to internally fund the compliance development costs ourselves. And then in the eleventh hour, when the application is 95% complete and everyone is exhausted, the producers lose the desire to continue funding People, Ideas & Objects. This type of financial failure is the primary cause that software systems have failed. With approximately $1 billion in projected costs, we would be foolish to even attempt to build a compliance framework ourselves. Particularly with a government such as Alberta's that changes the rules every six months.

One last point is that People, Ideas & Objects is user based developments. Our objective is to provide the oil and gas producer with the most profitable means of oil and gas operations. Think of this compliance issue from these user and producer orientations. And that does not mean that we just skip compliance, and that does not mean that we will fund these costs ourselves.

On a related note to this, here is a video of British Conservative Leader David Cameron talking about "The next age of government". He also has some answers.



If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

Technorati Tags: People's Government Perez Strategy Video
 

The past quarter's performance.

The conflicting information and contradictions present in the energy business show how difficult the industry has become. Prices have at least halved since last year, record levels of capital expenditures in 2008 have produced substantial 5 - 6% declines in production. Inventories are bursting with oil and many Super Tanker are idled with full loads of product. Yet here in Calgary we are met with significant shortages of gas. Companies such as Chevron have ceased to drill for any Natural Gas on the entire North American continent. With this technical, political and recessionary environment; is it any surprise that earnings have been challenged? Or that production and reserves continue to decline? What's a producer to do, they can't perform in the short or long term. I would ask if the past organizational methods, the bureaucracy, are appropriate for the current and future needs of the industry? 

The Times Online have prepared a summary of the most recent quarterly performance of oil and gas firms. Stating that lay-offs of 5,000 to 10,000 people will be cut in each of the International Oil Companies (IOC). Discussion in the article turns to how the industry may solve these problems. 

Anthony Lobo, head of oil and gas at KPMG, said that in the short term small mergers of, say, £20 billion, and joint ventures with national oil companies (NOCs) are more likely than huge mergers. “The deals of £40 billion or more seen in the last decade are unlikely to happen because one international oil company [IOC] buying another arguably compounds the problem,” he said.

Joint Ventures which are managed through the Joint Operating Committee and are the global and natural means of conducting oil and gas operations. The problem we face today is the development of Information Technology has focused on the technical capabilities and not on the business of the oil and gas business. The JOC is the legal, financial, communication, cultural and operational decision making framework of the global oil and gas industry. Using these "Joint Ventures" provides the industry with the ability to hit the ground running and deal with the unique attributes of the specific JOCs they are members of. Applying the JOC's unique strategic, financial and technical resources too the National Oil Companies reserves.

The difficulty is we have to develop the systems and organizations to define and support this natural and global manner of business operations. That is what we are attempting to do here at People, Ideas & Objects. Importantly, the author of the article takes the Joint Venture concept further.

“The magic formula is the combination of cash and reserves. The IOCs have cash and access to debt but the NOCs hold the keys to many of the reserves. As NOCs are not up for sale, we are likely to see international oil companies proposing joint ventures.”

This is because the “easy” oil — on land and in politically friendly regions — is drying up. NOCs own 80% of the world’s reserves, leaving the industry to fight over a shrinking number of fields in hard-to-reach places. Manouchehr Takin of the Centre for Global Energy Studies said: “The IOCs need the NOCs a lot more than the NOCs need them.”

I have established the revenue model for People, Ideas & Objects to consider this potential reality. Noting the two sources of revenue of this software development project are the oil and gas producer who needs to organize their approach to exploration and production. Secondly I have noted that the governments that are in producing regions. Have a vested interest in ensuring this software development project represents their compliance and governance frameworks. To ensure the management of the property in their country, state or province are consistent with their regulations and requirements. The financial resources necessary to develop the software for each of these unique jurisdictions, must be sourced from the individual governments themselves. There are three reasons this must be done.

1. The financial resources needed to address the unique characteristics of Joint Ventures operating in a certain jurisdiction. These compliance and governance demands may total $40 to $100 million in software development costs per region. For the software developer to raise this type of money from anyone other then the governments themselves is impossible. As evidenced by the lack of any current applications in the market space. Who would benefit from a return on these types of investments?
2. Secondly the producers are not motivated to fund these developments. It is not in their best interests to spend substantial financial resources on developing systems for government compliance in each region they operate. In the past the question of which producers should develop these systems is answered with the response that "all of them need to." So each producer firm should pay $40 - 100 million in software development costs in order to be in compliance with each jurisdiction that they operate in. Here I begin to define the surreal nature of the expectations of the oil and gas software developer.
   
3. Governments need the energy industry to be an active member of their economy. All members of that community. The article incorrectly suggests that the IOC's should be the ones that propose Joint Ventures with the NOC's. From my point of view, why would a jurisdiction like the North Sea, Texas, Saudi Arabia or Alberta limit the number of producers that are capable of operating in their jurisdiction. Limiting operations to only those producers that can develop an ERP system with the scope to manage their jurisdiction. The entrepreneurial and dynamic focus of the producers will provide the longer term value of the natural resources of the NOC's. Bringing all producers into their environment requires the ability to operate in their country. Whether that is an IOC or a geologist with an interesting idea. This type of environment can be facilitated by funding People, Ideas & Object's software development to provide this capability to operate in their country. Opening their economy to all capable producers will ensure that their resources are developed in a competitive and open business environment. 

It's important to stress that People, Ideas & Objects are an open source strategy of development. The code that makes up the system will be available to those interested parties to ensure they are operating in compliance to the guidelines and regulations of the country where the JOC resides. Access to the software code provides a transparency to both producers and governments that their operations are calculated correctly in the software they use.

If we take the scenario that is the software developers competitive business model that exists today. The various software developers are required to undertake these large investments on behalf of their producer clients. Investments in software that do not provide a competitive advantage, but clearly offer a reason for the producer not to use the software. The surreal nature of oil and gas ERP software development business is being addressed in People, Ideas & Objects business and revenue models.  Please join us here. 

Technorati Tags: People's Development Entrepreneurial Government Open Source

For the last time.

This royalty "debate" in Alberta has to stop. We consistently are told by the Calgary Herald, who for some reason are beholden to the venture capital groups, that the Provinces royalty regime is the reason for the economic difficulties. Are we to assume then, that the Alberta Governments royalty regime is the source of the global meltdown. 

The issue is there's money on the table. Billions and it belongs to the resource owners, the people of Alberta. It goes back to the battle of Alberta in 1972. Our Premier Peter Loughheed was not going to allow the Federal government, represented by Canada's version of Obama, Pierre Trudeau to abscond with the resources that belonged to the people of Alberta. Trudeau mania, as the Obama nation will do for the U.S., destroyed Canada. Loughheed was successful and the bitter Trudeau in retaliation changed the tax laws to disallow Alberta royalty payments as deductions from income taxes. Never before has a tax been implemented is such an unfair and unreasonable basis. 

Fast forward to today, our new Prime Minister Stephen Harper from Calgary quietly reversed this injustice two years ago. The tax deduct-ability of Alberta Royalties was brought back in line with all other industries and jurisdictions. Therefore creating a huge after tax benefit for the producers. What is not remembered is that the Alberta government had to reduce their royalty take in order to remain competitive in the industry. Not reducing the royalty take would have left Alberta a ghost town.

Enter the 1980's and Trudeau is up to no good again. This time implementing the national energy program. This much hated program disallowed producers from selling their production at world prices, and received a regulated price dictated by Ottawa. A wellhead tax of 12% and the discriminatory ownership rules that disallowed anyone but Canadians owning oil and gas producers. Lougheed countered this, again, with the Alberta Government granting up to 35% of capital costs to producers that remained active. This also stopped the province from housing only ghost towns. 

In the 1990's we found ourselves in debt and had a budget deficit of mammoth proportions. Our new Premier Ralph Klein implemented an austerity program that enabled us to live with in our means and indeed reduce our debt. Note at no time were the producers subjected to any changes in the royalty framework or taxes in order to balance the budget. This was done on the back of taxpayers who went without education and health benefits. Civil servants by the truck load were laid-off and eventually the government finances recovered. 

In this past decade the province has prospered due to their fiscal house being in order. We became debt free and were the benefactors of an appropriate fiscal discipline and increasing energy prices. What throughout this period back to the 1970's provided was a stable royalty regime for the industry that existed since 1972. My math may fail me but that is 37 years ago. Has the industry changed? Does the Alberta government have to keep its hands off the windfall the producers are realizing from the federal tax changes? I wouldn't think so either. 

What the Calgary Herald seems to be unable to comprehend is the royalties are the fair value consideration the producer pays to earn title to the product. It is not a tax. Royalties belong to the people of Alberta and the producer must purchase those commodities from the people of Alberta. The Alberta Government acts as an intermediary to administer and distribute this value back to the rightful owners. I have repeatedly made comments to the Calgary Herald over the past year about these points and have never seen any of these facts appear in the paper. I find it ironic and typical of the Herald is not permitting any comments on this point in today's' on-line version. 

The Canadian Association of Petroleum Producers have been running this campaign for the industry. Recent defections of their members are showing that cracks are appearing in this facade. Husky and Paramount have both ceased to be members of the association. It is not clear why they declined their membership, but the "rumor" is it's over the handling of this royalty situation. Paramount' founder and leader is on record as saying the royalty changes are positive. Therefore, I think the Calgary Herald, who are soon to meet the great printing press in the sky, will have the Calgary people cheering their demise for their representing only CAPP's point of view to the real owners of the oil and gas resources. 

Technorati Tags: People's Government Leadership

Auditor comments on royalties.

An article appeared in last weeks Calgary Herald that shows that all is not well with Alberta Royalties. The Auditor General will be reviewing the systems that collect oil and gas royalties.

Alberta's auditor general is examining the province's new royalty structure to ensure it's delivering desired results, after the old regime didn't collect a fair share of revenue and failed for six consecutive years to reach the bottom end of government's targets.

Fred Dunn told the legislature's public accounts committee Wednesday his office is hoping to report in October the results of a systems audit on the new royalty framework that will identify whether the structures are in place to en-able Albertans to collect the royalties they're due.

I can tell you that the report in October 2009 will reveal one gaping whole that the Alberta Government should close to ensure royalty compliance is achieved. It is this gaping whole that leaves an industry to scream blue bloody murder when changes are introduced. A situation where the opaqueness of the industry only frustrates dealings with the government.

I have first hand experience with this situation. In 1992 I started Genesys Software Corp to address the governments Royalty Simplification initiative. A new and comprehensive system that would ease the royalty calculations and simplify the administration for both government and industry. The problem with this system is the same as the Auditor General will be talking about in October. And that problem is the industries refusal to spend any money on developing in-house systems to meet the royalty obligation.

This situation is also the reason that I am turning to the various governments to fund the development costs associated with meeting their royalty compliance frameworks. I as a software developer was expected in 1992 to raise sufficient capital to implement the regulations on behalf of government for industries compliance. In retrospect I do some very dumb things. I can look back on this in hindsight and say that industry expected someone to build it and they will come. What I have learned is this scenario meets the industry needs for royalty compliance. Knowing that no one will be able to meet the industry expectations; companies can rest assured they will never have to implement any system of royalty compliance.

I may have periods where my intelligence is questionable, however, I do not tend to make the same mistakes more then once. My current thinking is that in the virtualized Joint Operating Committee, the royalty holder(s) will have a seat at the table. This transparency will show the extent of the efforts producers take to explore and produce oil and gas, and provide a better means of discussion between royalty holder and producer. Discussions that are based on the facts involved in each JOC. Discussions that involve the innovative oil and gas producer and the royalty holder who wishes to better understand the business they are in, and the specific nature of the JOC.

Technorati Tags: People's Governance Government Innovation

Just because they say yes...

... doesn't mean its ok. I thought we would have learned that lesson from the mortgage fiasco we are now experiencing. Just because a banker says you can have that new house does not mean that it's a wise decision. This logic is something that people should have thought about when it was happening, not when it's too late. 

Just as the mortgage broker, President Barack Obama and the Democratic Congress should heed the call to think twice about "stimulating the economy". We proved that Keynsianism was a flawed economic policy in the 1980's. Why is it now assumed that the problems brought about by easy money is going to be fixed by even easier money. Failure is a necessary element of economic change, and failure has to occur to make way for the new success. There is no way to avoid it. By delaying the organizational failures only makes it more costly in terms of higher unnecessary debt, and longer time frames.

We see here in an article from the New York Times  that the Chinese may be at the end of their unlimited financing of American consumption. What happens, President Barack "I'm in over my head" Obama, when the world says "no I'm not investing in that"; and the Obama budget meets the immovable mountain of the Chinese propensity to finance the American taste for debt . 

Moral hazard is here, no consequence from the government actions are considered. It's all just a matter of waving a magic Obama wand and all will be well. Or alternatively, we just dig ourselves into a much bigger hole to dig out of in the not so near future. 

Technorati Tags: People's Government Economics Failure

Miss-allocated capital.

How did we get ourselves into this economic situation. Professor Perez suggests this a result of long term economic cycles. This will be the fifth "turning" that has happened in the last 237 years. We can see in each of these that the past methods of economic growth and prosperity are no longer able to carry the load of the economy on their own. This appears to be as a result of the inability to invest wisely in making the economy more efficient. And I would suggest that the old and tired bureaucracy, a 20th century innovation, is primarily responsible.

The new Information & Communication Technologies (ICT) provide new ways of organizational efficiency. The rebuilding of industries to make the necessary changes is the scope of the current economic crisis. The damages to the old and tired organizations is so comprehensive in these turnings that rebuilding makes them necessary. We have a particularly critical situation in this turning that we had not faced before. The globalized and highly sophisticated economy based on Adam Smith's theory of specialization and division of labor. We physically can't self organize anymore. 

By miss-allocating capital, firms have not increased the base of productive assets in the economy. Instead of reaping continued returns from each years investment, we see our real earnings decline from neglect and no new revenues being generated. As a result the majority of the capital in the past 10 years has been spent on consumers non-productive needs. Purchasing bigger houses and renovating them took on a heightened importance in the economy. Those that have purchased homes at these high prices have only valued the size of their mortgages.

A mindset that the government will "fix it" I think will fade after the election today. The government knows the size of the problem and are aware that one of the most competitive advantages of the American people is their ability to pick themselves up and start again. This characteristic is the key to why the American economy is the most powerful in the world. And will continue to be. When as I noted in yesterday's post Volvo lost 99.6% of their unit orders of heavy trucks, and the Baltic Dry Index had fallen by 90%. It is clear to see that no goods are moving in the world economy right now. So it no longer becomes a credit crisis but is a major economic event that will affect the entire world. The governments are powerless to resolve even these two symptoms.

The lives that we have led for the past ten years will be changed fundamentally. The time we spend in a depressive economic state is dependent on us as individuals. Picking things up brick by brick and stick by stick is the only manner in which we are going to get ourselves out of these problems. It will be tough but we need to begin today. What ever becomes of the oil and gas industry it will need new systems to organize the people in the productive and critical energy production.

Professor Perez notes in a presentation;

For the next two decades at least, Information and Communication Technologies Industries and Services are not just an important industry, they are the key to competitiveness of any company, of any country, of any region. The shape of ICT infrastructure is the shape of the future.

Please, join me here.

Technorati Tags: People's Perez Failure Government

Conservative environmental policy.

An announcement by the Canadian Federal Government on environmental policy was leaked, with few specifics, on how the country would achieve certain CO2 targets.

There will be more information coming on Thursday at which time I will post an update. I "hope" that the government does not assess industry as it is suspected of doing. The tax, if any, should be assessed on the consumer, not industry. Secondly the majority of the taxes should be focused on bringing the costs of Coal in line with Natural Gas.

The other interesting point was, the reduction in greenhouse gases was proposed at 150 million tonnes. In my previous posting, the one facility had injected 7 million tonnes over four years on a pilot project. Maybe the injection of CO2 as a miscible agent will provide the environmentalists with the means to solve this alleged problem. Therefore I would recommend the Federal government join the Alberta Government and provide incentives for the energy industry to act in this manner.

Technorati Tags: Genesys, Environment, Proposal, Government