2022 is looking a lot stronger than last year for oil and gas offerings as the latest June offering came in at $2.9 million in revenue. That represents an increase of $2.4 million compared to the June 2021 offering.
The revenue generated from the June and April sales alone totals $22.2 million, that’s $7 million more than the whole 2021-22 fiscal year where there was $15 million in sales.
Randy Goulden, president of SUMA (Saskatchewan Urban Municipalities Association) said, “We’re excited to see the province, the economy rebounding from the last two years of the COVID pandemic. But as we see the province benefiting from these high oil and gas prices, through the royalties and the taxes they collect, municipalities do not have those revenue streams to deal with some of the rising costs that we’re seeing in our hometowns across Saskatchewan.”
She said that they are having a tough time dealing with the costs of inflation, particularly on infrastructure. Local governments own around 60 per cent of the infrastructure that includes roads, drinking water, wastewater systems and recreational systems.
“We are legislated, we cannot we cannot run deficits. So when we’re looking at some of this (rising costs), we’re looking at changes that we may have to make on the ground halfway through our years to to cover these increased costs and some of them might be changing our service levels,” Goulden said.
“So we’re hoping that (the) provincial government will share some of these increased benefits with our community, our urban municipalities.”
Ray Orb, president of SARM (Saskatchewan Association of Rural Municipalities) said, “We can see that the profits are coming back. You know, we’re going to be asking the premier and the finance minister to have another look at that, to see if they can actually give some relief to farmers and to municipalities.”
Of the 70 parcels posted for the June 2022 oil and gas public offering, 53 received acceptable bids, which covered 6,331.925 hectares. The average bonus bid was $463.43 per hectare with the highest acceptable bid at $6,180.00 per hectare.
The Estevan area saw the most interest, bringing in $2,645,873.18 for 38 parcels covering 4,649.346 hectares. The highest bonus bid in this offering was $641,751.62 for a 387.681 hectare lease in the Estevan area, northeast of Stoughton.
An exploration licence posted in the Estevan area received a bid of $602,204.02.
Jason Childs, associate professor of economics at the University of Regina, said that a lot of the increase in revenue is driven by the price of oil, with oil prices running at around $150 a barrel now unlike 2021 when demand was low and there wasn’t a push for production.
“What we’re starting to see is production in Saskatchewan becoming much more interesting now than it was a year or two ago,” Childs said.
“What I’d like to see, rather than rebates or any or a big boom in government spending, would be the development of the sovereign wealth fund. Something along the lines of what Norway has. So you take a lot of the money that’s coming in for oil from oil and gas revenues and you invest it abroad. You create a sovereign wealth fund that’s going to generate revenue into the future.”
When asked what these dollars could allow the government to do, Childs said that the province can try to bring the budget back to balance faster and relieve some of the pressure on borrowing.
“It’s going to mean that we’re less beat up by these raises and interest rates that are going on right now. And when we roll over, the debt is not going to have to pay quite so much in interest, hopefully,” Childs said. “It’s really what it really opens up a lot of avenues.
“So what is this going to mean for what is all this extra revenue going to mean for the typical Saskatchewan resident? The answer, the short answer is not a lot directly. It’s all going to come through to the government being closer, balanced and feeling more in a position to increase expenditures on various priorities.”
Global News reached out to the province to ask what they are planning to do with the windfall profit. In response, the province said, “Any money resulting from a land sale is put in the GRF to be spend on infrastructure and services for all the people of Saskatchewan.”
Regarding gas prices, Premier Scott Moe has indicated that, “as we find our way through this fiscal year, if we do find our way to a surplus, we are looking at how can we return these dollars so that it would benefit all Saskatchewan people.”