Alberta review ‘tarnished:’ Liberal leader

Gary Park

For Petroleum News

The Alberta government’s royalty review panel has stumbled out of the starting gate, facing accusations from two sides: One saying it is stacked in favor of the industry and the other complaining that there is no direct industry representation.

Opposition Liberal leader Kevin Taft wasted no time tarnishing the government’s choices for the six-member panel — a collection of former energy executives, oil and gas economists and tax experts — arguing they do not represent the best interests of Albertans.

He also said that by combining royalties and taxes in the same review, Premier Ed Stelmach has left a “huge amount of wiggle room to fudge the royalty question,” which was the overriding reason for the exercise.

“We have a tone being set by Stelmach that suggests to me the appetite for royalty change is not significant,” Taft said.

New Democratic Party leader Brian Mason doubted the panel could be objective when most members were attached to the corporate sector in some way. “There’s nobody representing the true owners of the resource — the people of Alberta,” he said.

The panel will be chaired by Bill Hunter, former president of Alberta-Pacific Forest Industries, with more than 30 years’ experience in that sector.

The others are: Judith Dwarkin, chief economist for the Ross Smith Energy Group, an independent energy consultant; Andre Plourde, chairman of the economic department at the University of Alberta; Kenneth McKenzie, an economics professor at the University of Calgary; Sam Spanglet, former vice president of oil sands operations at Shell Canada and a director of Atco Power; and Evan Chrapko, chief executive officer of the technology-based Crystal Group of Companies.

Spanglet faced a lot of finger-pointing because he holds “a couple of million” dollars in Shell Canada stock options, but said he saw no grounds for claiming conflict of interest. The government said Spanglet was never asked about his interests in Shell Canada.

August deadline for recommendations

“Albertans must feel confident the royalty structure is meeting the needs of the province,” he said.

“This is not a witch hunt. It’s got to be fair to both asides,” Oberg said.

“As owners of the resources, Albertans are entitled to a fair return. But the royalty structure must also be fair to the industry and not put a stranglehold on future economic growth.”

The Canadian Association of Petroleum producers, while disappointed it did not have direct representation, is counting on a chance to outline its views during public hearings which start in April and include stops at Calgary, Edmonton, Fort McMurray and Grande Prairie.

Stelmach agreed to conduct the review after facing a rising tide of criticism, including discontent that oil and gas producers now account for 19 percent of Alberta oil and gas revenues, down from 23 percent in 2001 and 2002, well short of the government’s target of 20 to 25 percent.

The review starts against a background of robust industry profits, with Canada’s five integrated oil and gas companies tallying profits of C$12 billion in 2006, while independent EnCana reported C$6.5 billion, an historic 12-month high for any Canadian corporation.

The most sensitive issue involves the oil sands, where producers pay 1 percent of gross royalties until project costs are paid off, then 25 percent of their net take.

Also on the table are conventional oil and gas royalties.