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Alberta wants bigger take from oil Government panel says province doesn’t get fair share from energy development, recommends tax bite should increase by 20 percent The Associated Press
The State of Alaska isn’t the only government looking to raise its take of oil and gas revenues. A government-appointed panel has concluded that “Albertans do not receive their fair share from energy development,” so their total take should rise by roughly 20 percent, or $2 billion a year.
Premier Ed Stelmach said Sept. 18 that his government would take about a month to decide whether to follow the panel’s recommendation to increase energy royalties, especially for booming oil sands projects.
The report, available at the government Web site, says all oil sands projects should pay roughly 36 percent more to the province, but a royalty holiday would continue for new projects.
High-production oil and natural gas wells should also pay higher royalties, although a large number of low-production wells would pay less.
“Fair share cuts both ways,” reads the 100-page report.
Net effect 9% for gas, 11% for oil The net effect would be a 9 percent boost in revenue for the government from natural gas royalties and an 11 percent increase in revenue from conventional oil production.
“Albertans own the resource,” concludes the report. “The onus is on their government to rebalance the royalty and tax system so that a fair share is collected.”
Klein lashes out at panel Negative reaction to the panel’s recommendations included comments by former Premier Ralph Klein, who told CanWest News Service that he “fears” for the oil sands sector.
Klein, who was premier in the mid-1990s when the current oil sands regime was set up, retired in December. In an interview with CanWest he said he talked to oil industry leaders right after the panel’s report was released.
“One of three people in this province depend on the oil industry to make a living, so maintaining a regulatory system that is predictable and stable is vital to maintaining the thriving energy sector that creates these benefits — in my mind,” Klein said in the interview. “Alberta is known all over the world for its stable and fair royalty system and last night, I happened to have the opportunity to speak with a number of oil industry leaders, and they weren’t pleased with the recommendations.”
In a Sept. 18 speech to a petrochemical convention, Klein said, “My province has a fair, clear and comprehensive regulatory regime where the rules are the same for everyone — and those rules don’t change on a whim.”
“Predictability and stability are what separate Alberta from places like Venezuela, where the government holds foreign companies hostage by arbitrarily imposing massive hikes in royalties and taxes,” he said. Stelmach: reasonable to take a few weeks to decide Premier Ed Stelmach was cautious with his initial remarks, but said he felt it was reasonable to take a few weeks to review the recommendations.
“The initial (royalty) policy has certainly spawned growth in the province of Alberta and now we’re going to be looking at the next 20, 30 even 40 years,” he told reporters. “So it is important for Albertans.”
Finance Minister Lyle Oberg said a couple of months ago that he was nervous about this royalty review because the stakes are very high for both taxpayers and the energy industry.
“Yeah, I’m still nervous,” he told a packed news conference. “But I’m also confident in the people that put this report forward.”
Panel Chairman Bill Hunter says the recommendations are aimed at keeping Alberta’s royalty rates competitive internationally, being sensitive to cost pressures in the oil patch and being fair to all Albertans.
“We stand by our report,” Hunter said. “We think this is very defendable and still keeps us in a very, very good position worldwide.”
Hunter said one example of Albertans not getting their fair share from antiquated royalty rates was in natural gas production, where he estimated the province has missed out on royalties “just short of $1 billion a year.”
The government caucus will review the report for the first time Sept. 19at an all-day meeting in Calgary, which could yield the first indication of support.
Energy industry leaders, including ExxonMobil Chairman Rex Tillerson, have said recently that increasing royalties could hinder investment in Alberta. But Hunter’s panel appeared to disagree.
“The total government take can be increased with Alberta still remaining an attractive investment destination,” the report says.
The opposition parties pounced on the report, calling it proof that the Progressive Conservative government hasn’t been collecting a fair share for Albertans by keeping energy royalties relatively low.
“The Tories have failed the people of Alberta and they have failed them badly and they have been failing them for years,” said Liberal Leader Kevin Taft.
“Billions and billions of dollars have been missed by the Alberta treasury because of the Tories’ failure.”
Taft also says he’s concerned that the premier has decided to take a month to respond to the report, because of the possible impact this will have on investment markets.
“I think that dithering by this government could really put the energy markets into some turmoil,” he said.
“If Alberta’s finance minister is saying publicly that he’s nervous, imagine how that makes the markets feel.”
NDP Leader Brian Mason blamed “the neglect of the government” for what he called the loss of billions of dollars.
—Petroleum News contributed to this report
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