Vowing a fresh start

Alberta’s new energy boss ready to rebuild partnership with petroleum industry

Gary Park

For Petroleum News

With blinding speed, he did what others before him had failed to accomplish and negotiated a pension plan with Alberta’s teachers, then reformed the province’s health care system.

That’s what Ron Liepert brings to the table along with a tough-guy reputation as he takes on the energy minister’s job in Alberta.

In what might have been the understatement of the day, Premier Ed Stelmach described Liepert as “task-focused” as he introduced a new cabinet that could be his last chance to arrest a free-fall in Conservative party fortunes after 39 years of governing — often by landslide margins — in Alberta.

Stelmach said he wants Liepert to spend time at the industry’s favorite hangouts in Calgary and open the lines of communication with an industry that has felt shunned by the government it has enriched and kept in power over the decades.

The reality for both men is that they don’t have much time to mend a fractious relationship that has cost Alberta billions of dollars in upstream investment and thousands of jobs since Stelmach set about overhauling a royalty regime that was once the envy of oil and gas jurisdictions across North America.

Calgary energy analyst Peter Linder said the decision to demote Mel Knight from the energy post is a “smart” move at a time when the government is “about to announce a new fiscal regime … that should be much more industry friendly, yet still gives a fair share to the people of Alberta.”

He said the government’s attempt to impose a 20 percent royalty hike was clear evidence that Knight has failed to heed industry warnings.

Now the Conservative government (with 68 of 83 seats in the provincial legislature) has made a breathtaking dive in opinion polls to a record low of 25 percent, compared with 39 percent for the fledgling Wildrose Alliance (which holds three seats, two of them from recent defections by government legislators).

Stumble out of gates?

He told the Globe and Mail the Alberta cabinet must decide how to “change our policy of come-one, come-all” before economic recovery brings the oil sands back to life.

Liepert said the current lull in construction gives the government time to decide if and how it can schedule new projects.

To those in the industry who believe the government has no role to play in the development of its oil and gas resources, Liepert said: “That’s not going to happen.”

Within a matter of hours he was clarifying that position.

Instead of conveying any suggestion of government intervention, Liepert said he was merely making a case to “talk about and think about (what might happen) two or three years down the road when development picks up again. I don’t think we’re offside with the industry,” he told the Edmonton Journal.

Stelmach was even more emphatic, saying the government’s objective is just to ensure the infrastructure is in place to match the pace of business development.

Liepert has made it clear he is anxious to bring the government and the industry back to the same page on royalties.

Prodded by Stelmach’s insistence that the two sides must be partners in attracting new investment to unconventional gas development, Liepert said his first priority will be to act on the findings, expected to reach the cabinet late in January, of a review comparing Alberta’s royalties and fiscal framework with other North American oil and gas jurisdictions.

He said it is vital to restore a dialogue that industry leaders say has been missing from the three-year process of introducing a new royalty framework.

Applying common numbers

“What we need to do is make sure government is not a hurdle to future investment,” he said.

Stelmach said an improved dialogue is essential as Alberta deals with “significant structural changes” in the gas sector and shifts its focus to shale gas.

“We own the resource, but the industry puts up the critical dollars, which are at risk unless we have a very good competitive position as a province,” he told a conference call.

A spokesman for the Canadian Association of Petroleum Producers and Roger Soucy, president of the Petroleum Services Association of Canada, said there is a strong sense of concern within the industry over how the government will handle the competitiveness review.

Soucy said Liepert does “have a general understanding of industry issues,” but his performance will be judged by how he handles the competitiveness review.

Gary Leach, executive director of the Small Explorers and Producers Association of Canada, said in a statement that a strong economic policy is vital to guide Alberta’s energy strategy and accelerate the province’s economic recovery.

“The first step to achieving this goal is for government and industry to work together,” he said.

Second energy minister shown the door

In less than a week, those holding the portfolio in Alberta and now the Canadian government have been moved down the pecking order.

Mel Knight handed the reins of control in Alberta to Ron Liepert, and Lisa Raitt, after only 15 months as Canada’s Natural Resources Minister, has been yanked from the job by Prime Minister Stephen Harper in favor of Christian Paradis, a 36-year-old star-in-the-making.

Despite giving his home province of Quebec some added clout in the federal cabinet, Paradis may face his toughest job selling the importance of hydrocarbons in Quebec, which has adopted California’s low-carbon fuel standard and is the bastion of strongest Canadian opposition to the oil sands.

Gilles Duceppe, leader of the separatist Bloc Quebecois, reflected the mood when he said Paradis was “stooping very low to accept a portfolio like that. A Quebecer will be defending the indefensible. That’s shameful.”

It matters little in Quebec that the energy sector is responsible for 25 percent of Canada’s Gross Domestic Product, or that Alberta’s energy wealth is redistributed to economically weaker regions such as Quebec.

It is not clear whether Paradis will attempt to present a more complete picture of the oil sands in Quebec or across Canada.

But many observers note that the real control at the federal level over the petroleum industry is in the hands of Environment Minister Jim Prentice, who runs Canada’s climate-change agenda, has government oversight of the Mackenzie Gas Project and, like Harper, comes from Calgary, the headquarters of the Canadian industry.

Even so, Paradis can’t be shoved out of the MGP picture, given the importance of current attempts to negotiate a fiscal regime with the project partners and the cabinet’s ultimate role, once the regulatory agencies have completed their work this year, in issuing final approval.

The change was forced on Harper by a series of gaffes committed last year by Raitt, who is facing an investigation by the federal ethics commissioner into allegations of improper fundraising activity and who left confidential government documents in a TV studio.

—Gary Park