Stuck between a rock and a hard place
Friday, September 28th, 2007Stuck between a rock and a hard place… That’s where our Premier is right now after oil and gas giant EnCana gives him an ultimatum.
If Ed Stelmach decides to hike the provincial royalty rates by 20 per cent, the company says it will slash capital investment in Alberta by $1-billion next year. Although the energy company did take part in the royalty review hearings, EnCana officials were shocked when a report by the review panel suggested the hike in rates.
EnCana says most of the spending cuts would occur in areas where increases would make exploration and development uneconomic or uncompetitive. EnCana, North America’s largest natural gas producer, said it had been planning to spend $2.5-billion to $3-billion on Alberta-based activity in 2008. Officials with the company tell 660 News their announcement today is not a threat, just an economic reality and they’re simply looking for a win/win situation.
Earlier this week energy research company Wood Mackenzie said Alberta would reduce the value of oil sands projects by US$26 billion if it adopted the recommendations to boost taxes and royalties.
But some view the situation in a different way.
The controversial report by the royalty review panel said Albertans have been shortchanged by the oil patch for years. It also says oil sands projects should be paying roughly 36 per cent but high-production oil and natural gas wells should be paying higher royalties, with low-production wells paying less.
The big question is: What will Stelmach do?
Political scientist Keith Brownsey at Mount Royal College, says this move by EnCana may actually backfire on them. Brownsey says when push comes to shove Premier Stelmach may actually take a stand against the oil and gas industry and adopt the report in its entirety.
But he adds that Stelmach could easily side with the oil and gas companies on this one and keep the money where the oil is. Brownsey says it isn’t going to be easy for “Steady Eddy.” He says our Premier has the choice between going against public opinion or losing investment in the oil patch.
So what is the best move for our province and will Stelmach make that move? It seems only time will tell.
Have a great weekend mulling this one over.