Are we getting our fair share?
The issue of royalties from oil and gas companies has been front and centre on the political scene for at least the past six months. There are some who say the royalty system is fine as it is, but there is also a large group who believe we are being short-changed.
Today there is more fuel to the fire for both sides of the argument.
Alberta’s Auditor General, Fred Dunn, released his annual report and addressed the royalty system in our province. While he didn’t discuss the recent recommendations made by a royalty review panel, he did release a scathing indictment of the provincial government’s collection of energy royalties.
Dunn found that the Alberta government hid information for at least three years showing that energy royalties could be increased without hurting the energy industry. The Auditor General says the energy ministry’s own reports, from as far back as 2004, say that royalties could be increased by $1-billion a year or more without stifling profitability.
Dunn says officials know that the royalty rates are low in Alberta and actually one of the lowest rates out of any jurisdiction with oil and gas.
The auditor general says the principles of transparency and accountability - the hallmarks of Premier Ed Stelmach’s Conservative government - have not been followed when it comes to royalties.
Dunn adds the situation has become so bad that people are forced to file freedom of information requests just to get vital information about royalty collection.
While the report doesn’t focus on the recent royalty review or make a suggestion about raising rates or holding them steady…it can definitely be used as a tool for those who believe our rates are too low and need a hike.
The fact that a rise may not hurt the energy industry may shoot down any opposition to a hike.
And that leads to the other side of the royalty argument.
Today another oilsands company has come forward urging Premier Ed Stelmach not to adopt the suggestions from a royalty review panel, which says higher royalties would bring $2-billion more annually to the province. Investment bank Tristone Capital says ‘punitive’ recommendations in an Alberta royalty review would actually lead to $2-billion in less revenues for the province by the end of the decade.
Tristone president George Gosbee says boosting royalties, particularly in the natural gas sector, would lead to a ‘flight of capital’ away from Alberta.
Late last week, energy giant EnCana said it would slash spending in Alberta by $1-billion if the royalty rate hike was adopted. Tristone is proposing a smaller royalty hike, and Gosbee admits that the oilpatch made a mistake when it advocated leaving the rates unchanged.
Are we getting our fair share? Are oil and gas companies getting an easy ride from our province or are they paying enough for our resources?
It doesn’t seem that there is an easy solution to this problem and Premier Stelmach will have to come up with a detailed compromise to make both sides happy.
Some of you may think your opinion doesn’t matter, but I urge you to voice your thoughts to your MLA. These resources are owned by all Albertans and I’m sure if someone was trying to buy your home, you’d want a say in what price you get for your property.
October 5th, 2007 at 6:15 am
Yes the oil industry does a lot of good for Alberta, but the lowest royalties shows we have been suckers. I believe if we increase the royalties in stages, they can accept it. They have been getting away with too much. They flaunted their wealth too much, like Britney, Paris Hilton and Lindsay Lohan. Now they must pay the pipers.
October 5th, 2007 at 6:58 am
It sounds like a fight between ‘fair’ for us, and big industry greed. Of course Texas should not be getting more than we do (sounds a bit like children gathered around the pie). However, charging ‘what the market will bear’ is an attitude that generates inflation and shows a certain greed on the part of the Albertans who insist the royalties should be raised.
There are more important factors: On the one hand, it is very dangerous when big industry runs government — that is not democracy. But on the other hand, it is tyranny when the government breaks contract — that is not democracy either. As Heather Douglas (Chamber of Commerce) says, whatever changes are made should be made gradually, and that can be orchestrated by simply honouring existing contracts.
It is the very fact that our royalties are lower that brought so much big industry to our province. That is a good thing, in that we are out of debt and prosperous. But it is a bad thing, because it brought droves of newcomers, and our infrastructure is desperately in arrears trying to handle them. And it is also a bad thing because our oil reserves are being depleted quickly… which is why we need greater royalties, to sustain us when the wells dry up! Hopefully the added revenues would be invested, not just spent, or we would really be headed for down times.
Industry, of course, says that they need to keep the money for research and development, not just for greed. It might be interesting to publish the annual incomes of their top executives to see just how much greed is really involved!
Finally, if some industry pulls out and goes elsewhere in Canada, to the Maritimes and Saskatchewan, for example, that might not be such a bad thing. The huge influx of population that we have experienced might slow down and infrastructure could catch up.
Other places could share our prosperity:
“It’s mine, but you can have some.
With you I’d like to share it,
‘Cause if I share it with you,
You’ll have some too.”
And our oil sands would last longer, which would mean we might not need that vast increase in royalties, because our prosperity would settle down a bit and last longer.
I think going slowly would be a good idea. Yes, raise the royalties, but don’t break contract. And don’t pretend the increased income is for the citizens of Alberta NOW, because it should really be for down-the-road, and for diversification.