Alberta royalty review: No changes to rates before 2017
'For 16 months companies and investors can operate with certainty,' says energy minister
The NDP government offered some short-term certainty to Alberta's troubled oil and gas industry Friday, announcing that royalty rates paid by companies will not change before 2017 at the earliest.
Energy Minister Marg McCuaig-Boyd announced the names of panel members who will spend the rest of this year conducting a comprehensive review of the royalty system, with a mandate to report back by the end of December.
"Our government is committing that the current royalty framework will remain in place until the end of 2016," the minister said Friday. "That is to say, for 16 months companies and investors can operate with certainty, knowing there will be no changes in the royalty framework."
Setting that time frame will help companies plan their drilling seasons for this winter and for next year, she said.
New revenues would go to Heritage Fund
If and when changes to the royalty rates are made, McCuaig-Boyd said, any extra money raised will be invested in the province's Heritage Savings and Trust Fund, which now has about $18 billion in it.
The panel's final report will provide certainty for Albertans, the minister said, so they will know the rates are neither too high nor too low.
"As owners, Albertans deserve to know they are getting a full and fair value from the development of their resources," she said.
The panel will be headed by Dave Mowat, the president of ATB Financial. Other members named Friday are:
- Peter Tertzakian, an energy economist.
- Annette Trimbee, a former deputy minister of finance.
- Leona Hanson, the mayor of Beaverlodge.
Asked about the current economic recession, Mowat said with oil sitting at about $45 a barrel, this is the perfect time to conduct such a review, given that companies now know they will face no changes to their rates before 2017.
"One of the things we want, any insights we have about a framework for the future is, it's got to work as well at $30 a barrel as it does at $100 a barrel."
Any new royalty system must balance the need to protect the energy industry during down times, when oil prices are low, with the need to make companies pay full value when prices are higher, the minister said.
Mowat said royalties in the province have been reviewed more than 10 times since the 1930s. Most recently, the government of former premier Ed Stelmach brought in changes in 2007 but later backtracked under intense pressure from the industry.
Website created for public input
The government has created a website called letstalkroyalties.ca to gather input from the public until the end of November. The panel will answer some questions raised there, and will publish information on the website every two or three days.
The panel will also talk to experts, including industry and consultants who understand other royalty systems across the world, Mowat said, in an effort to ensure Alberta remains competitive.
"Investment is mobile," Mowat said. "Investment goes to places it thinks it can find good results.
Mowat said the industry has been "very generous" with a willingness to provide otherwise confidential information about their companies.
The panel will take into account any changes the province plans to make to the cost of carbon as it develops its climate-change policy.
The Canadian Association of Petroleum Producers said the royalty review should consider how to make the province more attractive and competitive for the oil and natural gas investment.
"Many Albertans are feeling the severe impact of low oil and natural gas prices that have resulted in one of the most dramatic economic downturns in a generation," CAPP president and chief executive officer Tim McMillan said in a news release.
"That's why the royalty review should focus on how to re-establish Alberta as a province that is competitive with other jurisdictions. The more competitive we are, the more we can protect and grow jobs, investment and government revenues in Alberta."