Alberta Premier Ed Stelmach offered vague hints Wednesday about how his government will handle the divisive issue of oil and gas royalties, suggesting a new framework for charging fees is on the way.

Stelmach spoke during a 19-minute televised state-of-the-province address, his first official response to a government-commissioned report that called for energy companies to pay $2 billion more annually to develop the province's non-renewable resources.

Alberta Premier Ed Stelmach holds up a copy of his televised speech at a fundraising dinner in Edmonton Wednesday.
(Jason Scott/Canadian Press)

"I promised you a royalty system that works for Albertans who own the resources and also for companies who invest billions," said Stelmach. "And that's what we're doing."

While the premier said Albertans will have to wait until a Thursday news conference to learn details, he suggested energy companies will be given time to adapt to the new system.

Stelmach didn't say whether the changes will yield the 20 per cent royalties increase called for by the review panel in the report issued five weeks ago.

"Now we are ready to take decisive action. One that delivers the fair share Albertans rightly expect from the development of their resources," he said.

"It will provide the stability and predictability business needs, and time to adjust to the changes."

Stelmach also suggested there could be incentives to encourage companies to upgrade resources such as bitumen in Alberta rather than exporting them to foreign refineries.

Report shocked industry

The government-appointed panel rocked the oil and gas industry when it concluded Albertans were not getting their fair share, and called for the royalty rates charged to energy companies to increase by 20 per cent or about $2 billion a year.

Oil and gas companies oppose any changes, coming out with almost daily proclamations that royalty hikes will force them to cut jobs and billions of dollars in investment in booming Alberta.

Stelmach has said the big oil lobbying won't intimidate him, but Alberta NDP Leader Brian Mason doesn't buy it.

"I haven't heard him say it lately," said Mason. "He gave the oil industry a whole month to mount their campaign. He's created a political situation that's very difficult for himself."

'He's created a political situation that's very difficult for himself.'— Brian Mason, Alberta NDP leader

Stelmach will release more details of his royalty response at a news conference Thursday afternoon.

Political observers believe the royalty issue will put Stelmach's leadership to the test, and may turn out to be a defining issue for the premier, who has had the top job for just 10 months and is rumoured to be gearing up for a fall election.

Health care a focus

Stelmach also used his televised address to discuss health care, crime prevention and economic diversification.

He said his government would focus on improving health care, saying "that's clearly what Albertans want.

"We're taking action to add doctors and nurses to the system to reduce wait times."

He acknowledged the need to build more hospitals, schools, housing projects and roads.

The premier also promised a new crime reduction strategy, a new plan to better manage Crown lands and diversify key industries such as energy, agriculture, forestry and tourism.

"This will involve making choices and even taking some risks. But being timid and doing nothing is a far greater threat to our future," said Stelmach.

With files from the Canadian Press