new Alberta royalty structure, doesn't take effect until Jan. 1, 2009
Stelmach under fire
Industry and opposition criticize province's new $1.4B royalty hike
Jason Fekete and Tony Seskus, with files from Lisa Schmidt, Joel Kom and Jamie Komarnicki, and Jason Markusoff, Calgary Herald Published: Friday, October 26, 2007
Premier Ed Stelmach found himself under siege after trying to strike a balance on the explosive issue of increasing Alberta's energy royalties, declaring Thursday night his government is "not Communist" and defending its new blueprint for change.
In what's been described as the most important economic decision in Canada this year, Stelmach introduced a new oil and gas royalty plan -- a strategy to significantly boost rates that left oilpatch leaders fuming, but falls nearly $500 million short of what the government's own expert panel recommended.
Oilpatch firms declared the government's framework the death of the winter drilling season, while opposition leaders said Stelmach caved under the relentless pressure from the province's powerful oil and gas industry.
At a premier's dinner in Lethbridge on Thursday night, Stelmach shot back at investment industry critics who claimed the changes would align Alberta with socialist regimes such as Venezuela, where President Hugo Chavez nationalized his country's oil industry.
"Certainly in the last few weeks I've been called a lot of names," Stelmach said. "We're not Communists. I'm not whatever-his-name-is in Venezuela."
"This is Alberta. We share the returns of our economic rent with all Albertans."
The new royalty structure, which doesn't take effect until Jan. 1, 2009, is expected to deliver an additional $1.4 billion -- 20 per cent more -- in royalties in 2010, compared to current projections.
However, the province would collect about $464 million less than what a six-member royalty review panel called for in its Our Fair Share report, released in mid-September.
"This isn't a compromise," Premier Ed Stelmach told reporters earlier in Calgary. "I have confidence we have got this right."
The premier insisted he struck a good balance with a system that is "fair and reasonable, not greedy or short-sighted."
But the framework tapped into a well of criticism on both sides of the debate.
Petroleum producers warned it could devastate the oil and gas sector -- the province's most powerful industry -- while opposition parties and environmental groups claimed Stelmach sold out Albertans.
"There is genuine and very real concern," said Pierre Alvarez, president of the Canadian Association of Petroleum Producers.
Industry has warned for weeks that fully adopting the royalty report would kill thousands of jobs and force companies to yank billions of investment dollars out of Alberta.
George Gosbee, president of Calgary investment firm Tristone Capital, was incredulous with the government's royalty plan, calling it "window dressing" of the panel's proposals.
"This will result in the loss of the winter drilling season, a decrease in royalties for 2008 and 2009, and in a nutshell, it will not be a bigger pie. It will be a smaller pie," Gosbee said in a teleconference.
"I'm in utter shock."
In crafting the new framework, the Tory government rejected nearly half of the 26 recommendations from the government-appointed panel -- including six of 11 suggestions on oilsands alone.