Alberta should get extra $2B, royalty report says; Oilsands projects would pay higher rates; Government to respond in October
Tony Seskus, with files from Lisa Schmidt, Calgary Herald; with files from Reuters Published: Wednesday, September 19, 2007
Albertans are not being fairly compensated for oil and gas development in their province -- and have lost out on billions of dollars in revenues, according to a landmark study that recommends boosting the government's take by $2 billion a year.
The Our Fair Share report -- the product of a six-member expert panel appointed by the government -- calls for a significant increase in oilsands royalties and boosting the provincial take from high-production oil and natural gas wells.
It also proposes dramatic improvements in the accountability of the overall royalty system.
"Albertans do not receive their fair share from energy development and they have not, in fact, been receiving their fair share for quite some time," panel chairman Bill Hunter wrote in the 104-page report given to the government Tuesday.
"The onus is on government to re-balance the royalty and tax system to ensure a fair share is collected both currently and as circumstances change."
Premier Ed Stelmach, who ordered the review in keeping with a campaign pledge during the Conservative leadership race, said his government won't issue a formal response until mid-October.
"This is a very important decision and my goal is to ensure that Alberta's royalty framework strikes the right balance," Stelmach said.
Reaction from the industry was swift.
"From our perspective, it's much worse than we anticipated, but we've got to go through and crank the numbers," said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers, the industry's chief lobby group. "We expected some changes to be recommended on the rates, but this goes far beyond that."
The report will be presented to the Tory caucus today in Calgary. It's sure to ignite fierce political debate across the province as the Stelmach government moves toward a general election, widely expected within the next year.
The study deals with the thorny issue of future energy revenues -- worth almost $10 billion last year due to unprecedented commodity prices and triggering record industry profits. Finance Minister Lyle Oberg said earlier this year he was nervous about the review because of its potential implications for taxpayers and industry.
"Yeah, I'm still nervous," Oberg said Tuesday. "But I'm also confident in the people that put this report forward."
Almost a third of the Alberta government's total revenue comes from oil and gas royalties, and about one in six Albertans are directly or indirectly employed by the energy sector.
While the energy industry has lauded the stability of Alberta's royalty regime and warned against changes, there has been growing public concern the province has not been getting its fair share from the ongoing oil boom.
The panel's groundbreaking study found other energy producing jurisdictions in North America, including Texas, New Mexico and California, gave residents a bigger share of the money generated in the form of royalties and taxes.
The report states that if all its recommendations are implemented, they would boost the government's annual take by about $2 billion per year at current price and production levels -- 20 per cent more than current revenues of $9.5 billion on oil, gas and oilsands.