The Alberta government was blasted by the opposition parties when the Royalty Review Report was released last week.
The report was part of Premier Ed Stelmach’s leadership campaign promise to initiate an independent review of the province’s royalty regime and for the process to be open and transparent. Unfortunately for the Stelmach government, the review claims the government should raise royalty rates by an additional $2 billion a year and contains serious allegations of mismanagement in the Department of Energy.
“This is a very awkward position [premier Stelmach] has been put in because the report was quite strongly worded,” said University of Calgary political science professor Dr. Doreen Barrie. “It generated a lot of interest from Albertans and an outcry from the oil and gas industry so now he has to balance what to do.”
The Liberal opposition had some strong words about the handling of the industry by the Conservative government.
“The government has their own target of collecting 25 per cent in royalties as a fair share and we have never hit that in the last number of years,” said Alberta Liberal energy critic Hugh MacDonald. “In fact, we keep falling further and further behind to the point where we are collecting 19, 18 per cent, even less than that on conventional crude oil.”
MacDonald expressed shock at the accountability section of the report.
“We never even realized that the Department of Energy doesn’t even have a handle on the information that is used to determine how much royalty is collected from whom,” he said. “It is another indication how this ministry is out of control. Our minister of energy is in over his head and I think Mr. Stelmach should be looking at the back benches, there at another Conservative member who I think could a little better of a job than the current guy.”
Most surprising to many Albertans is the province’s royalty rates are lower than those in many places in the U.S.
“It is lower than places like Texas, Wyoming, Oklahoma, the American States,” said Barrie. “If they are taking more and deriving more benefits, then how come in Alberta we can’t do the same thing.”
The Alberta government views the Royalty Report as a new tool for the toolbox, explained spokesman for the Premier’s office David Sands.
“In fact, what the Royalty Report shows what we should be collecting and we didn’t have this information in the past,” said Sands. “The report itself is new information and a government cannot act on what it does not know.”
The Canadian Association of Petroleum Producers–the lobby group for the industry–saw some aspects of the report as very concerning.
“The panel ignores the real costs facing the industry,” CAPP stated in a press release, Mon., Sep. 24. “For example, the costs for a typical oilsands project are stated to be $5-6 billion by the panel, but the actual costs are $10-11 billion. These costs, such as the price of steel, are largely driven by global factors and are not within the control of the industry.”
On the heels of heavy criticism, Stelmach has appointed an independent panel to ensure that Albertans are receiving the long-term benefits needed from industry.
“We’re looking for feedback from Alberta residents on what they feel it’s important to save and what their priorities for the future are,” said Dr. Jack Mintz, the future head of University of Calgary’s School of Public Policy and chair of the commission.
The five-member Financial Investment and Planning Advisory Commission will make recommendations regarding the management, structure and use of the funds based on public input and will submit their report by the end of Nov. The reaction to the Royalty Report may affect FIPAC’s recommendations.
“If the government decides to enact all the suggestions in the Royalty Review Report into policy, that will definitely affect the income flowing into Alberta’s funds,” said Mintz.
Students should be concerned with this panel because it could have an impact on post-secondary funding. Along with the $16 billion Heritage Trust Savings Fund which generates investment income that helps pay for education, the smaller Heritage Scholarship and Heritage Science and Engineering Endowment Funds are also within the scope of FIPAC’s report.
Dr. Mintz explained he felt it’s important that the panel collect feedback from all factions of society to ensure that they have a fair picture of Albertans’ priorities before making recommendations. Thus far, FIPAC has consulted with the managers of the funds, policy experts, labour groups, not-for-profit organizations, and other stakeholders.
“We’ve been having some very good meetings, and some excellent work has been done,” said Mintz. “We’re still pulling in information about what the public wants.”