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JF-Expert Member
Feb 11, 2007
Alberta royalty grab stuns oil industry
Stelmach unveils new regime that will mean a potential windfall of $1.4-billion for the provincial treasury beginning in 2010

From Friday's Globe and Mail

October 26, 2007 at 1:59 AM EDT

CALGARY AND EDMONTON — Alberta Premier Ed Stelmach infuriated the province's oil industry Thursday with surprisingly aggressive plans to take more money from the energy business, but the increases are less than a government-commissioned panel recommended last month.

The government said that under the new regime, money collected from the energy business could be 20 per cent higher in 2010 than forecast, potentially bringing an additional $1.4-billion to the treasury. That figure is nearly half a billion dollars less than the expert review panel wanted.

Starting in 2009, royalty rates will be increased across the board – for example, in the oil sands, rates will start rising when the price of oil is higher than $55 a barrel, with a new maximum of 40 per cent of a company's net revenue, up from a fixed rate of 25 per cent.

“As future generations look back at today, I believe they will see we were fair and reasonable, not greedy or short-sighted,” the rookie Premier said after the Progressive Conservative government released details of how it will redraw the royalty rules for oil, natural gas and oil sands in the debt-free province.

Alberta royalty decision

Premier says energy royalties will rise starting in 2009

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Analysts predict tempered trading
Stelmach bows to oil-industry pressure

A deep well of discontent
“I'm confident we've made the right decisions for today and for Alberta's future,” Mr. Stelmach said, on the same day as the price of oil climbed past $90 a barrel.

The issue has sparked a major political debate in Alberta in recent months, and is considered to be the watershed for the province and Mr. Stelmach's government.

The industry had threatened billions of dollars of capital spending cuts if increases were too high, saying thousands of jobs are on the line.

“You will see an impact. It's not going to be positive,” said Pierre Alvarez, president of the Canadian Association of Petroleum Producers.

George Gosbee, chairman of Tristone Capital Inc., said the industry will do some “aggressive lobbying” to fight the changes.

Non-industry players were upset, too.

Chris Severson-Baker of the Pembina Institute, a left-leaning research group, criticized Mr. Stelmach for stopping “far short” of the panel's recommendations.

“It's extremely disappointing. This is a status quo unless prices get very high,” he said.

Mr. Stelmach said his government's response isn't a compromise. “Please don't say it's a compromise,” he told reporters in Calgary.

The government plans to use the extra money to fund infrastructure projects and for savings. The plan is more aggressive than Mr. Stelmach hinted at on Wednesday.

The Premier spoke with Prime Minister Stephen Harper Thursday, trying to assure him that higher royalties would have a “minimal” impact on Ottawa, although he told reporters there would be “less revenue” for the federal government. Energy companies can deduct royalties from federal taxes, meaning higher rates in Alberta cut into money paid to Ottawa.

In the 1970s, when Alberta raised royalties, Ottawa struck back by disallowing royalties as deductions from corporate taxes, a double blow for industry. An estimate suggested Ottawa could lose several hundred million dollars annually.

The Premier played down rumours of a fall election yesterday. “I'm not doing this because I'm going to an election. I'm doing this because it's right for Albertans,” he said.

However, Keith Brownsey, a political scientist at Mount Royal College in Calgary, said it's possible that if the government's internal polling indicates the new royalty regime is embraced by voters, Mr. Stelmach may opt for a December election.

Since Mr. Stelmach became Premier last December, the Progressive Conservatives' 36-year-old dynasty has struggled, with popularity plummeting below 50 per cent amid widespread criticism the government hasn't dealt well with boom-related issues.

David Taras, a University of Calgary political analyst, said the government's new royalty rules are “muddled” and “confusing” to the point that most Albertans won't understand them and Mr. Stelmach might appear weak compared with Danny Williams, premier of Newfoundland.

“He's kind of like a Danny Williams on Valium. He's going ahead with all these changes, but they don't look very aggressive.
Asante Bubu,

No wonder Kikwete aliwaomba wazungu watusaidie watanzania namna ya kuandika mikataba. Insulting kwa wasomi wooote waliosomeshwa na nchi since independence!
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