As Rachel Notley faces tough questions from Alberta progressives about her new royalty review, the premier says there might have been a different outcome if oil prices were higher and the province faced fewer market-access issues.
“If we were still in a $100-a-barrel environment, I would suggest that perhaps we could have done better as a province, but the fact of the matter is that what we’re dealing with now is fundamentally different,” Notley told CBC Radio on Monday.
“No one knows it more than the people in Calgary — the tremendous level of uncertainty and there’s a tremendous need to inject some stability and to attract investment in an industry which, quite frankly, is in the process of trying to reposition itself on a global basis.”
On Friday, the province unveiled its new royalty review, which concluded the province was charging a comparable rate of royalties to other energy-producing jurisdictions.
The NDP government, which had promised the review in the 2015 election campaign, will not change the rates for companies operating in the oilsands, and existing oil and gas wells will also not be affected.
For wells drilled in 2017 and beyond, the changes will maintain existing rates of return for companies at the outset. New wells will pay a flat royalty rate of five per cent until payout, followed by a higher rate once costs are recovered.
It’s expected the new system will encourage companies to drive down costs and improve efficiency in the sector.
But progressive groups that have asked for years for royalties to be examined aren’t impressed.
“The new royalty framework accomplishes a number of advances that were long overdue, not least of which is increased transparency and accountability, but seriously misses the mark in terms of making sure that Albertans — the resource owners — obtain their fair share of energy resources once the price of oil starts rebounding,” says a new blog by Richard Acuna, executive director of the Parkland Institute.
Alberta Federation of Labour president Gil McGowan said Saturday he’s not happy with the results, calling it a “profound political mistake.”
“To say I was disappointed would be an understatement,” McGowan told the Calgary Sun’s Rick Bell.
“Some people say the NDP have come face to face with reality. I say what happened can best be described as the government being captured by industry.”
Joel French, executive director of Public Interest Alberta, which has called for a “fairer share” of royalties in the past, said he expects some of the NDP’s core supporters will be disappointed with the outcome.
“The NDP’s base — or most of it at least — was hoping to see when prices are high, Albertans getting a bigger part of the revenue from the resources we own,” he said in an interview Friday.
“I think it’s the first major policy decision since the election where I think the NDP’s base would be hard-pressed to be satisfied.”
But Energy Minister Marg McCuaig-Boyd defended the review on Monday, saying the advisory panel consulted with all Albertans.
“I think they first of all have to remember we’re governing for all Albertans,” she said of the critics.
“There were lots (of people) who wanted us to raise rates, there were lots who wanted us to lower rates. In the end, I think we’ve come up with something that is right for Alberta.”
The minister said the panel and government had to consider the state of the economy and downturn affecting the industry, which has seen thousands of jobs disappear.
“It is responding to the pain and uncertainty that workers and families are feeling in our province. So I think sometimes we have to look at the bigger picture,” she added.
Political analyst David Taras at Mount Royal University said it’s been apparent for weeks that the Notley government was going to hike costs to the energy industry through its new carbon tax, not higher oil and gas royalties.
He wonders if the unhappiness by some of the NDP’s political base signals a struggle coming over public sector wages and possible cuts in the spring budget.
“Does this foreshadow a new battleground where their own troops become disenchanted?” Taras asked. “Any government that is going to survive has to understand where the political middle is.”
On Monday, the premier said the conditions are different today than during last May’s election campaign and the review took place during a period of uncertainty and worry for the energy sector.
“It’s not without its changes but it is without, certainly in the short term, any net change in the cost to industry. But I do think it will set us up well for the future,” Notley said.
“So it might have been different if the price of oil had been higher and, or, if we’d managed to get access to other markets or if the U.S. hadn’t become our biggest competitor.”
