Alberta Politics

Can Alberta’s Royalty Review get us off the “Royalty Roller Coaster?”

Alberta’s Royalty Review panel stopped in Edmonton on Oct. 6, 2015 for the fourth and final scheduled community consultation meeting. Compared to reports from a tense meeting the previous evening in Calgary, the crowd of about 120 Edmontonians was generally polite and quite tame.

A review of Alberta’s natural resource royalty rates was a key plank in the New Democratic Party‘s election platform and a panel was appointed shortly after Rachel Notley was sworn-in as Premier earlier this year. The panel is chaired by Alberta Treasury Branches President and CEO Dave Mowat and includes Town of Beaverlodge Mayor Leona Hanson, former deputy finance minister Annette Trimbee, and respected energy economist Peter Tertzakian.

The difference in tone at the two consultation meetings is likely explained in the job losses caused by the decline in the international price of oil, which has impacted Calgary and communities in northern Alberta in larger numbers than Edmonton, which has been somewhat sheltered by a boom of large construction projects and a large public sector workforce.

Unlike other parts of the province where the new government’s policies may be met with varying levels of hostility or cynicism (and where NDP MLAs were elected with thin margins), support for Ms. Notley’s party is deep in Edmonton where 64 percent of voters cast ballots for NDP candidates.

As Mr. Mowat described it, it is critical to separate overlying vision (which is inherently emotional) and the complex technical structure (which is very complex) of Alberta’s natural resource royalties when trying to have a public discussion about the issue. And to Mr. Mowat’s credit he presented the panel’s goals and answered questions from the crowd using layman’s terms with ease.

Of course, what is actually implemented when the panel submits its report to the government will be a decision left to the politicians.

An advantage of appointing an arms-length panel like the one Mr. Mowat is chairing is that the government can pick and choose what recommendations it deems viable, both politically and economically.

Last month, Ms. Notley echoed comments made by former Premier Jim Prentice when she said it was time to get Alberta “off the royalty roller coaster.”

The drop in the international price of oil exposed a large cleavage in the government’s finances as past governments became too comfortable and over reliant on these unstable resource revenues to fund the province’s operations budget.

Like her predecessor, Ms. Notley says she plans to fix this, albeit without significant cuts to public services as Mr. Prentice and the opposition Wildrose Party proposed.

But before Alberta’s government is in a position to decide whether the royalties we collect in exchange for allowing private corporations to extract our natural resources should be lowered, kept the same, or increased, the panel is continuing to collect feedback and submissions from Albertans.

These natural resources belong to all Albertans, so do your part and let the panel know what you believe the future of our natural resource royalties should be.

3 replies on “Can Alberta’s Royalty Review get us off the “Royalty Roller Coaster?””

All this does is create uncertainty in capital markets. Didn’t we learn from Stelmach the first time? There should be no royalty review, period.

The answer is “of course not” simply because (a) the price of oil factors into the royalty percentages as well as the volumes of oil produced and we have no control over the global price of oil, and (b) the impacts of the royalty roller coaster aren’t really felt in the revenues, the impacts are mostly felt in the expenditures. Technically, the quickest way to get off the royalty roller coaster is to either bank 100 per cent of royalty revenues into the Heritage Trust Fund or just stop collecting royalties altogether. That way, the price of oil and the subsequent royalty revenues will have zero impact on the provincial budget, we’d be off the roller coaster.

Darren, I thin that’s a disingenuous response. There is a middle ground between “spend all the money, always” and “give away all our oil for free”. What if we were to budget with a ten- or fifteen year rolling average of oil prices? Anything over that gets put in the Heritage Fund to grow, and when it dips below, you adjust by removing the difference from the Fund. It seems like that would remove any uncertainty for the Government when trying to pay the bills.

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