Annette Trimbee – daveberta.ca – Alberta Politics and Elections

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.

Let’s Review Oil Royalties and Start Acting Like Owners Again.

Alberta’s new NDP government has taken steps to fulfill one of their key election promises by appointing a panel to ensure Albertans are receiving their fair share from their natural resource wealth through the royalty rates paid by the oil industry to the Alberta government.

Rachel Notley Alberta NDP leader — Rachel Notley

The choice of Alberta Treasury Branches President Dave Mowat, energy economist Peter Tertzakian, former Alberta deputy minister of finance Annette Trimbee, and Mayor of Beaverlodge Leona Hanson to review Albertans royalties should calm any anxiety industry leaders may have had with this process. These are sensible choices for this important review.

Like the panel reviewing Alberta’s climate change strategy, the royalty review panel is stacked with knowledgable appointees who cannot be accused being partisan New Democrats. And while some industry leaders are still uncomfortable with this year’s election results, Mr. Tertzakian has some advice for conservative-connected business leaders.

“The industry needs to have more than just an open mind — I think you have to go with forward thinking and that this is an opportunity to get away from business as usual,” Mr. Tertzakian told a business reporting website after Rachel Notley‘s NDP was elected with a majority government on May 2015.

The appointment of Mr. Tertzakian received immediate praise online from two prominent conservative voices – former Wildrose MLA Heather Forsyth and former Wildrose leader Danielle Smith.

The panel has an important task ahead of it and has a mandate to “optimize” returns to Albertans as owners of the resource, industry investment, diversification opportunities, such as value-added processing, and responsible development of Alberta’s resources.

Bill Hunter, who chaired the 2007 royalty review panel established by former Premier Ed Stelmach, wrote in his final report that “Albertans do not receive their fair share from energy development. Albertans own the resource. The onus is on their government to re-balance the royalty and tax system so that a fair share is collected.”

Nearly a decade after Mr. Hunter penned those words, the responsibility once again falls on Alberta’s government to ensure that Albertans are receiving their fair share from energy development.

It is up to the current panel to consult with Albertans and industry to determine what that proper balance will be.

Part of that balance will be timing, as Energy Minister Marg McCuaig-Boyd told reporters today that any changes to royalties will not be implemented until 2017. And like any other panel review, Ms. McCuaig-Boyd and Ms. Notley have the leeway to ignore any recommendations that might appear to be politically unpalatable or carry too much risk. This is why government’s like to employ these types of panels to review potentially controversial policy changes.

Politicians from the opposition benches have been fiercely critical of NDP plans to review royalties. The Wildrose, Alberta Party, Liberal and the Progressive Conservative opposition have described the review as “job killing.” A September 3 by-election in Calgary-Foothills has escalated the partisan rhetoric from the opposition, who see a by-election win as a way to discredit the new government’s agenda.

But others, like Alberta Oil Magazine editor Max Fawcett, argue that now is the perfect time for a royalty review. Canadian Association of Petroleum Producers president Tim McMillan has said he does not want the government to delay the review, and even Mr. Stelmach has said the review should happen.

Comparisons can be made to a rookie PC government led by Peter Lougheed, which reviewed royalties during its first year in office, to the consternation of industry leaders who had grown accustomed to a comfortable relationship with the old Social Credit government.

“The oil companies, not unexpectedly, are howling – while the natural gas industry is quaking in its boots because the government also has made clear it is going to change its taxes in the fall,” the Ottawa Citizen reported on May 8, 1972.

“This is a sale of a depleting resource that’s owned by the people. Once a barrel of oil goes down the pipeline it’s gone forever. It’s like a farmer selling off his topsoil,” Mr. Lougheed once said while encouraging Albertans to think like owners.

As the owners of the resources, Albertans deserve to know whether we are getting our fair share. But the result of a royalty review is made more important if the government does something meaningful with the funds collected through the rent of our natural resources.

Alberta launched the Alberta Heritage Savings Trust Fund in 1976. Under Mr. Lougheed’s leadership, the Heritage Fund initially received 30% of government resource revenues and was worth $12.7 billion in 1986, when the PCs began a 17 year freeze on new deposits into the fund. The Heritage Fund is now worth only $17.4 billion. Despite an embarrassment of riches during most of its 44-years in power, the old conservative government proved to be poor financial managers once Mr. Lougheed retired.

In their 2015 election platform, the NDP campaigned on the promise that “100% of incremental royalty revenue, above the sums earned by Alberta under the current regime, will be invested into Alberta’s Heritage Fund.”

The current downturn in the price of oil will certainly change some of the new government’s short-term plans when the budget is tabled in October 2015, but significant investment in the Heritage Fund when oil prices do rise again will pay off for Albertans in the long-term. And ensuring that the owners – Albertans – are receiving their fair share from energy development, as Mr. Hunter wrote in 2007, will be key to this long-term planning.