The Notley evidence: Favourable royalty review, climate change policies designed to increase oil sands market access, pipeline coalition building
Back in May, I wrote a column about the Alberta oil and gas royalty review that still makes a lot of sense in light of today’s report by the review commission.
The column quoted Gordon Sick, professor of finance at the Haskayne School of Business, who made the following argument: “I do agree with the NDP that it is worth having a look at what is going on. If nothing needs to be changed, then don’t change anything.” Prof. Sick even suggested the Alberta government might consider regular reviews every few years to ensure the province continues to receive a fair return on the resource.
Panel Chair Dave Mowat and his fellow members were channeling Sick when they released their report, since it recommended only minor tweaks to the royalties, including adding a flat five per cent royalty rate for conventional wells until their revenues equal a cost allowance (to be determined by the province), after which rates will go up.
Oil sands rates remain the same.
Big Oil was pleased. Tim McMillan, president of the Canadian Association of Petroleum Producers, said in a press release that “Today’s announcement has been the result of a fair and credible process, one Albertans can trust.”
Alberta’s opposition parties focused their criticisms on why a review was called in the first place.
For instance, PC interim leader Ric McIver accused Rachel Notley’s NDP government of creating “uncertainty” and jeopardizing investment in the Alberta oil patch and said that the “outcome of this review has yielded minor tweaks to an otherwise competitive royalty regime – tweaks that were hardly worth the stress this process placed on our energy sector at such a challenging time.”
Official Opposition Leader Brian Jean of the Wildrose Party is commenting mid-after at a media conference, but given his unrelenting censure of Notley over her climate change policies and pipeline strategy, one can assume his remarks won’t be complimentary.
And that brings me to the point of this column: Is Notley’s NDP government anti or pro-oil and gas?
Down-hole tubing failures are costly. Reduce failures due to wear/abrasion with EndurAlloy™. Available in Texas through Maple Leaf Marketing.
After today’s royalty rate announcement, I think a fair argument can be made that Notley is quite supportive of the industry, and perhaps in a way that will ultimately prove far more constructive for the oil sands than anything Jim Prentice and the PCs could have done had they won the election last May.
During the past eight months or so, Notley has engaged in three major energy industry initiatives: The royalty review, introducing sweeping climate change policies, and engaging on pipeline projects.
On the first two issues, Big Oil has been fulsome in its praise.
Four energy CEOs joined her on stage to make the climate change announcement back in Nov. and CAPP fell all over itself bragging about how the different tack would “increase market access,” especially after companies figured out how to take the carbon out of the barrel.
McMillan’s comment the royalty review may go down in Canadian political history as the nicest thing Big Oil has ever said about an NDP government.
Which only leaves pipelines (or greater market access, which could include neatbit by rail, as I’ve argued in several columns). And by all accounts, Notley is working quietly behind the scenes to build an Eastern Canadian coalition to support Energy East, as evidenced by the enthusiastic endorsement from Ontario Premier Kathleen Wynne and Prime Minister Justin Trudeau last Friday.
If this trend continues – the Premier’s success is by no means guaranteed – Albertans may wake up one day in the not too distant future and discover that in 2015 they elected the most pro-Big Oil government in provincial history.
UPDATE: “l am grateful the panel agreed with Wildrose’s position to provide stability in royalty rates for our energy sector, and that Premier Rachel Notley accepted,” Wildrose Leader Brian Jean said.
“Our heart goes out to the Albertans who suffered job losses because of the instability caused by calling the royalty review. The next step is to recover from the damage done by this review and the series of poorly thought out policies that are harming our energy sector. Alberta needs to start seriously evaluating how to restore our competitiveness on the world stage.”