The Alberta NDP government appears to realize it is better to listen to the oil patch than to get in a shouting match with a key industry in Alberta that has fallen on hard times.
Some in the oil patch are responding in kind, rather than being critical of the NDP and claiming its Royalty Review Panel is causing fear within the oil patch, as they have no idea what horrible policies the "socialists" are hatching to hurt investment and profits in the oil industry. This latter view appears to be the line that both the official opposition Wild Rose Party and the Conservatives are taking. The reaction of some in the oil patch is surprisingly different.The Royalty Review Panel was a key NDP election promise but the thought of such a review with possible increases in oil royalties, at a time of declining prices, revenue, and investment in the oil patch, naturally created jitters in the industry. However, to chair the review Energy Minister McCuaig-Boyd chose banker, Dave Mowat, CEO of provincially-owned ATB Financial back in June. The Canadian Association of Petroleum Producer's actually applauded the appointment of Mowat. McCuaig-Boyd said of the review:In late August McCuaig-Boyd responded to the loud complaints of the opposition and others about the review creating uncertainty, by announcing that royalty rates would not change before 2017 at the earliest:The review panel is to report to the government by the end of 2015. There is even a website for citizen input into the review. With the review process now well under way, Brian Schmidt, president and CEO of Tamarack Valley Energy and a member of the board of governors of the Canadian Association of Petroleum Producers(CAPP) said:Schmidt credited the review panel with having a useful discussion of ways to add efficiencies to the system, for example by rethinking the way royalties were applied to wells so as to encourage companies to recover oil more productively.Schmidt said:
“I think there was a concern from Albertans, ‘Are we getting our fair share? Could it be different? Could it be better?’ So we are delivering on that promise and reviewing. I think there should be a review every few years on something like that.”
"Our government is committing that the current royalty framework will remain in place until the end of 2016. That is to say, for 16 months companies and investors can operate with certainty, knowing there will be no changes in the royalty framework."
“I’ve been through two royalty reviews already, back under the Stelmach days. I will tell you this is the most efficient process that I’ve seen, with the best people on the committee that I’ve seen. I’m probably seeing a little more openness to listen than I’ve seen in the past from the government side,”While CAPP will probably see many of its 60 recommendations rejected, the oil patch appears to believe they will achieve more by cooperating with the NDP rather than simply subjecting the committee to a barrage of partisan attacks. Mowat has himself said the industry had been quite cooperative in providing the panel information it requested. The NDP for its part is not about to challenge the capitalist nature of Alberta's oil industry, even by such mild socialist measures as taking provincial ownership of some Alberta oil companies that will be available at cheap prices because of low oil prices. That will be left to those energy companies still able to fund such purchases, often large global players or even state-owned enterprises. If the NDP wants to be elected again, it will need not only to make peace with the oil patch but develop policies that will help it through these hard times.
“I think there is a huge opportunity, a huge win for Albertans and the industry if we look at things . . . to improve recovery. Make the pie bigger instead of [taking] a bigger slice of a smaller pie.”