The realization that Albertans are not getting what they could from their most valuable resource — oil and gas — seems to have hit everyone like an out-of-the-blue tornado. Talk radio is bristling with indignation. Columnists from north to south of the province are still agog at the findings of the premier’s Royalty Review Panel. And when the usually timid auditor general added fuel to the fire by revealing that even government bureaucrats had recommended raising royalties but were ignored by the politicians in charge, there seemed to be no end to Albertans’ outrage.
There’s no question that the Royalty Review Panel surprised almost everyone when it issued a forthright demand for higher royalties. After all, when it began its hearings earlier this year the five-member panel was roundly criticized for being in the pocket of the energy industry. The Canadian Association of Petroleum Producers more or less confirmed that impression when its officials said they had no problem with any of the appointees — except they would have preferred that CAPP be directly represented at the table.
Should we have been that surprised at the panel’s findings? In some quarters of the province, the fact that Albertans have not been getting their fair share from the resource they collectively own is old news. It wasn’t widely publicized news, but it was the conclusion of respected individuals and organizations who had thought long and hard about the issue.
Take for example the Parkland Institute; in 1999 it commissioned a study that found the Alberta government took in less than half of the revenue per unit of oil and gas produced in the province than the Lougheed government did 15 years previously. The study also found that the Klein government claimed a much smaller share of the resource pie than governments in other major oil and gas producing regions. Interestingly, one of the authors of the report was a well-connected economist who, at the last minute, decided he couldn’t afford the negative publicity that would undoubtedly ensue when the report was made public. His name was removed and Gordon Laxer, Parkland’s director, took on the task of explaining the study to the news media.
The Pembina Institute has also been exploring the royalty issue for several years. According to a 2004 Pembina study, Alberta collected a meagre 69 per cent of available oil and gas revenue between 1995 and 2002. Norway collected 88 per cent; Alaska claimed 99 percent and British Columbia 93 per cent.
“Clearly there is a need to review and revise the oil and gas royalty structure in Alberta to make sure the regime is maximizing the return to the citizens of the province for the development of these non-renewable resources,” Pembina analyst Amy Taylor said at the time. That’s almost exactly what Bill Hunter, the chairman of the current Royalty Review Panel had to say in his cover letter to provincial Finance Minister Lyle Oberg in September, three years after the Pembina report.
Most of the opposition parties have also spoken out in favour of higher royalties. The New Democrats quietly positioned themselves on the issue during the 2004 election campaign. In the summer of 2006, Liberal energy critic Hugh MacDonald said Albertans were being “ripped off” because royalty rates were too low. The Alberta Alliance is the only party to completely reject the findings of the Royalty Review Panel.
Former premier Peter Lougheed weighed in on the subject in the summer of 2006 when he stated that Albertans weren’t getting their due, given the high price of oil and low royalty rates. And, to be fair, several candidates for the leadership of the Alberta Conservatives — Jim Dinning, Ted Morton, Mark Norris and Ed Stelmach — called for a review of the royalty structure even though Premier Ralph Klein had said earlier that he didn’t give a “tinker’s damn” about whether Alberta was getting its fair share of energy wealth.
There have also been a few brave writers and journalists who have spoken out in favour of higher royalties. Not an easy undertaking during the Klein years, when criticizing the government could leave one without much hope of career advancement. Nevertheless, writers such as Andrew Nikiforuk and Gordon Laird frequently called for higher royalties so Albertans could collect a bigger share of the energy wealth they own. Columnists Rick Bell at the Calgary Sun and Sheila Pratt at the Edmonton Journal have also long been touting a review of Alberta royalty rates.
Alberta’s energy titans have made it clear there will be dire consequences if the government raises royalties. They seem intent on depicting the Royalty Review Panel and the auditor general as a bunch of uninformed renegades who would put Alberta’s future in peril. However, in fact, it now looks as though Klein and his passel of passive cabinet ministers were the renegades. Except they weren’t uninformed: they had all the information and data they needed at their fingertips. They just chose to ignore it.
