Monday, October 01, 2007

AG Says the Dept of Energy and Former Ministers Have a Problem

I thought is a worthwhile exercise to post and highlight some comments from the Auditor General’s Report released today on the royalty issues and the Department of Energy.

Page91: says the Department (Energy) has identified critical issues that have not been addressed publicly and they relate to higher oil and gas prices outside the range anticipated by the old royalty regimes. The Department has know for at least three years royalty revenue were not meeting government's targets. The Department, (meaning the bureaucrats) estimated that it could collect an additional $1B or more per year without stifling industry profitability. The AG notes that "...neither this information nor the reasons why changes have not taken place have been made public."

Page92: says "Readers will ask 'Why have these issues not been addressed?" The AG says those "...questions must be directed to those responsible for the royalty regimes." The AG then clarifies the point by saying "The Minister of Energy has final responsibility and is accountable for these decisions."

In those two paraphrased statements the AG has identified problem and who is to blame…various past the Minister’s of Energy! He then makes five key recommendations and they are interesting.

First the Department of Energy should clarify it royalty objectives and make them public. The current objective to "optimize Albertans' resource revenue share" is code to accept what ever we get as the target.

The Department's "technical review work" needs to be improved in terms of planning, coverage and reporting and it needs to expand the topic and issues it considers.

The Department needs to improve its annual performance measures related to the effectiveness of the royalty regime beyond the current "share the profit" measure. Again this smacks of accepting whatever shows up as royalty payments is deemed to be the target. The Department's performance measures indicated satisfactory performance of the royalty regimes FOR SEVERAL YEARS while a detailed analysis in the Department "indicated otherwise. What gives?

The Department should periodically report in greater detail on the status of the provinces' royalty regime. The AG says with better information, Albertans can ask better questions about the management of their resources.

Finally the Department needs to "improve controls for its monitoring and technical review." They need to document complex processes, reviewing and signing off key outputs and referencing final results to source documentation." This tells me the Department does not know what is actually happening in terms of records, controls and monitoring of resource revenues...and if they did they can't prove it.

Very strong parallels between the AG and the "Our Fair Share" Panel recommendations. Some past Energy Ministers have got some serious Explaining to do by the looks of it.