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Wednesday, October 24, 2007

What Are Alberta Ed's Royalty Review Options Tomorrow?

So here we are, two days away from an event that could change the culture and consciousness of Alberta for at least a generation. Premier Stelmach is going live on the Internet to present and explain his government’s plans for the stewardship and management of our non-renewable energy resources.

Every engaged and influential Alberta citizen will be watching his TV address tonight. Many more will be glued to the Internet at 3:00 pm tomorrow to here in detail what he has to say about royalties. In any event by the end of the week Albertans will have finally come to know who Ed Stelmach really is. They will make up their minds as to what kind of character they think he is and what kind of leader they think he will be.

I sure don’t know what the outcome will be on Thursday. I have done some “what if” thinking about some options and the political implications in each case. I think there are five paths open to the Premier to take on royalties.

1 He Blinks! This is an approach based on minimalist tinkering and timidity with no substantial change. The conclusion will be that review process was just an exercise of "going through the motions" and fear of change and the industry are the guiding principles. This will be interpreted as a big industry win and voters will be angry since polls show 88% want changes made. Albertans who are now “Thinking like Owners” will begin “Acting Like a Voter” and we end up with a minority government – likely PC but no guarantees.

2 He Creates Confusion! He cherry picks pieces out of the “Our Fair Share” Report. As a result no one owns the ideas and nobody can understand what exact the policy goals are or what the proposed implementation means are to get there. This will seen as a big industry win and will be characterized by the pre-payout royalty going up to 3% and no severance tax and a post payout royalty of less than the 33% recommended by the Review Panel. Politically this will be interpreted that Ed is just a Ralph Rerun. Voters will disengage again and harbour grudges. PC supporters will stay away from the election in droves resulting in a minority government.

3 He Reacts Like A Progressive Conservative! He accepts the “Our Fair Share” recommendations as a package In addition his Progressive focus will be on new opportunities like synthetic gas from coal, Coal Bed Methane extraction, biomass and tying together with a major push for funding for Greening of the Growth as the overarching principle for the next Alberta energy strategy. His Conservative side will announce major policy changes to ensure accountability and transparency in the relationships between the owners and the tenants in the energy sector. He will outline stricter policy initiatives for calculating, monitoring and collecting royalties in response to the Auditor General’s recent report. This gives industry certainty and cleans up the governance mess in the Department of Energy.
Politically Albertans will be encouraged but will wait to see if the actions align with the rhetoric. If no authentic action is taken before the election PCs will abandon the party under his leadership. It will be worse than Ralph in 2004. I expect as many as 350,000 previous loyal supporters and volunteers will stay home through the campaign and on election day. Advantage Taft but this election he will have to earn our consent to govern. He cannot just wait for Ed to lose it.

4 He Goes Bold and Transforms the Province! In addition to option #3 he initiates the environment and technology fund idea in the Afterward of the “Our Fair Share” Report. He announces a major policy moves towards a comprehensive integrated economic, societal and environmental approach for the future of Alberta. He moves into a transformational mode and weaves in the Water for Life, Clean Air and Integrated Land Management strategies into the emerging Energy Strategy. He repositions the consciousness from today were the society is there to serve the economy to where the economy is more focused on meeting the needs of the society.
He balances revenues between short term infrastructure needs and savings for the long term aspirations of Albertans. And he puts conservation back into conservative politics and by protecting wildlife habitat and watersheds and water supplies and pushing for more and faster energy industry land reclamation. Ed defines the next Alberta and imbues the province with a new consciousness that emphasizes sustainability, responsibility and openness. He calls an election in February and wins a majority government based on fresh ideas and lots of fresh faces in Caucus and Cabinet. Alberta becomes recognized a leading force in energy, environment, innovation and investment.

5 The Nightmare Response! The nightmare scenario is “The Muddle of the Road.” This is not a variation of the Blinking or Confusion option. It is all of them together with the added instability of confusion trumping clarity, uncertainty over sureness, deconstruction of complex concepts instead of integration of related initiatives. There will be no definitive leadership statement declaring obvious goals and a game plan to get there. We would not have any articulated sense of the direction and preferred destination by the government arising from the royalties and the review. This will be the worst of all possible worlds for the industry and investment, for governing and politics and ultimately for the people and families of Alberta.

So which way is it going to be under Premier Stelmach? I have no idea but I am pulling for the transformation of Scenario #4. That said, I know one thing for sure. No matter which way this thing goes on Thursday, we Albertans are well advised to fasten our seat belts – it is going to be one hell of a ride.