Too Much Heat and Not Enough Light on the Royalty Collection Issues

So now we see the over heated rhetoric and misinformation campaigning move from the energy industry and into the Alberta Legislature. This is a sad “state of affairs.”

The Alberta Liberals are torquing the facts by insinuating criminal intent on the Klein government Ministers of Energy and the current Minister of Energy and is reported to be “suggesting” a criminal investigation may be needed….” Mr. Taft, the Leader of the Alberta Liberals is apparently making these unfounded accusations and he knows better. After all he has a B.A. in political science, a Masters degree in community development and a PhD in business. So this hyping of the facts by such an educated and experienced individual is neither ignorance nor innocence. It is more like the kind of negative, half-truth, Republican-esque partisan politics we have come to expect from Stephen Harper.

The Auditor General Fred Dunn has clearly stated the situation around past royalty collection decisions by the Klein government. This kind of decision is at the discretion of the government and taken by the appropriate Minister, the Energy Minister in this case.

Premier Stelmach also seems to be getting caught up in the torque the facts for effect and rhetoric. He is reported to be tying an “Our Fair Share” recommendation for a proposed Oil Sands Severance Tax as being akin to the NEP and saying such a tax would “cripple the province’s economy.” That is mostly a political judgement. Ironically if Stelmach had kept that severance tax recommendation he would not have to try and renegotiate the Suncor/Syncrude royalty agreements. That tax would have leveled the playing field for the newer projects. That is partly why the Expert Panel recommended the tax.

Political judgment aside, Premier Stelmach goes much further by implying such a "production tax" would drive people out of the province, create a situation where people could not pay their mortgages and many business would go broke…as he suggests happened with the NEP.

The NEP is part of the Alberta mythosphere and we tend to forget that the NEP was negotiated with Alberta. The fact is conveniently forgotten that before the NEP got implemented President Reagan released the US strategic oil supplies. That alone pulled the rug out of the world oil prices and as they plunged they sent the Alberta economy into a tail spin. The NEP would have really hurt Alberta but it didn't, President Reagan got to us first.

The issue of uncollected energy royalties is very clear in the Auditor Generals Report. The administration recommended an increase and that recommendation was rejected by the Minister(s) of the day. That decision was totally within the government discretion so no legal wrong doing is at issue. To project a criminal intent is over the line.

What is at issue here is the quality and consequences of the policy judgment call to not increase royalties and how and why it was made at that time. We elect politicians to make these “hard choices” on our behalf and the issues are never simple and all the facts are never fully known. It is always a judgment call.

So it comes down to a few salient points. Did the Ministers of the day follow a proper review process and analysis of the situation in coming to this discretionary judgment? On what basis did they make the decision and was it a sound judgment and how do they justify the decision as being in the public interest.

The other key question is who did the Klein government listen to in arriving at such decision? Interestingly, Premier Stelmach is quoted now as saying "But at the end of the day, in this government the decisions are made by government, not listening to advice that may come from bureaucracies." "We take advice obviously, from others."

Well I hope the new Lobbyist Act will help us answer the question of just who those "others" are who our elected representatives listen to in the future and why they were so persuasive. We Albertans can then perhaps begin to understand just what part of the public interest those "others" represent. We can also consider if our elected representatives are serving the common good in the exercise of the many discretions they have and the complex decisions they have to make.

Lets remind the politicians of Premier Stelmach's early suggestion to calm down. Lets also get serious about this stuff. There is enough grist for any political mill in these royalty issues that hype and rhetoric are not only unnecessary - it is unhelpful in assisting Albertans in better understanding what is and was going on.

None of this needs to be torqued for effect. The politically motivated manufacturing of misleading media headlines are not helpful. Lets get opportunistic partisan politics out of the royalty deliberations and go right to the debate about how we ensure open, transparent, accountable and good government as the larger goal.

There are signs of hope this could happen. The multi-party support of the NDP motion for an emergency debate on these issues was a step in the right direction…we need more politicians with that greater sense of responsibility and public duty who will stand up like that. Good for those individual MLAs from all parties who voted for the emergency debate. I am looking forward to reading Hansard to see who the real statesmen are on this issue.

Big Money Meeting Behind Closed Doors Today with Deputy Premier

So the National Post reports that some of the large capital investors are meeting behind closed doors with Deputy Premier Stevens today to add to “the-sky-is-falling message that for the energy industry to pay a fair share of taxes and royalties will put Alberta into recession. While the next story in this link shows unemployment in Canada is at a 33 year low.

I am sure there is a need for some confidentiality in these discussion with Deputy Premier Stevens. But as one of our Trustees for our natural resources, I am sure he will fully disclose what his visitors have presented to him by the end of today. Albertan deserve to know and transparency demands it.

The Globe and Mail Report on Business front page below the fold story today is interesting too. The headline is “Wall Street to Alberta: Don’t be so Stupid.” An “influential New York based analyst with Oppenheimer & Co.” is quoted as saying raising taxes on industries that are the “lifeblood of your economy…It’s so stupid – I thought these people were more sophisticated than that.”

Speaking of a lack of sophistication, I wonder if this influential analyst has read the Auditor General’s Report. We were such rubes that we have left $6B of oil and gas royalties alone on the table since 2005. That would have paid for school repairs, teacher’s unfunded pension liabilities and increases staff wages to liveable levels in Alberta’s social services sectors so we would not be endangering lives of disables Albertans.

The “Influential Analyst” says Albertan should attract investor, not repel investors.” Sir, perhaps you have been out of the loop as to the facts in Alberta. We have $140B of investors from all over the world keen to participate in Alberta with a 1% pre-production royalty and a 25% - soon to be 33% production royalty payable on their net profits. Pretty damn attractive I’d say…and based on the amount of money coming in…pretty damn effective too.

I find this other item in the Globe story too. It says this past May the Alberta Finance Minister, Dr. Lyle Oberg “returned to the city (New York) to assure analysts and investors that the new government of Premier Stelmach was …committed to a business-friendly investment climate.” A quote attributed to “one American Canada watcher” who was at the Oberg speech says: “There was never any indication there would be a move like this.”

Strange that Dr. Oberg did not mention this in his May meeting with the money men of New York. The Premier had announced the review on February 16, 2007 and it was to report to Dr. Oberg by August 31, 2007. It actually reported on Sept 18 but that is a quibble. Makes you wonder how far you can trust someone who omits such key information doesn’t it!

Too bad the Canada watcher did not know that this now Alberta Finance Minister was once kicked out of the government Caucus for his “misleading statements” over Klein’s political skeletons. Could the $6B royalty boondoggle Auditor General Dunn discovered have been the “skeleton Oberg was talking about? If so why didn’t he say so?

Alberta's Auditor General Says Higher Royalties Justified Even Beyond the Expert Panel's Recommendations

The Auditor General is calling for even higher royalty rates than the “Our Fair Share” Expert Panel according to a Calgary Herald story this morning. The AG says the Department of Energy has a royalty rate of about 66% to keep it competitive with other jurisdictions. Dunn says even a 70% royalty rate would still keep Alberta’s royalty rate competitive.

The story goes on to say: “The auditor general's comments come the day after the release of his annual report, where he said a lack of political leadership saw the government miss out on an additional $1 billion or more in royalties annually.

Dunn said that money could have been collected without stifling the industry.

The key quote from Fred Dunn is “What is the risk that the industry sees which would therefore justify the owners – Albertans – selling the resource for less than other jurisdictions.”