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Notley shifts position, backs maintaining current energy royalties

Alberta Premier Rachel Notley annnounces Alberta's New Royalty Framework in Calgary, Jan. 29, 2016.

Larry MacDougal/THE CANADIAN PRESS

After years on the opposition benches sounding the alarm about a royalty regime that she once compared to a fire sale, Alberta Premier Rachel Notley on Friday endorsed maintaining the province's current royalties for a decade on existing wells.

Speaking in front of members of her caucus from Calgary, she unveiled the results from the province's four-member royalty review panel. While there will be some tweaks to the royalty framework, the rates will remain largely unchanged for many producers.

"The panel's advice is that the current royalty rates for oil sands are appropriate and we will maintain those rates," she said.

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"Oil and gas wells drilled this year and in previous years will pay royalties to Albertans in the same way they have since they were drilled. The exact same system now, next January, and for the next 10 years."

The muted tone in Friday's announcement was in sharp contrast to the November unveiling of the government's new climate policy. At that announcement there was a festive atmosphere in a room filled with emotional supporters as Ms. Notley announced a cap on the size of emissions from the oil sands, introduced a carbon tax and announced a timeline to phase out coal.

According to Cheryl Oates, Ms. Notley's spokeswoman, "the Premier said on many occasions that she had no preconceived ideas about what the outcome of the royalty review should be, only that a review was needed."

Ms. Notley told reporters in Calgary that the oil and gas industry has changed dramatically in the past few years and that she had not had complete information in the past.

In April, only weeks before she was elected premier, Ms. Notley told The Globe and Mail that the province would "get a fair share of royalties" under her government.

"We've been profoundly inept at sharing the windfall of a completely unique level of resources and I'm afraid that 50 years from now, our great-grandchildren will look at what we did with our resources and they'll rip up our pictures," she said at the time.

The NDP's election platform said that previous governments had "failed to earn Albertans' full and fair value for their oil and gas by maintaining one of the world's lowest oil royalty rate structures."

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During that campaign, Ms. Notley spoke about designing royalties as a way to encourage diversification and a more equitable sharing of the province's resource wealth, often decrying the "rip and ship" mentality of the province's energy sector.

"They've done some good things that were laudable, but that keeping the royalty rates and structure was disappointing," said Ricardo Acuna, executive director of the Parkland Institute at the University of Alberta.

"There was a lot of room for improvement to capture a greater share of the resource generated by the industry in a high-price environment; holding the line doesn't accomplish that."

Mr. Acuna did cite the government's call for greater transparency and reporting from companies paying royalties as a significant improvement.

The unveiling of the results of the royalty review was delayed by several weeks. According to Duane Bratt, the chair of policy studies at Calgary's Mount Royal University, the announcement's sharp departure from Ms. Notley's previous views could be an explanation.

"This may explain the delay. This announcement is what the panel came up with and the government didn't like it. It's not what they wanted to hear," he said. "Given the NDP's previous positions on royalties, you can see a disconnect between what was released and what they previously argued."

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Alberta's opposition parties claimed victory after Ms. Notley's announcement.

"We were right all along," Wildrose Leader Brian Jean told reporters in Edmonton. "The NDP proved themselves wrong on this issue."

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About the Author
Ontario legislative reporter

Based in Toronto, Justin Giovannetti is The Globe and Mail’s Ontario legislative reporter. He previously worked out of the newspaper’s Edmonton, Toronto and B.C. bureaus. He is a graduate of Montreal’s Concordia University and has also worked for CTV in Quebec. More

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