If you want to know what has Alberta's oil industry spooked, all you have to do is read the New Democratic Party's election platform. Incoming premier Rachel Notley ran on a blueprint that promises "a careful review of how Alberta will promote resource processing and fair royalties." The thing is, no one – not the public, not the industry and probably not even the incoming NDP government – knows exactly what that means. Which is pretty much the definition of uncertainty.
A couple of months ago, nobody was expecting the NDP would end up running the province – least of all the New Democrats. That may explain why the party's election platform was as much a list of wishes as an actual plan to govern. Item No. 1 on the wish list: Charging the oil industry more for what it takes out of the ground.
Here's the very first sentence of the NDP platform: "The PCs have squandered Alberta's resource wealth." How? By "refus[ing] to implement realistic oil royalties that the people who own the resources – all of us – deserve." As a result, "the people of Alberta as a whole are deprived of much of the benefit of our own resources."
The platform repeatedly states that taxpayers are being shortchanged, and also accuses the Progressive Conservatives of "neglecting our opportunity to invest in value-added processing and refining – investment that would create more jobs in Alberta instead of exporting them to Texas."
The solution: "Establish a Resource Owners' Rights Commission to report to the new Premier and the Legislature within six months on measures to promote greater processing of Alberta's energy resources, and to ensure a full and fair return to the people of Alberta for their energy resources." There is even a pledge to "act on recommendations within the first year."
All of which appears to add up to an unmistakable promise of higher royalty rates, paired with pledges to somehow force Big Oil into spending billions of dollars building new refining and upgrading capacity. It sounds like a plan to impose significant, new costs on Alberta's most important industry – which may explain why Ms. Notley has spent the past couple of weeks trying to water down her platform's language.
For example, when The Globe and Mail editorial board spoke to Ms. Notley a week before the election, she insisted that she was not trying to harm the industry, and that a review of royalty rates did not guarantee higher rates. She believed an independent assessment would recommend rates be raised – but she allowed it might not. She stood for higher royalties if necessary, but not necessarily higher royalties.
And the day after her election victory, she stressed that she wanted to work with the industry, not against it. Over time, she said, "they'll come to realize that things are going to be just A-OK over here in Alberta."
And then on Tuesday, she upheld the promise of a royalty review, while simultaneously appearing to push it into an indefinite future. "I'm not going to make any specific determinations around timing," she said, "except to say it was in our platform, it will happen within this term and it will be preceded by good, thorough discussions with all stakeholders, including industry." Within this term? The platform, remember, promised to complete a review within six months.
So what does it add up to? Who knows? In fairness, Ms. Notley is not even premier yet, and her cabinet hasn't been named, so a bit of patience is in order. But only a little bit. The oil industry needs to know where it stands.
Ms. Notley has a couple of options to end the uncertainty.
She could shelve the whole idea of a royalty review. A period of depressed oil prices and industry layoffs is not the ideal time to be talking about raising the industry's costs, and that's an argument any Alberta leader should be willing to make. But it's probably not realistic to expect the not-yet premier to kick off four years in office by boldly disowning a core campaign promise.
Her other option is to live up to the promise, to the letter. An independent commission, staffed by experts in the economics of the industry, would almost certainly find that measures to force or incent greater processing of crude in Alberta would carry greater costs than benefits. As for the question of where royalty rates should be set, that is trickier. But any honest accounting of the hoped-for windfall from higher rates would also weigh the quantifiable downsides in terms of investment, employment and wages. There's no gusher of free money.
The bottom line is that Alberta's keystone industry needs clarity and certainty. There's no reason the new government can't provide it, and soon.