Royalty review results expected any day
Posted Jan 27, 2016 7:34 am.
This article is more than 5 years old.
The province is expected to release the results of its royalty review any day now.
While we still don’t know exactly what the changes will be, it’s a safe bet the Notley government has had to adjust its plans, as oil has cratered since they promised to do the review during the election campaign.
Any increase to royalty rates right now would be another hit for producers, but David Yager, National Leader Oilfield Services MNP LLP, says if you made a list of the ten things that matter during one of the slowest drilling seasons in years, the review would probably rank eleventh, adding most companies are focused on the short term.
“The provincial government has already said there will be no changes in 2016 and has hinted that this won’t make business materially different in a period of low prices,” he said.
Ted Morton with the School of Public Policy says he doesn’t expect much change, pointing out with $30 per barrel oil, there’s no room to take anymore.
“They’ve taken, from the oil companies’ perspective, corporate taxes went up in July and the big carbon tax was imposed at the end of November,” he explained.
Yager says companies are more concerned about keeping the lights on day-to-day than with what the review might produce.
Morton suspects we could see something where higher royalties kick in if oil makes a recovery; adding as it stand, royalty rates in Alberta are done on a sliding scale.
“The higher the price that oil and gas is selling for the bigger the cut, the bigger the royalty the government gets,” he said. “Conversely, the lower the price the smaller the cut.”
He adds the bottom line is that premier Notley really needs this to go her way.
“She’s already, in a certain sense, lost at least the first round on pipeline politics,” said Morton “Her charm offensive and carbon reduction policies that she unleashed in November really haven’t worked. She doesn’t have much political capital left so I don’t see her picking a fight with the oil and gas sector on these royalties.”
