Are Albertans getting a fair royalty rate for the resources we own?
It’s a reasonable question and one that has dogged Ed Stelmach since 2007 when he “initiated a public review of the province’s royalty and tax regime to ensure Albertans are receiving a fair share from energy development through royalties, taxes and fees.”
An important reason why Ed seems to be hated by much of Calgary’s oil and gas sector is the conventional wisdom (a.k.a. convenient myth, for some opportunists) that this royalty review drove away investment from the province and is primarily responsible for our continued economic woes. The real blow to Alberta’s “one sector economy” occurred not long after the review when the global market for oil became extremely volatile and the price fell from $142 to $34 abarrel as the global finance industry melted down in the fall of 2008. The price eventually stabilized around $65-75 after the stock market began to recover last March.
It was unlucky political timing for a new Premier having difficulty articulating a vision for Alberta’s future, but even worse for the thousands of Albertans that lost their jobs as a result.
Brent barrel petroleum spot prices, May 1987 – March 2009
Last year’s tough economic times affected Alberta’s entire economy and this year’s $4.7 billion deficit is strong evidence that these circumstances endure. But even with the price volatility ushered in by the greatest financial collapse in 70 years, the question of whether Albertans are getting their fair share for the resources we own remains a reasonable, albeit limiting, one. I would prefer to see us asking how our government can act as more responsible and effective steward of our natural resources, our climate and Alberta’s environment. We also need to look at how to reduce the province’s ridiculous over-reliance on variable resource revenues and make large strategic investments to our post-secondary education system to help diversify our economy, (the exact opposite approach of the 2.7 per cent cut we saw in budget 2010).
Bearing all this in mind, yesterday the Edmonton Journal reported that:
EDMONTON — Alberta is dead last in terms of competitiveness for oil and gas development and should drop its current royalty regime, says a University of Calgary professor.
Jack Mintz, director of the School for Public Policy, ranked five provinces plus Texas for the ability of their tax and royalty structures to attract investment, and found Alberta’s current royalty regime “creates a burden on investment that is twice as high on oil and gas” compared with other sectors in the economy.
Interesting findings. Here’s the PDF.
Although the comment is now removed from edmontonjournal.com website, the following was pasted from a Forbes.com database of board of directors’ compensation disclosed by publicly traded companies:
Director Imperial Oil
57 Years Old
Jack M. Mintz, Palmer Chair in Public Policy for the University of Calgary. President and chief executive officer, The C.D. Howe Institute (public policy institute) and professor, Joseph L. Rotman School of Management, University of Toronto.
Director Compensation (Imperial Oil) for 2008
| Fees earned or paid in cash |
$69,000.00 |
| Stock awards |
$138,200.00 |
| Option awards (in $) |
$0.00 |
| Non-equity incentive plan compensation |
$0.00 |
| Change in pension value and nondisqualified compensation earnings |
$0.00 |
| All other compensation |
$0.00 |
| Total Compensation |
$207,200.00 |
Serving on Imperial Oil’s board of directors, Mr. Mintz has a direct financial stake in the success of a subsidiary of the largest oil company in the world that just happens to have billions invested in projects in Alberta.
The introduction to Jack Mintz’s research states that:
it is crucial to know just how much government tax and royalty policies affect the investment decisions the oil and gas industry makes relative to those of other sectors of the economy.”
If the conflict of interest couldn’t be more glaringly obvious, look no further than imperialoil.ca where you find them crowing: Imperial Oil Foundation gives $1 million to the University of Calgary’s School of Public Policy.
Ridicule is the only appropriate response to this mockery of “public policy research. ”
For the record, I agree it is important to ask how much do “government tax and royalty policies affect the investment decisions the oil and gas industry?”
Without independently funded studies, free of direct financial conflicts of interest on the part of the researcher and the university department undertaking the study, I have little faith in our ability to get a straight answer to this important question… which is another compelling reason for the government to properly fund our post-secondary researchers.
The Journal took some flack on this in the comments for churning out a preliminary story on this naked and seemingly effective, attempt to grab headlines. There are 70 (AHHH!!!) related articles and it looks like most are churnalism.
Ok. Deep breath.
Can we please all work together and put in a little more effort to ensure that we aren’t being spoon fed bullshit?
K thx.
