Peter Lougheed Speaks Out
AO interview with Alberta’s iconic ex-Premier
Alberta Oil magazine met with Peter Lougheed, Premier of Alberta from 1971 to 1985, to discuss government policy issues affecting the petroleum industry. The meeting took place on January 23, well in advance of the province’s royalty settlement with Suncor Energy and Premier Stelmach’s call for a spring election. The interview was conducted by Alberta Oil editor-in-chief Sebastian Gault in the library of the Ranchmen’s Club, Calgary. Mr. Lougheed’s chair was chosen to afford him a comfortable view of Beaulieu, the restored mansion of his grandfather, senator Sir James Lougheed.
AO: One topic that is now really front and centre amongst Alberta Oil readers is the royalty issue. Have you noticed any similarities between what is taking place now and what took place back in the early 70s when there was a tripling of the price of oil and you raised royalties. Is this something like a déjà vu?
PL: Well, I wouldn’t describe it that way, but there are a lot of similarities. There are differences, too. In our time, what we were involved in was basically conventional oil and natural gas, and the royalty rate structure which we’d inherited from the Social Credit government – a maximum of 16 percent gross royalty structure – we said was inadequate. We held public hearings on it and then reached a conclusion to change it dramatically in 1973. And we changed it in a number of ways. We changed it not only in the rate but we also tied it in to the price as well. So it was a major review. There are similarities to today, particularly on the pricing side, but one of the major differences is, of course, we didn’t have the oilsands at that time. We were basically focused on natural gas and conventional oil.
AO: You were aware, though, that at some point in the not-so-distant future the oilsands would come onstream and that a new royalty regime structure would be necessary.
PL: Yes.
AO: Were there thoughts given at that point?
PL: Yes there were, but not as part of the package that we put forward in ’73. It was not too many years later that we entered into our first negotiations with Syncrude for the full-scale oilsands plant that they built. We’d always contemplated that although the conventional oil and natural gas would be predicated on a gross revenue basis, that we would have to probably change to a net royalty basis with regard to the oilsands because of the magnitude of the upfront costs. So we negotiated in due course with Syncrude to set that structure forward for that particular one in the mid-70s.
AO: There were, in the mid-90s, agreements put in place then with Syncrude and Suncor with regard to the 1 percent / 25 percent royalty formula. The current government is saying that they might rescind that or force these two corporations into accepting the new royalty regime to bring them on-side. From the standpoint of a lawyer, do you have any thoughts about that?
PL: I wouldn’t respond as a lawyer; I’d respond from a public policy point of view. I think the Klein government made a serious mistake because I think that clearly, as the owner of the resource, the province should always retain the right to adjust the royalty rate depending on circumstances, and I think they made a mistake with Syncrude and Suncor in the mid-90s when they reached an agreement with them that was for a specific period of time, in which they committed the province to not change the royalty rates. And because of that, they’re in some difficulty with it now. I think you always have to keep in mind that we’re the owner of the resource, the people, and we should always be in a position where we could change the royalty rates. It would be like our sticking with the Social Credit 16 per cent rate when we came to office back in the early 70s. We didn’t; we changed the law and we faced right up to it in the legislature.
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