Royalty Review Retrospective
Birthrights Don’t Last Forever
The 2007 Alberta royalty review was arguably the most important economic event in Canada last year. Whereas comments from Alberta Oil readers show a general acceptance for a periodic re-evaluation of the province’s oil and gas royalty regime, they also point towards an antipathy for the very process by which this recent review was conducted. Contributing editor and historian David Finch illuminates this contentious issue by reflecting on its many lessons in the light of reviews past.
“Name one good thing that came out of that royalty review,” a Calgary oilman challenged in exasperation.
Anger, frustration, threats, fear-mongering and confusion erupted after the government-appointed panel released its recommendations the autumn of 2007.
In his time Premier Ralph Klein was smart not to call for a public review of his government’s resource royalty income. He spared himself a lot of grief.
Upon reflection, the 2007 royalty review process may have given us an opportunity to examine – perhaps for the first time – the role of resource revenues in Alberta society. Consider some of the lessons learned along the way.
I. Oil is Alberta’s birthright – for more than 60 years it has been filling treasury coffers with billions of dollars. Royalties and related petroleum revenues have exceeded $150 billion since 1950. But at current royalty rates, resource revenue has peaked and is set to drop quickly in the near future. Lesson: Birthrights don’t last forever.
II. The Alberta government has not conducted a royalty review in public since the early 1970s. Before that, reviews were held every ten years – in 1941, 1951 and 1961. Each of those reviews was very contentious and prompted outbursts with a familiar ring:
Don’t kill the goose that lays the golden egg!
What’s a fair return?
Don’t strangle Alberta’s oil industry!
Get the most for our money!
Can Alberta really be serious?
Don’t cry wolf!
Assure the maximum possible revenue for the province!
A reasonable return from the recovery of a depleting resource!
Given that the resource revenue pie was expanding, everyone clamoured for a larger share. Posturing, name-calling and crying wolf were all part of the game, but in the end nearly everyone benefited. Lesson: Public royalty reviews are always contentious – “us versus them” confrontations – but most everyone wins when the pie is growing.
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