Inquiry to assess Alberta’s business competitiveness
Communication lines are open between energy sector and government
An invitation for data submissions promptly generated 27 reports on natural gas and 11 on conventional oil. The province’s oil sands regime is not part of the review except as a model of a collaborative approach that Rodgers says the government aims to adopt for all sectors. The 2007 royalty panel’s brisk and high-profile public hearings, which limited appearances to a few minutes and gave equal time to industry critics, are not being repeated. The new inquiry is a quiet affair of interviews, breakfast meetings, focus groups and workshops with participants in oil and gas development.
“Key stakeholder groups” are singled out for attention by the competitiveness inquiry, says an energy department briefing document. In the government, the panel is talking to the top ranks in the provincial cabinet and senior civil service, the energy, finance, treasury and environment departments, and the Energy Resources Conservation Board and National Energy Board. Industry participants include pipeline mainstays TransCanada Corp. and Enbridge Inc., the Canadian Association of Petroleum Producers, the Small Explorers and Producers Association of Canada, chief executive officers of the biggest companies, representatives of small- to medium-sized firms and working groups of oil and natural gas specialists.
Studies will make national and international comparisons on fronts ranging from geological characteristics of oil and gas deposits to costs, profits, royalties, taxes, regulation, project approval speed, and landowner and aboriginal relations. “Alberta has a big, complex industry. Solutions aren’t always immediately obvious,” Rodgers says.
The biggest immediate question is whether B.C. set a new standard by enacting special treatment for unconventional shale sources that is a clone of Alberta’s oil sands regime. B.C. assistant deputy energy minister Gordon Goodman confirmed that work is underway on the first batch of royalty agreements for the province’s prolific shale gas deposits in the northern Horn River Basin.
The new B.C. regime is a net profit royalty. The rate is a token two per cent until project drilling and construction costs are paid off. After that, the system limits the government take by applying higher rates only to after-expense revenues. Traditional gas royalties, including all of the Alberta system, are levies against gross sales revenues. Sliding-scale formulas automatically raise rates as prices and production volumes increase.
Rodgers made no promises that Alberta will match B.C. “That’s a political decision.” But the competitiveness review’s first reports will zero in on unconventional gas and should be done by the end of this year, he predicts. “It’s difficult to imagine we won’t need to have change, on the regulatory front and on the economic front.”
Provincial policy will be a critical element in industry decisions on whether to launch unconventional gas production by taking costly technology out to new locations, Graham says. “Without the good policy in B.C., we wouldn’t have the Horn River or the Montney [another big shale development]. Alberta has to realize that.”
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