Alberta royalty review: No changes to rates before 2017

The NDP government offered some short-term certaintyto Alberta's troubledoil and gas industry Friday, announcing that royalty rates paid by companies will not change before 2017 at the earliest.

Energy Minister Marg McCuaig-Boydannounced the names of panel members who will spend the rest of this year conducting a comprehensive review of the royalty system, with a mandate to report back by the end of December.

"Our government is committing that the currentroyalty framework will remain in place until the end of 2016," the ministersaid Friday. "That is to say, for 16 months companies and investors can operate with certainty, knowing there will be no changes in the royaltyframework."

Setting thattime framewill help companies plan their drilling seasons for this winter and for next year, she said.

New revenues would goto Heritage Fund

If and when changes to the royalty ratesare made, McCuaig-Boyd said,any extra money raised will be invested inthe province's Heritage Savings and Trust Fund, which now has about $18 billion in it.

The panel's final reportwillprovide certainty forAlbertans, the minister said, so they will know the rates are neither too high nor too low.

"As owners,Albertansdeserve to know they are getting a full and fair value from the development of their resources," she said.

The panel will be headed by DaveMowat, the president of ATB Financial. Other members named Friday are:

Peter Tertzakian, an energy economist.

Annette Trimbee, a former deputy minister of finance.

LeonaHanson, the mayor of Beaverlodge.

Asked about the current economic recession, Mowatsaid with oil sitting at about $45 a barrel, this is the perfect time to conduct such a review, given that companies now know they will faceno changes to their rates before 2017.

"One of the things we want, any insights we have about a framework forthe future is, it's got to work as well at $30 a barrel as it does at $100 a barrel."

Any new royalty system must balance the need to protect the energy industry during down times, when oil prices are low, with the need to make companies pay full value when prices are higher, the minister said.

Mowat said royalties in the province have been reviewed more than10 times since the 1930s. Most recently, the government of former premier Ed Stelmachbrought in changes in 2007 but later backtracked under intense pressure fromthe industry.

Website created for public input

The government has createda website calledletstalkroyalties.ca to gather input from the public until the end of November. The panel will answer some questions raised there, and will publish information on the website every two or three days.

The panel will also talk to experts, including industry and consultants who understand other royaltysystems across the world, Mowat said, in an effort to ensure Alberta remains competitive.

"Investment is mobile,"Mowatsaid. "Investment goes to places it thinks it can find good results.

Mowat said the industry has been "very generous"with awillingness to provide otherwise confidential information about their companies.

The panel will take into account any changes the province plans to make to the cost of carbonas it develops its climate-change policy.

The Canadian Association of Petroleum Producers said theroyalty review should consider how to makethe province more attractive and competitive for the oil and natural gas investment.

"Many Albertans are feeling the severe impact of low oil and natural gas prices that have resulted inone of the most dramatic economic downturns in a generation," CAPP president and chiefexecutive officer Tim McMillan said in a news release.

"That's why the royalty review should focus on how to re-establishAlberta as a province that is competitive with other jurisdictions. The more competitive we are, the more we can protect and grow jobs, investment and government revenues in Alberta."