Not the time for "money grab": Notley keeps industry-friendly royalty

Alberta's slumping economy has prompted its NDP government to protect its oil patch after completing its review of royalty payments made by oil and gas companies that are exploiting provincial resources, Premier Rachel Notley said on Friday.

“It is not the time to reach out and make a big money-grab, because that's just not going to help Albertans right now," Notley said at a news conference in Calgary.

Her announcement — praised by industry as "principled" — largely leaves the struggling oil sands sector without any new costs, and instead offers new incentives or subsidies to help the companies write off costs for drilling and other expenses.

The review was promised by the NDP in its 2015 election campaign at a time when the left-leaning party said Albertans were not getting their fair share of revenues as owners of their resources. But Notley said long-term concerns about plummeting oil prices and a fragile economy were key factors in the final plan.

The government said new royalty rates would be introduced in 2017, but would only apply to new wells, while the existing operations would see no changes for a decade. New oil and gas wells will pay a flat royalty rate of five per cent until payout.

Notley said revenues would improve over time but that the government did not yet know how these revenues would change. But she said the new framework provides certainty to the industry and shows that the government is working with companies to ensure that things don't get out of hand.

Industry representatives and stakeholders have been warning the government for months not to make drastic changes, in the wake of plummeting global oil prices that have prompted tens of thousands of layoffs in Alberta over the past year.

"Today's announcement has been the result of a fair and credible process, one Albertans can trust," said Tim McMillan, president of the Canadian Association of Petroleum Producers in a statement. "But I can say today that the grandfathering of existing projects, the fact that the new rules will only apply to projects starting in 2017, and maintaining the oil sands royalty regime, are signals that the government is serious about encouraging investment in Alberta at this difficult time."

One critic, who participated on an oil sands committee as part of the government's review, said the new plan leaves Alberta with "the sweetest deal on Earth" for investors, with the new incentives expected to cancel out any increases in royalty payments.

"The profits and returns to Albertans are all going to remain exactly the same," said Regan Boychuk, a former research director at the Parkland Institute. "They're making sure that the oil companies get paid first and get paid fastest."

Boychuk said one oilpatch executive was so thrilled to hear details about the plan that he asked government officials in a briefing on Friday morning whether his company could adopt the new framework and its incentives right away, instead of waiting until 2017.

Throughout the review, some critics of the existing regime, such as the Fort McMurray First Nation had noted that Alberta had gone through a significant economic boom over the years, without significant benefits for Indigenous communities.

Notley said the new plan provides more accountability about costs, revenues and benefits. At the same time, she said it would complement Alberta's new climate change plan that was announced at the end of 2015.