This article originally appeared on The Tyee.
The recommendation of an Alberta review panel not to raise royalty rates paid by oil and gas companies to the province is an economic disaster and represents a capitulation to Big Oil and its financial backers, say a variety of critics.
Released last Friday, a five-month review into the royalty system argued that low global oil prices had placed Alberta in an existential quandary and that no increases should be considered in royalty rates.
Royalty rates are not costs or taxes, but a price a company must pay to the owner for the right to develop the resource.
For 35 years, the former Tory government of Alberta consistently lowered royalty rates to among the lowest in the world. At the same time it saved almost nothing for future generations.
But the long-delayed review, commissioned by the new NDP government in 2015 as the result of an election promise, concluded that the “current share of value Albertans receive from our resources is generally appropriate.”
The review added that Albertans should stop focusing “on questions of ‘are the rates right,’” and look more “on what changes need to be made to our royalty framework to position Alberta and our energy industry to address the challenges of a very different environment and outlook for the future.”
The review then recommended maintaining current royalty rates for wells drilled before 2017 and setting a generic rate — five per cent — for all new oil and gas wells drilled after 2017, a policy equivalent to grading and selling all cuts of beef as hamburger.