Alberta’s Energy Minister hopes to energize investment

Alberta Energy Minister Ron Liepert is a busy man. On March 11, less than two months after taking on the energy portfolio, he delivered the report Energizing Investment – A Framework to Improve Alberta’s Natural Gas and Conventional Oil Competitiveness – also known as the competitiveness review.

On March 17, at a Calgary Chamber of Commerce luncheon, he discussed the review and its impact on the energy industry in Alberta.

The key modifications to Alberta’s natural gas and conventional oil royalty structure arising from the review include:

• the current incentive program rate of five per cent on new natural gas and conventional oil wells becoming a permanent feature of the royalty system;
• the maximum royalty rate for conventional oil being reduced at higher price levels from 50 to 40 per cent to provide better risk-reward balance to investors; and
• the maximum royalty rate for conventional and unconventional natural gas being reduced at higher price levels from 50 to 36 per cent.

The reasons for these adjustments are numerous: the global recession, recent volatility in oil and gas prices, increasing competition from other jurisdictions, more intense competition for investment capital, and increasing production from unconventional sources in the U.S. reducing American demand for Canadian natural gas. What wasn’t mentioned was the Alberta Royalty Framework of 2007, which is at least partially responsible for Alberta’s decreased competitiveness.

Most attendees at the presentation were from the oil and gas industry, the energy services sector  and the energy investment sector. Despite knowing about the changes from the announcement made one week ago, the luncheon was sold out. This is an audience very keen to hear about the prospect of 8,000 new jobs in 2011-2012 and 13,000 more jobs annually thereafter.

Liepert didn’t dwell on this. His focus was on the process. The review looked at how Alberta’s competitiveness has decreased, the reasons behind the decrease and the ways Alberta can reverse the trend.

The review compared Alberta’s investment competitiveness with its 12 main competitors: British Columbia, Saskatchewan and ten U.S. states. It drew on the expertise of individuals from the financial sector, oil and natural gas industries and Alberta government ministries. In response to criticism that there was no public consultation, Mr. Liepert pointed to the input from 64 [Conservative] MLAs who represent the public and understand its issues and concerns.

Another key message in Mr. Liepert’s talk was the importance of the oil and gas industry to Alberta. In 2008, about 30 per cent of Alberta’s total GDP was from energy development. Mining and oil and gas extraction in the province accounted for almost 150,000 direct jobs. Without oil and gas royalties, combined sales taxes amounting to 16 per cent would have to be implemented to maintain current services.

The fiscal structure is only one aspect of competitiveness. Liepert also spoke to the need for a more efficient and effective regulatory system. A cross-ministry task force is to report within the next three months on:

• implementation of near-term regulatory enhancements;
• changes to support deployment of innovative new technologies; and
• the process for comprehensive review of the regulatory system.

As new technologies will be key to continued energy development, Liepert assured his audience that any new regulatory system will be flexible enough to accommodate new technological developments in exploring for, developing and producing Alberta’s energy resources.

With the world emerging from a major recession, it appears the Alberta government is intent on taking “the necessary steps to position Alberta as one of the most competitive North American destinations for energy investment.”

Clothesline ban no longer hanging in the wind

The clothesline ban in Ontario won’t be hanging around anymore. That province’s Energy Minister, Gerry Phillips, has announced the province will be banning the ban, a move that will, no doubt, delight environmentalists and birds all across the province.

One does have to wonder, however, with today’s increased environmental consciousness, why it would have taken this long to peg this particular law as problematic. The clothesline ban was initially implemented for aesthetic reasons. The presence of clotheslines in one backyard, according to this 2007 article, drew complaints from a number of residents, saying it reminded them of urban slums.

It begs the question, though, that if aesthetics were reason alone to implement the law to begin with, what of the other optical undesirables in our society, like microwave towers, ad-plastered bus stops, and billboards. What of garishly coloured newspaper boxes that line street corners in jagged-angled rows – or even worse, how their contents litter city streets and parks at the end of the day?

The point is that a law which was originally rooted in aesthetics, but that hampered efforts to conserve energy has been hung out to dry. And that means something, even if it is a little late in the game. It means that as a society we know that beauty is subjective and the need to conserve energy is widely regarded as truth. Maybe only some of us know that beauty is negotiable, transient and sometimes superficial but at least most of us know that climate change isn’t.

More information on the ban removal.