Alberta to change royalty scheme… again.

Alberta Premier Ed Stelmach

Alberta Premier Ed Stelmach is expected to announce new changes to the the provinces royalty scheme by the end of the week. Perhaps in what proved out to be the worst political move in provincial history, Premier Stelmech ignored the advice of industry executives and increased the royalty percentage that exploration and development companies paid to the province. Exploration and development kept there promise and started to move the focus out of Alberta to British Columbia and Saskatchewan. Then the markets crashed, the economy crashed, and Alberta’s gravy train ground to a screetching halt with only 32% of the provinces rig inventory active.

Over the last few months, Premier Stelmach changed the royalty scheme or parts there of. The end result was simply more confusion and no results because of the declining economic conditions. Industry players made their decision to focus resources outside of Alberta, and changes to the royalty scheme simply was not enough to attract them back to the province. They were cutting budgets due to falling energy prices and remained committed to plays in Northern BC, and Saskatchewan. The subsequent changes simply brought confusion and uncertainty to the long term confidence in Alberta’s administration. Industry players were asking how long this plan would last until it was changed again.

Well they have their answer. Premier Stelmach intends to introduce new changes in a effort to make Alberta competitive again in a dramatically changed energy market. In Premiere Stelmach’s defense he did not foresee the coming economic recession and energy price decline when he originally made his decision to make changes to the royalty program. And perhaps he did not foresee the massive impact shale gas finds across North America would impact the energy market. However, the royalty changes were not implemented until January 09 – a number of months after the markets took a turn for the worst.

Time will tell if Premier Stelmach can turn Alberta’s energy industry around.

Calgary Herald: New natural gas incentives in the cards for Alberta