Raising royalties would further reduce industry's ability to compete, association says
CALGARY—The Alberta royalty review panel should propose new rules to help restore investor confidence and make the province more attractive for oil and natural gas investment, the Canadian Association of Petroleum Producers said.
“Many Albertans are feeling the severe impact of low oil and natural gas prices that have resulted in one of the most dramatic economic downturns in a generation,” CAPP president and CEO, Tim McMillan, said. “That’s why the royalty review should focus on how to re-establish Alberta 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.”
CAPP noted the royalty structure is an important part of Alberta’s competitiveness. The association said an appropriate royalty structure helps attract investment, creates jobs, generates government revenue and builds communities. It added that Alberta’s current royalty structure, which was put in place five years ago, has helped achieve these goals by being responsive to the ups and downs in the industry.
“While our industry did not ask for a review, now that we have one we believe it should be completed in a timely manner,” McMillan said. “A timely, open and transparent review of how to make Alberta more competitive could help to reduce market uncertainty and allow oil and natural gas companies plan for the future. It’s important the Alberta government gets this right.”
CAPP wants to see the government pursue policies that make Alberta competitive in order to attract and retain capital investment. it also wants to government to support more ways to transport oil and natural gas, as well as encourage investment in high-efficiency technology.
With continued low commodity prices, investment in oil and natural gas projects is down significantly. CAPP noted Alberta’s share of North American capital investment has eroded steadily since 2000, dropping from about 35 per cent to nearly 15 per cent today.
“Raising royalties would add even more costs at a time when new government policies are already reducing the competitiveness of the oil and natural gas industry – Alberta’s No. 1 economic driver and job creator,” McMillan said. “That is why royalties should not be considered in isolation. A thorough review seeking a balanced outcome should examine all factors impacting our industry, including the cumulative costs of government policies and market access. Doing so will position Alberta for the future.”