Alberta's fate in Eduardo's hands
Don Braid
Calgary Herald
Saturday, September 22, 2007
The government is already polling furiously to find out what Albertans think of the startling royalty report released this week.
But the strategists think (or hope) they already know the answer -- most people will find it quite good in part, but too radical to be swallowed whole.
Specifically, they expect the majority to be uneasy with the recommendation against "grandfathering" existing oil and gas deals.
If that part of the report is adopted, new royalties would be charged on all old projects.
The very idea of rewriting
legal deals is so inflammatory that it has already prompted a private warning to the government from Washington. (As usual, the Americans can find us on the map when there's money at stake.)
That single suggestion is the basis of the spreading comparisons between Venezuela's Hugo Chavez and our own
Premier Eduardo Stelmach.
The linkage is ridiculous. Chavez nationalized some companies. Stelmach will drive energy investment out of
Alberta the day ND Leader Brian Mason seizes the Petroleum Club.
Historically, the very notion of an Alberta Tory government turning hostile to the industry is absurd. For 35 years, Toryism and oil have gone together like coffee and cream, with huge benefits to politicians, business, and the province at large.
But the balance has gradually shifted over a long period of rising prices and profits. The companies, and many individuals, have grown wealthy from an oil and gas regime that is now too soft. It has to change.
In this situation, the great political trick is to keep the golden goose healthy, while diverting some of its daily feed back to the public good.
That's why the anti-granddaddy bombshell is having its political uses. Oilpatch leaders will probably agree to significant royalty increases, just to make sure that existing projects are grandfathered.
They also know -- as does Stelmach -- that industry reaction to the report is not uniformly hostile.
Alberta oilmen who span the world get annoyed at the deals offered state oil companies in Alberta, when the terms in their home countries are always more stringent.
And you won't find a brighter icon of Big Oil than Sam Spanglet, the retired Shell executive who sat on the panel. The Liberals accused him of conflict of interest because he still owns some Shell options. "The review process is tarnished from day one," Liberal Leader Kevin Taft fumed in February.
But Spanglet, to the Liberals' shock and awe, turned out to be a man of high integrity.
He was the toughest questioner on the panel and now backs the report. Spanglet says the industry should stop whining and control its costs -- implying that the royalty regime is so lush there's not much incentive to do that.
Now, why would a guy like Spanglet take this view if there were no truth in it? Why would these establishment panelists, all with a strong understanding of the industry, risk their Pete Club invitations if they didn't believe passionately that they're doing the right thing for the province?
Maybe they went too far. It seems unfair to change existing deals. But the panel's general call to action is irresistible.
Successful Alberta premiers, from Ernest Manning to Peter Lougheed, never lost sight of some vital points: the province owns the oil; the companies pay for the privilege of profiting from it; the government sets the rate of payment; and one fine day that rate will change. That's the deal, and everyone knows it.
Industry leaders can warn of disaster all they like. They can threaten to pull out. They can even compare Stelmach to a South American populist/nationalist demagogue.
But no premier who wants to survive can submit to threats and bluster, or leave the decisions to the oil industry.
If he remembers all that, and gets the details right, Eduardo from Andrew could be one popular leader within a few months.
