Memo to Energy Minister
Memo to Alberta Energy Minister Ron Liepert: Royalties are not taxes
Already “under attack for allegedly being rude and dismissive when he was health minister,â€[1] current Energy Minister Ron Liepert conceded he hadn’t read the Parkland Institute’s new report on vast oilpatch profits but that didn’t stop him from dismissing it:
“This is a not unexpected sort of NDP/socialist view that if you tax everybody, everything will be fine,†he told the Calgary Herald.[2]
Apparently someone needs to remind the man in charge of managing trillions of dollars in Albertans’ natural wealth of an elementary fact: A royalty is not a tax.
The oilpatch doesn’t own the resources; Alberta’s oil and natural gas and bitumen belong to Albertans.
In that sense, Albertans are like homeowners. The oilpatch is like our real estate agent.
What is left over from the sale of our ‘homes’ after the real estate agent’s costs and a modest profit are deducted is our ‘home equity’.
Royalties and land sales aim to capture that ‘home equity’ back for Albertans, the owners of the resource.
Royalties are not taxes, they capture the equity generated by Albertans’ natural wealth.
As currently being managed, however, the Alberta government grants the oil and gas real estate agent more than half of Albertans’ ‘home equity’.
In the tar sands, the real estate agents get at least 85% of the ‘home equity’.
Albertans might ask themselves why the real estate agent has any right to any of their ‘home equity’, let alone 50-85%.
Even Liepert’s own Department of Energy recognizes, “a decision to not capture the full [equity] amounts to a decision to sell the province’s resources at less than their full value.â€[3]
Albertans keeping more of the equity generated by their natural wealth isn’t some extreme idea that can be rudely dismissed by the energy minister – it is simply thinking like an owner.
But as the 2007 Royalty Review Panel noted, it was clear to them the view that Albertans owned their resources was not shared by the Progressive Conservative government.[4]
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[1] Dan Healing, “Liepert angered over oilpatch invitationâ€, Calgary Herald, 26 November 2010, pp. B1ff.
[2] Dan Healing, “Royalty cuts ‘cost billions’â€, Calgary Herald, 26 November 2010, pp. B1ff.
[3] Alberta Department of Energy, “Alberta royalty review 2005: Some additional questions,†March 2006 quoted in Annual Report of the Auditor General of Alberta: 2006–2007, September 2007, vol. 1, p. 116.
[4] Alberta Royalty Review Panel, “Our fair share: Report to the Hon. Lyle Oberg, Minister of Finance,†18 September 2007, p. 5.
I am going to echo myself here: if nationalization is not on the table you will be forever playing this game. And really it is one of the oldest games in town. Until such time as you can just call for the outright nationalization of nat res companies you are going to play this game. Natural resource companies are scoundrels and if you feed them an ounce they will be back.
Lipert also said our royalty was now at 5% and would stay there for 5 years only. He told us to get used to the idea in the same conversation. In 2007 the Government switched to the WTI for about a month then went back to the Brent. They still keep a 2007 oil royalty price up on their site indicating we are on WTI whereas we are firmly implanted in the BRENT a London Bases system for deep sea rigs that have no overhead for transportation. Canadian Commissioner Stewart Beck told the Financial Post Alberta was discounting the Brent 30% right out of the gate! We are being robbed on so many levels its hard to keep track. Royalty in Alberta is now zero!