Alberta Premier's TV Address Skirts Oil, Gas Royalty Issue

Alberta's Premier, Ed Stelmach, avoided commenting directly about the government's response to proposed hikes to oil and gas royalty rates Wednesday, only promising that the decision will offer stability and predictability to energy companies.

Toward the end of a television address to the province, Stelmach said his government recognized Alberta's future lies in the oil sands and coal bed methane as conventional oil and gas reserves decline. The government is "ready to take decisive action" and the new royalty framework will support this, he said.

The new regime will provide the "stability and predictability business needs and time to adjust to the changes," Stelmach said, as well as offering Albertans their fair share of the revenues.

Last month, a government-appointed panel recommended raising oil and gas royalties by 20%, or C$2 billion, a year, after concluding that Albertans haven't received a fair share of their province's vast resources for quite some time.

Stelmach and Alberta's energy minister Mel Knight will present the government's formal response Thursday at 5 p.m. EDT.

The panel targeted the oil sands sector in particular, where companies have proposed more than C$100 billion in project proposals, eager to feed U.S. demand and spurred on by robust oil prices and tightening access to resources elsewhere. It also proposed increasing royalties on the conventional oil and natural gas sector, the latter of which is already struggling with low prices.

Since then, Alberta's energy industry has unleashed a barrage of criticism, saying the panel relied on flawed data which don't reflect the cost pressures facing the sector, and threatening to pull investment from the province.

Recent analyst speculation reckons the government will soften the more contentious proposals in light of industry criticism. These include raising net royalty rates once oil sands projects recoup capital costs to 33% from the current 25%, and a new oil sands tax linked to oil futures prices.

Stelmach added that the current royalty regime had created "one of the most successful economies of all time."