Alta takes bigger slice of black gold profits

CALGARY — Western Energy companies and investment firms are warning that Alberta Premier Ed Stelmach’s decision to hike oilpatch royalties will cost jobs and hurt the industry.

Despite outrage from energy-related businesses and opposition parties, the Conservative leader announced yesterday that the province would increase its share by an extra $1.4 billion (20 percent) from the booming oil and gas industry revenues.

The new royalty scheme, dubbed “Our Fair Share,” will take affect in 2009, giving the industry more than a year to adjust to the change.

A chill has blown over the oil and gas market as
pessimism over Alberta’s new royalty regime grows.

It could have been worse, though, if Stelmach had complied with most of the recommendations by a government review panel, which urged close to a 50 percent increase. However, he did adopt the panel’s advice not to grandfather or allow exemptions for existing oilsands projects.

Oilpatch companies, including trucking service providers, have reacted angrily to the plan ever since it was proposed.

“Many of our oil and gas customers have made it clear that they intend on reducing their capital investments in Alberta if the recently announced oil and gas royalty proposal … is implemented,” said Murray Mullen, Chairman and CEO of Mullen Transportation. “In fact we have already seen demand for our services decline since the September 18, 2007 announcement. There is no doubt … the oil and gas service industry, and the hard working employees that generate their livelihood from the industry, will bear an unfair burden of these changes.”

TransForce President Alain Bedard told unit holders yesterday that the new royalties would put a drag on future growth in the sector. “Depending on its effect on the energy industry, we will take the appropriate action possibly including layoffs as others serving the drilling segment have done,” he said.

In reaction to the news, the Toronto Stock Exchange’s main index was set for an energy-driven dive today. About 25 percent of the TSE is made up of the oil and gas industry.