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The one man who can stand up for Alberta’s oil industry, but will he?

September 18, 2015 9:15 AM
James Rose

From the beginning of his appointment, Dave Mowat has stressed that the ideal outcome for the royalty review is to optimize the royalty structure for both government and industry. Key to achieving that goal, is to go into the review process with no preconceived notions on what should or should not be done.

“As one of four million-plus owners of Alberta’s natural resources and bringing my understanding of just how important this industry is to Alberta, I want the best possible system for all of us,” he said at a news conference with Alberta Energy Minister Marg McCuaig-Boyd.

As is well known, Dave comes to government from working in the private sector with Alberta crown corporation ATB Financial.

In June 2007, Dave was hired as President and CEO of ATB Financial, the largest Alberta-based financial institution and a dynamic presence across the province. ATB offers a full range of banking services and is consistently recognized as one of Canada’s top employers.”

The decision to review royalties and potentially increase them has been not as well received as NDP has hoped.

Sam Spanglet, a member of the last royalty review panel in 2007, is direct in his assessment of the need for a swift review and decisive action.

“If you know what the answer is, don’t form a panel or a committee and create all kinds of uncertainty — just tell us what you want,” he told CBC radio, but his comments were clearly directed towards Notley.

“It creates a lot of uncertainty, and as a result it postpones or delays growth in the province,” he said

After being announced as chair, the next major announcement that Mowat and McCuaig-Boyd made was that royalty rates will remain unchanged until at least December 31, 2016.

ATB has a huge stake in oil & gas industry

The history of ATB is telling as to how involved the bank is with industry and the Albertan citizenry. According to the ATB website, “ATB was established by the Government of Alberta in 1938 to provide Albertans with an alternative source of credit during the Great Depression. ATB became a provincial Crown corporation on October 8, 1997, under the authority of the Alberta Treasury Branches Act and Alberta Treasury Branches Regulation (the ATB Act and ATB Regulation, respectively).”

“In January 2002, we launched our new corporate identity, ATB Financial. This identity reaffirms the business we are in—providing a full range of financial services across Alberta—and reconfirms our commitment to the people of our province.”

ATB has developed a huge stake in the Alberta oil and gas industry ($43 billion of assets). The bank, over the years, has provided billions of dollars of debt to a wide array of energy companies. And with that said, Mowat is clearly no stranger to the implications of royalty rate changes to the industry.

Will he suggest government lower the royalties?

With oil prices hovering in the mid 40’s, oil and gas company margins are already as is tight. It has been estimated that the average break-even point for oilsands producers is in the mid 30’s. With any increase in royalties doing business, keeping employees, expanding operations, and servicing debt will become far more difficult.

Popular consensus in Alberta seems to suggest that the likely scenario from the left-leaning Alberta NDP would be to raise the royalty rates. Just as federal NDP leader Tom Mulcair plans to increase spending and taxation if he wins the federal election, the same mentality can be assumed with the Alberta NDP.

However, Dave Mowat has the opportunity to suggest that it is indeed in the province’s best interest to lower royalties, quell uncertainty and kick-start the oil and gas industry.

 

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