Reboot Alberta

Wednesday, October 24, 2007

What Are Alberta Ed's Royalty Review Options Tomorrow?

So here we are, two days away from an event that could change the culture and consciousness of Alberta for at least a generation. Premier Stelmach is going live on the Internet to present and explain his government’s plans for the stewardship and management of our non-renewable energy resources.

Every engaged and influential Alberta citizen will be watching his TV address tonight. Many more will be glued to the Internet at 3:00 pm tomorrow to here in detail what he has to say about royalties. In any event by the end of the week Albertans will have finally come to know who Ed Stelmach really is. They will make up their minds as to what kind of character they think he is and what kind of leader they think he will be.

I sure don’t know what the outcome will be on Thursday. I have done some “what if” thinking about some options and the political implications in each case. I think there are five paths open to the Premier to take on royalties.

1 He Blinks! This is an approach based on minimalist tinkering and timidity with no substantial change. The conclusion will be that review process was just an exercise of "going through the motions" and fear of change and the industry are the guiding principles. This will be interpreted as a big industry win and voters will be angry since polls show 88% want changes made. Albertans who are now “Thinking like Owners” will begin “Acting Like a Voter” and we end up with a minority government – likely PC but no guarantees.

2 He Creates Confusion! He cherry picks pieces out of the “Our Fair Share” Report. As a result no one owns the ideas and nobody can understand what exact the policy goals are or what the proposed implementation means are to get there. This will seen as a big industry win and will be characterized by the pre-payout royalty going up to 3% and no severance tax and a post payout royalty of less than the 33% recommended by the Review Panel. Politically this will be interpreted that Ed is just a Ralph Rerun. Voters will disengage again and harbour grudges. PC supporters will stay away from the election in droves resulting in a minority government.

3 He Reacts Like A Progressive Conservative! He accepts the “Our Fair Share” recommendations as a package In addition his Progressive focus will be on new opportunities like synthetic gas from coal, Coal Bed Methane extraction, biomass and tying together with a major push for funding for Greening of the Growth as the overarching principle for the next Alberta energy strategy. His Conservative side will announce major policy changes to ensure accountability and transparency in the relationships between the owners and the tenants in the energy sector. He will outline stricter policy initiatives for calculating, monitoring and collecting royalties in response to the Auditor General’s recent report. This gives industry certainty and cleans up the governance mess in the Department of Energy.
Politically Albertans will be encouraged but will wait to see if the actions align with the rhetoric. If no authentic action is taken before the election PCs will abandon the party under his leadership. It will be worse than Ralph in 2004. I expect as many as 350,000 previous loyal supporters and volunteers will stay home through the campaign and on election day. Advantage Taft but this election he will have to earn our consent to govern. He cannot just wait for Ed to lose it.

4 He Goes Bold and Transforms the Province! In addition to option #3 he initiates the environment and technology fund idea in the Afterward of the “Our Fair Share” Report. He announces a major policy moves towards a comprehensive integrated economic, societal and environmental approach for the future of Alberta. He moves into a transformational mode and weaves in the Water for Life, Clean Air and Integrated Land Management strategies into the emerging Energy Strategy. He repositions the consciousness from today were the society is there to serve the economy to where the economy is more focused on meeting the needs of the society.
He balances revenues between short term infrastructure needs and savings for the long term aspirations of Albertans. And he puts conservation back into conservative politics and by protecting wildlife habitat and watersheds and water supplies and pushing for more and faster energy industry land reclamation. Ed defines the next Alberta and imbues the province with a new consciousness that emphasizes sustainability, responsibility and openness. He calls an election in February and wins a majority government based on fresh ideas and lots of fresh faces in Caucus and Cabinet. Alberta becomes recognized a leading force in energy, environment, innovation and investment.

5 The Nightmare Response! The nightmare scenario is “The Muddle of the Road.” This is not a variation of the Blinking or Confusion option. It is all of them together with the added instability of confusion trumping clarity, uncertainty over sureness, deconstruction of complex concepts instead of integration of related initiatives. There will be no definitive leadership statement declaring obvious goals and a game plan to get there. We would not have any articulated sense of the direction and preferred destination by the government arising from the royalties and the review. This will be the worst of all possible worlds for the industry and investment, for governing and politics and ultimately for the people and families of Alberta.

So which way is it going to be under Premier Stelmach? I have no idea but I am pulling for the transformation of Scenario #4. That said, I know one thing for sure. No matter which way this thing goes on Thursday, we Albertans are well advised to fasten our seat belts – it is going to be one hell of a ride.

10 comments:

  1. Four years ago, a report by Deloitte & Touche put the lie to insurance lobby allegations that a compensation cap on injury claims was necessary to rein in spiralling auto insurance rates. Under intense insurance industry pressure, Deloitte’s quickly withdrew the report, and the Alberta government accepted the insurance lobby’s recommendation to slash compensation payable to innocent injured car crash victims. While Alberta traffic fatalities spiked by over 20% in the year following implementation of the Klein government’s insurance “reforms”, the "good news" is that insurance industry profits have increased by over 2000% in the last four years.

    Now another powerful, multi-billion dollar industry is turning the screws on a report deemed injurious to its fiscal interests. It remains to be seen if the oil industry’s relentless attack on the royalty review panel report will prove as financially rewarding as another industry’s attack on another report four years ago.

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  2. Anonymous2:37 pm

    You have lost your mind Ken, even with your constant pushing of this thing, that is way over the top. Out there with the NDP and Libs.

    If anyone thinks Ed is going to take all of those recommendations and implement them, they're stupid. And that doesn't mean he's blinking - it means he's smarter than everyone pushing this ridiculous report. This thing has more holes in it than swiss cheese. None of these economics profs would accept this paper in their classrooms, its baffling that they would allow their names on it.

    I'm with you on cleaning up the governance and transparency but a natural PC reaction is to enhance the economy not make it worse.

    Gas production (the largest earner for the province) is stagnant with high cost and low price. Those will get evened out by market forces. If it needs anything, its encouragement. And more likely, the gov't should stay out of the business entirely.

    They created a system that works for everyone, the only message is - don't fuck it up.

    Randy

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  3. Randy your comment reads like the kind of short-term, self-interested and single-minded rapid-development-at-all-costs focused kind of guy.

    That is so inappropriate and unacceptable as a governing philosophy for a society to go forward with these days.

    As important as getting rich is for some people, the issues are about so much more than just some people getting rich and scaring others in the meantime - for good measure.

    Do you guys read anything other than Milton Friedman? Before you ask - yes I have a copy of Das Kapital - just haven't read it (yet) ;-}

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  4. Anonymous3:15 pm

    I agree with Randy on one item - that not implementing the recommendations in totality does not necessarily imply "blinking".

    Unfortunately, that is how the media is trying to portray it to sell papers.

    Taking the recommendations, studying them, and implementing all/none/some is certainly in the purview of government.

    For example: What if the government came up with an alternate plan, one that was still estimated to come up with a similar increase in royalty collections, and simultaneously easier for industry to swallow? I would hardly call that blinking, yet you seem to suggest that it is based on the five scenarios you list. Maybe you did not mean the five scenarios to be an exhaustive list., but it read that way to me.

    I think it is time for everyone to tone down the rhetoric. The decision is obviously made; last minute threats from industry or some group purporting to represent the public is not going to change anything at this point.

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  5. My five scenarios are far from exhaustive and are looking at the political as well as the stakeholder interests and implications. I could come up with a dozen more in ten minutes - it is that intricate and complicated...and that interesting.

    The media seems to have framed the issue of seeking a "balance" as a trade-off between the industry and the Panel. I expect the media to look for that and seek reaction in that context - who won - who lost and what are the implications for the future of Ed Stelmach’s leadership.

    But if Thursday’s presentation is in fact that trade-off who won, who lost, then no matter what, Premier Stelmach is in trouble.

    I welcome a government designed alternative plan based on the findings and goals articulated in the "Our Fair Share" Review. Ideally that would be a starting place and not the destination.

    Question is will the GOA go backward into the old "Regime of Ralph" style of lazy-unfair and behind closed doors. Or will he take the highroad with a new rebalanced royalty and relationship regime. A new "Made by Ed" approach is what I want!

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  6. Anonymous3:44 pm

    Haven't made a lot of money but I guess I'm doing OK.

    I am actually thinking very long-term Ken, the trouble is that the panel was not. They obviously didn't look seriously at the numbers or just took the ones the consultant and/or DOE gave them.

    I've seen the numbers on what it takes for business to continue to move forward in Alberta.

    Alberta is a marginal investment and we depend on the re-investment of dollars. That is what makes every part of our economy tick. It stopped in the 80s with the introduction of the NEP and the exit of capital.

    It is a lot easier to say 'slow down' than for govt to execute it. When gov'ts exercise levers of power, they always mess it up.

    I would love for them to toss the report and start from a point that actually makes sense economically and tie in some of the environmental aspects but I don't think anyone has the balls to do it.

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  7. We have to think long term and integrate the full range of environmental aspects, air, land and water and biodiversity.

    Protecting and enhancing the environment is no longer a cost of doing business - it is now the minimum "ante" before you should be in the game.

    I like the report as a launching pad to a full econ-eco-socio integrated approach.

    I appreciate the tone and content of you comment too - thanks for participating.

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  8. Anonymous4:03 pm

    http://www.alaskaalliance.com/pdf/all001_jaws_v152.pdf

    Try that link on for size.

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  9. Anonymous9:54 pm

    Just spent a few days with people from all around Alberta that are very involved with municipal development concerns and issues.... No one was talking about the Royality review... but when asked the major view was that it would be very difficult for ED to WIN this one.

    Most views were similar to Ken's #4 in what they were wishing/looking for and the expectation generally was that ED was not going to be able/willing to deliver a hard stand in favour of Albertan's and our future.

    It truely was a conservative future view that this crowd was looking for but one where environment = economy. The phrase, 'it is past time when we could afford to see these as seperate' came up a lot.

    A minority of the crowd, by show of hands, felt that the future would not improve. So, if they don't think Ed will do it... they must think someone else will.

    green girl

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  10. HI green girl - thx for the comment.

    I agree there is a consensus out there and there is not enough confidence in any of the current leaders to deliver the goods - yet.

    If Ed won't do it - someone else will. My money is on Ed based on tonights television presentation - if it is a foreshadowing of tomorrow's royalty response.

    Tomorrow and the royalty response is the real test. There needs to be some serious new policy direction and actual implementation done before February. That is the political the acid test see if he really means what he is saying.

    Read my post on tonights TV presentation and the point about the survey results we got yesterday. It is on the confidence level of 1200 Albertans on the political leadership in all of Alberta's parties. It is focused on the trustworthiness of the various leaders to manage our growth.

    It reflects the same attitude you described in your meeting today.

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