The Shotgun Blog
Thursday, November 20, 2008
Parasitic Alberta Tories resuscitate enervated host oil and gas economy
Yesterday, the Alberta Tories made their second attempt to undo the damage their government has caused to Alberta’s oil and gas economy with its New Royalty Framework tax increase.
In response to the slowdown in oil and gas drilling throughout the province, the Government of Alberta will now provide companies drilling deep wells after January 1, 2009 with a one-time option of selecting new transitional royalty rates. This new scheme is designed to lighten the short term tax burden on junior oil and gas companies in order to increase the cash these companies have on hand to invest in new projects in the province.
“In light of the current global financing crisis, governments around the world are taking action to stimulate their economies - Alberta is no different,” said Premier Ed Stelmach. “We must act to provide stability, particularly for those junior oil and gas companies that are often fully Alberta-owned, and employ thousands of Albertans in areas of the province that are especially vulnerable right now.”
This is the second attempt by Stelmach to undo the damage of the New Royalty Framework. On April 10th, the Western Standard reported on the decision of the Alberta government to exclude certain high cost oil and gas projects from the New Royalty Framework to avoid the “unintended consequences” of reduced royalty income due to an industry slowdown. The decision was expected to keep $237 million annually in the economy and out of government hands.
Here’s an excerpt from that story:
After announcing the tax cuts, Knight said “Addressing the unintended consequences with these programs will help Alberta achieve the necessary levels of investment and production to generate the royalties anticipated by the New Royalty Framework.”
So let me get this straight: To generate the oil and gas royalty revenues anticipated in the New Royalty Framework, the government has been forced to lower the royalty tax increases announced last year in the New Royalty Framework.
All this "unintended consequences" stuff must be very confusing for Knight and his colleagues in the Alberta government. Perhaps they’ll find this explanation easier to understand:
Taxes kill jobs and investment.
The Western Standard reported yesterday that the New Royalty Framework will regrettably remain unchanged for oil sands producers, pulling almost $1 billion of new money out of this sector at a time when major capital projects have been put on hold.
On November 14th, the Western Standard reported that Paul Hinman, leader of the Wildrose Alliance, wants to see the province cancel the New Royalty Framework tax hike completely and focus instead on cutting government spending:
The engine of Alberta’s economy is beginning to stall. Declining commodity prices and tight credit markets are hurting the province’s energy sector and putting major capital projects on hold.
Alberta’s Wildrose Alliance party says that compounding the challenges facing the oil and gas sector is Premier Stelmach’s costly New Royalty Framework (NRF) tax grab and C02 sequestration scheme, a billion dollar plan to bury C02.
Wildrose Alliance leader Paul Hinman is calling on Stelmach to cancel the NRF and C02 sequestration scheme: "Clearly now is not the time for the government to throw another wrench into the economy."
Hinman is also urging the Alberta Tory government curb spending: “Alberta is skidding out of control."
Stelmach was elected Premier as a moderate and a pragmatist. By now it is abundantly clear that the New Royalty Framework is hurting the province. The moderate and pragmatic thing to do, then, is admit the mistake and make deep cuts to all existing royalty schemes and to the bloated public sector.
It makes no sense for a parasitic government to kill its host.
Posted by Matthew Johnston
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