Energy giant rages against plan to hike Alberta royalties

Another oil and gas gianthas joined the parade of companies warning the Alberta government not to raise royalty rates for gas and oil.

ConocoPhillips President Kevin Meyers said he has written to Premier Ed Stelmach warning that boosting royalties by 20 per cent, as recommended in a recent report,would cost his company an oilsands project worth $500 millionnext year.

He also said a further $8 billion in projects planned for the next three years would have to be postponed.

A panel appointed by the Alberta government released a report in September that said Albertans are not getting their fair share of energy revenues, and it recommended raising royalty rates by 20 per cent, or $2 billion a year.

A series of oil and gas companies have been coming forward to criticize the suggestion, saying an increase would hurt the province's investment and growth potential.

Last week, EnCana threatened to cut $1 billion from its 2008 investments if recommendations in the report are adopted.

The company said it will cut 30 to 40 per cent of the $2.5 billion to $3 billion it plans to spend next year on Alberta-based activity.

On Tuesday, Crescent Point Energy Trust said it would shift about $150 million in investment from Alberta to Saskatchewan if royalties are raised.

Then, on Wednesday, the former chief executive of Talisman Energy warned Alberta that the company would likely cut around $500 million from its capital program if the proposed royalty hike is approved.

"At current gas prices, I believe it will be difficult for anyone to grow their natural gas production in Alberta, and if you implement these proposals we will see a significant loss of investment, jobs, taxes and the loss of world-class technical expertise," Jim Buckee wrote in an open letter toStelmach.

The cut would be on top of Talisman's current plan to trim $500 million from its spending in the province due to low prices for natural gas.

Also on Wednesday, Petro-Canada weighed in, saying that royalty rates should increase only for oil and gas prices thatrise above current levels. The company also said any royalty changes should be phased in, so producers and investors have time to adjust.

"We want to continue to invest here, so it's important that we find a solution that works for everyone," said Ron Brenneman, Petro-Canada's CEO and president.

Stelmach has promised to consult with the oil and gas companies before making his decision, which is expected later in October.

"No one should be surprised that firms are making noises that they will invest less or build less if royalties increase," energy policy expert Joseph Doucet said Thursday.

"The real question for the government to look at is by how much that might change, in order to make the best decision."

Doucet said the government should be able to strike a balance between increasing rates and maintaining the industry.

"Although there will be a hit on the industrial sector, it won't necessarily be as large as people are predicting," he said.