Panel calls for hike in oilsands royalties

To give Albertans their fair share of the province's lucrative oilsands,a government reviewrecommends the province charge the oil and gas industry 20 per cent more in royalties, or about $2 billion, per year.

The highly anticipated report looked at how much oil companies pay the province in exchange for the right to extract resources. For years, critics argued that Albertans were getting ripped off.

"Albertans do not receive their fair share from energy development and they have not, in fact, been receiving their fair share for some time," panel chair Bill Hunter wrote in the 104-page report released Tuesday.

"Royalty rates and formulas have not kept pace with changes in the resource base, world energy markets and conditions in other energy-rich jurisdictions."

The report targets Alberta's oilsands in particular, saying projects in that booming region should pay one-third more than they are now.

Decade-old formula

Alberta's current royalty structure was introduced in the 1990s to encourage companies to invest in the oilsands and at a time when oil was significantly cheaper than it is now.

"Now they're making billions of dollars in profit," said Lyn Gorman of the Council of Canadians. "Why should a certain small percentage of that not come back to Alberta and not come back to Albertans?"

The oil industry wanted the structure left alone, warning that any changes would scare off investors.

Proposed changes

The current formula requires oilsands projects to pay a one per cent royalty on their revenues until their initial investment is paid off. The royalty then jumps to 25 per cent. Tuesday's report recommends increasing that rate to 33 per cent.

The report suggests decreasing royalties for some of Alberta's conventional oil and natural gas wells, which have lower production rates.

It also finds that the royalty regime is hard to understand and fundamental reforms are necessary.

Panel held public hearings

This summer, a six-person committee toured Alberta listening to more than 300 submissions from residents, municipal leaders and people in the oil and gas industry.

Premier Ed Stelmach thanked the panel for its work but did not commit to adopting the recommendations.

"We'll make our final decision and provide a formal response to the report in a very timely manner, within a few weeks," Stelmach said Tuesday. "This is a very important decision and my goal is to ensure that Alberta's royalty framework strikes the right balance."