Remember the Alberta Advantage?
It’s over, according to many in the oil and gas industry, smothered by layers of new federal and provincial government taxes and regulations making the province uncompetitive with other oil and gas–producing regions.
A new report by the Canadian Association of Petroleum Producers (CAPP) says there are between 40 and 50 different policy and regulatory initiatives currently underway that could adversely affect the industry. And they are occurring at a time when the U.S. is streamlining and reducing the cost of regulations.
“The cumulative effects of the resultant costs are having significant impacts from an investment perspective,” says the report. “While many of these policy and regulatory changes are ongoing initiatives, some of which precede the tenure of the current government, the combined impacts of numerous recent policy and regulatory changes have resulted in a significant incremental burden over the existing base costs.”
The cumulative costs associated with the changes in provincial and federal government policies and regulations to conventional and unconventional development could be between $450 million and $760 million annually in the near term, according to CAPP.
“I think we are killing ourselves with government,” Sue Riddell Rose, president and chief executive officer of Perpetual Energy, told the TD Securities Calgary Energy Conference. “The U.S. is blowing us out of the water. We are making it harder, and they are making it easier in terms of regulation.”
Riddell Rose said she’s “not so sure we have an Alberta Advantage right now except for the resource and the people...[However], there are a lot of us working hard with government and there are a lot of really good people in government too. If they can get their agendas to the top of the pile, we can make some progress on this.”
For example, “we haven’t yet figured out how to manage our liabilities,” she said. “Our liabilities could be dropped by a third probably…just by changing the way we reclaim our leases and restore land, particularly farm land.”
As for municipal taxes, “it’s criminal, actually, some of the profits the municipalities are taking based on how evaluations are done with assets,” said Riddell Rose. “We are actually getting slaughtered in this industry.” In the eastern half of Alberta, in particular, where assets are mature, companies “really are disadvantaged,” she suggested.
“There are issues on the regulatory side everywhere, and our governments have to help us create an environment where we can be competitive,” she said.
Phil Hodge, president and chief executive officer of Pine Cliff Energy, agreed with Riddell Rose.
“I don’t know if we have an Alberta Disadvantage, but we are heading in that direction,” Hodge said. “If we continue to put more regulation than is unnecessary on them and burden that when other jurisdictions are lessening that burden, the competitive advantage is going to shift…. We are seeing that already.”
CAPP is inviting the Alberta government to collaborate to streamline both federal and Alberta regulations and policies to reduce the burden on industry.
“We feel strongly there is an urgency needed and that we need to be deliberate and intentional about how we take the next steps if we want to be competitive, and if we want to be attracting investment capital into the future, that current path we are on isn’t going to be getting us there,” says Tim McMillan, CAPP’s president and chief executive officer.