Calgary, AB (January 29, 2016): Dr. David Swann has expressed his disappointment with the NDP Government’s wholesale adoption of today’s Royalty Review.
“Overall, I’m disappointed the Government has chosen to adopt this review in its entirety,” said Swann. “There are several important issues they have either overlooked or deemed irrelevant.”
“The most glaring omission is the complete absence of any kind of incentive for environmental improvement by industry. Under this new royalty system the government is rewarding the environmental status quo.” Swann stated. “Alberta’s energy industry is innovative and they deserve the opportunity to be rewarded for improved environmental practices. This is particularly prevalent in the decision to ignore the oilsands royalty process completely.”
In an effort to ‘emulate a revenue minus costs system’ the government has ignored an actual revenue minus costs system known as a cash flow tax. “I’m surprised by the decision,” Swann said. “As a cash flow tax is a significant element of the current oilsands royalty structure which the NDP has chosen to leave in place. Other jurisdictions, too, have determined this system superior to a complicated royalty scheme.”
“I’m also concerned about the report’s impact on investment,” Swann stated. “In an attempt to provide incentives, the government has chosen an averaging system when determining the cost of a well. The report talks frequently about how improving competition and efficiency will beat the average, resulting in greater margins and higher investment,” Swann continued. “Unfortunately, this implies that Alberta’s energy companies are currently inefficient and uncompetitive. I don’t believe this to be true.”
“All in all,” Swann stated. “I don’t feel this royalty review will provide protection for the environment, add revenue for Albertans, or increase investment and jobs. There are positives, such as increased transparency and the harmonizing of hydrocarbon royalties, but overall, I’m disappointed.”