NDP Alberta Royalty Review

Date PublishedOctober 22, 2015
CompanyNuVista Energy Ltd.
Article AuthorJohnathan Wright
Article TypeNovember 2015 Issue, October 2015 Issue
CategoryArticles, Oil & Gas
Tags, , , ,
PULSE Interactive

NDP Alberta Royalty Review


An open letter to our peers in the Oil & Gas industry and to interested Albertans from Jonathan Wright, President & CEO of NuVista Energy Ltd. Are you limited to survival, or can you thrive in the face of adversity?

“Raise Your Hand and Make Your Input Heard”

Alberta Royalty Review - NuVista EnergyAs Albertans – many of us being in the Energy business, we are experiencing what has been one of the most difficult years the province has ever faced. In one way or another, plunging oil and natural gas prices have affected all of us. According to Alberta Labour Force Statistics, over 35,000 people have lost their jobs since the beginning of the year, and some stats show the numbers may be much higher than that. Billions of dollars in projected Oil and Gas investment in Alberta have been reduced for 2015, and plans are being shelved for 2016 as I write. This means the job losses are likely to continue.

In the spring Rachel Motley and the NDP were elected. As you know, one significant component of their platform was a commitment to conduct a review of Alberta’s Oil and Gas Royalty structure. This review process has started and is expected to bring recommendations to the Premier by the end of the year. Our company and many others, through the Canadian Association of Petroleum Producer (CAPP) have been engaged with the Alberta government and the Royalty Review panel and will continue to be until the review is completed. Our industry is encouraged by the level of engagement and openness that the Royalty Review Panel has provided not only with the industry but also with the public. One key theme that has emerged is the goal to ‘Grow the Pie’ for all Albertans; this is an importante point – as a larger piece of a much smaller pie isn’t good for anyone. The current royalty structure incentives drilling, provides an increased government share at higher prices, and enables continued competitiveness in low price environments such as we are experiencing today. There are always areas for improvement , but overall the framework is effective. We believe the review should focus on increased royalty revenue for the government, and increased activity towards job creation, which directly or indirectly benefits all Albertans. The focus should not be increased royalty rates. It should be on increasing the size of the royalty and activity pie. Royalty rate increases were attempted before and the result was a harsh reduction in activity which hurt the province. The best way to increase the pie is to incentivize drilling activity and ensure that any royalty changes considered are based on real facts and economic comparisons to competing jurisdictions.

Through the summer, the outlook for the Energy industry in Alberta has continued to darken. The prospect of a year-end 2015 recovery in oil prices is unlikely and the impact of the prolonged weakness in all commodity prices is really hitting home and beginning to be felt in many more places than just the energy business. During this Royalty Review Process it is important that all Albertans do as much as we can to learn about how royalties and the industry work and provide the feedback to the panel that has been requested.

The Royalty review panel has done a very effective and balanced job thus far, including creating a website to inform and to seek input from all Albertans. There will be those who provide input which is easy to say but is negative and may not be based in fact. It is critical that those of us who support the energy industry are heard loudly and clearly. We are Albertans too. The website is interactive and more is added weekly so I strongly encourage you to visit it regularly.

Alberta Royalty Review Panel - NuVista Energy Ltd.The Government also has a website which provides information and solicits input on the ongoing Climate Change Panel discussions. I strongly encourage you to visit it to ensure we are all informed, and to provide input. I believe the website, although trying to do the right thing, needs more balance. It talks about climate change aspects as foregone conclusions despite the reading which I’ve done which demonstrates a lot more uncertainty. I respect everyone’s right to an opinion of course, but as you read the website information, please question the way the questions are even asked. Ask yourself things like why the website pushed entirely towards wind/solar/renewables? They are an excellent area upon which to focus continuous annual improvement and growth, and I support this at the appropriate pace. But let’s be honest, they have no realistic chance of being a big enough portion of the energy mix in the near decades to provide the energy we all need. Why is switching to natural gas from coal for power generation not a great thing for Alberta and for GHG alike given that it produces 50% less Carbon emissions? The website doesn’t even mention it. Why isn’t it good for the world if AB produces more energy with ethical practices and good GHG intensity “per bbl or per mcf” so that we and others may benefit – and so that regimes without these attributes may have less world market share? Access to affordable energy is the vital ingredient that has lifted the very quality of life of billions of people around the world. I want us to produce more of that needed oil and gas for the world at reasonable GHG intensity. And with a balanced approach and realistic goals, progress can be made on all these fronts. It’s ongoing already.

Preferred Vendor Microsite: NuVista Energy Ltd.Your participation, and ensuring your voice is heard on the Climate Change panel for Alberta is just as important as it is for the Royalty Review Panel. There will be many advocating for more Carbon tax and nothing but green power, but perhaps not fully understanding the degree of realism of the goals and what that might do to our industry. The time for input is literally right now, as decisions will be made in November-December.

So if you’re interested, what can you do? I ask you to please consider the following:

   Visit the Royalty Panel website to access easy-to-digest information and to make your input heard – letstalkroyalies.ca

   Support the “Raise Your Hand” campaign by joining Canada’s Energy Citizens if you want to show your support for the oil and gas industry and receive ongoing information at energycitizens.ca

   Go to the Alberta Climate Change Website to further inform yourself. The initial survey timing has closed but there is always opportunity for more input. Comment liberally if canned questions do not lead where you would go http://alberta.ca/climate-leadership.cfm

  …and encourage all your staff and family to do the same

Thank you for stepping up and making your voice heard. This is a critical time for all Albertans to be heard – not just those who may vocally vilify the very industry which provides them life improving energy each day, who fuel their cars and heat their homes the same way you and I do. The answers will form policy which will benefit or hurt our industry for a long time. Let’s help the decision makers get it right.

Johnathan Wright
President & CEO

NuVista Energy – -Oilfield-pulse-october-2015






Originally published in the 

October 2015 issue of Oilfield PULSE