January 6, 2008
Government Responsible for Sustainable Tar Sands Development
by Rachel Penner de Waal
The Dominion - http://www.dominionpaper.ca
Alberta's current royalty regime has likely cost the province more in lost revenue than Trudeau's National Energy Program did, according to a senior policy analyst at the Pembina Institute.
Dan Woynillowicz, who works with the environmental think tank, says the September 18 provincial review of the royalty system proves that Albertans aren't getting their fair share from tar sands development. The review advises increasing the royalty rate from 25 per cent to 33 per cent.
Alberta Energy spokesperson Tim Markle says the province will respond to the review's recommendations toward the middle or end of October.
"[The royalty system] was developed a long time ago as an incentive to produce our oil up north," Markle explains. "While oil sands are certainly the future, the majority of what we receive now is the result of natural gas."
The oil industry has said an increase in royalties will scare off investors and ruin the economy. Woynillowicz says the industry's reaction, while expected, is disturbing.
"It is overstated, full of rhetoric and not grounded in reality. Producers are looking to their own interests and doing so in a way that is deceiving Albertans."
Woynillowicz points out that while producers claim the review panel didn't use the right data, they were using a 10-year-old report to substantiate their claims. He also notes that over the past 50 years, "an incredible amount of money" from the federal and provincial governments facilitated technological innovations that private corporations needed to develop the tar sands.
Woynillowicz says the oil industry has been able to create fear over the review because the sector plays such a significant role in job creation and government revenues. If the province's economy were more diverse, one industry wouldn't have so much leverage over the government.
"The government is responsible to protect Alberta from boom and bust," says Woynillowicz. "It needs to diversify the economy so we are not so dependent on energy resource development and a global supply and demand market."
Woynillowicz says the Pembina Institute doesn't advocate government intervention in oil sales or foreign investment in the tar sands, but says the province needs to manage the rate of development.
As for the royalties the province does collect, Woynillowicz says they need to be better managed. Considering that petroleum is a non-renewable resource, the province should be saving a portion of revenues to ensure future Albertans can continue to have a high quality of life, he says.
The Alberta Liberals advocate taking almost one third of annual non-renewable resource revenues and dividing it among four areas, including the Heritage Fund, the province's savings fund. Kevin Taft, leader of the provincial Liberal party, also believes the province needs to create a long-term strategy for tar sands development. His approach would include partnering with other western provinces.
"If I were the premier, I would be calling a meeting of the other provinces to sit down and look at ways we can work together to determine our own destinies. Right now, the Alberta government is just shrugging its shoulders," says Taft. "One million barrels of unprocessed bitumen are leaving the country every day. We can't handle it all in Alberta. Think of what we can do together as a team."
According to the Canadian Association of Petroleum Producers, production from the tar sands is expected to reach four million barrels a day by 2020.
However, Markle says the province doesn't have a strategy for developing the tar sands. That is left up to producers.
"Industry is the driver of it," says Markle. "The government is basically here to ensure the resource is mined in an environmentally friendly and sustainable way. We are stewards of the resource on behalf of Albertans."
Woynillowicz says the tar sands are being "mismanaged" and the province has been unwilling to address the rate of development. The Pembina Institute advocates a moratorium on new tar sands projects, something the majority of Albertans support, says Woynillowicz.
The rapid development of the tar sands is the root cause of economic inflation, neglected infrastructure and environmental damage, he says. But oil producers are responsible to their shareholders and won't voluntarily decide to slow down development.
"This is a matter of public land. The government has the responsibility for creating the playing field," says Woynillowicz.
He points out that the federal government also has clear areas of jurisdiction, such as in the area of greenhouse gases and global warming. However, Ottawa is not living up to its job of representing all Canadians due to many reasons, including the support the Conservative minority government has from Alberta.
"When they do introduce new regulations that would impact the oil sands, they are creating large loopholes (for the industry)," says Woynillowicz. "To date, the federal government has been dodging their responsibility."
He says if Canadians want the federal government to play a role in tar sands development, they can communicate their wishes through a variety of ways, including a federal election.
The Canadian Association of Petroleum Producers did not return calls.
