CALGARY - The dust appears to be settling in Alberta after an initial outcry by the energy and business sectors over Premier Ed Stelmach's announcement Thursday that royalties will be increased by 20 per cent or roughly $1.4 billion annually starting in 2009.
"What you saw was some hysteria building up, some knee-jerk reactions, but I think cooler heads will prevail," said Finance Minister Lyle Oberg. "I think they'll take a look at it and say, 'Gee, this isn't as bad as I as I thought."'
Energy Minister Mel Knight looked visibly relieved Saturday as he mingled with the 450 delegates at the governing Progressive Conservatives' annual policy conference.
"We haven't had an awful lot of irritated e-mails and that sort of thing. It's quieted down quite a bit and the tone is much more constructive," he said in an interview.
"People have had an opportunity to look at the situation from the point of view of their individual asset bases."
The energy minister also said the muted stock market reaction seems to have had a calming effect on the business sector.
"When they got to analyze the numbers a little bit, they realized that we were definitely taking Albertans' share, but not at the risk of thousands of jobs in Alberta," said Knight. "I think the markets realized that it was a fair share."
Wilf Gobert, an independent energy analyst, rejects any suggestion that the initial reaction from the energy industry was "knee-jerk."
"It's ridiculous and intellectually dishonest to be saying that a CEO doesn't know what he's talking about. They represent billions of dollars of shareholder value," he said in an interview while golfing outside of Calgary.
Energy CEOs are likely still studying the fine details of the new regime, said Gobert.
Stelmach focused on the royalty issue during his keynote speech Saturday night to the Tory delegates.
"Change is never comfortable," he told the crowd. "We need a bigger pie to create new jobs, new opportunities and to build for the future.
"As future generations look back on this decision, I'm confident they'll see we were fair and reasonable. Not greedy and short-sighted."
Deputy premier Ron Stevens said support for the province's royalty decision appears to have been reflected in the relative calm among investors.
"The smart guys were doing the analysis overnight, and as they understood what the new royalty regime was about, that was reflected in the markets (Friday)," Stevens said.
"That's a vote for the future of the industry in Alberta and by proxy, a vote for the future of this government."
But Gobert noted history has shown that popular political decisions aren't always good for the economy. The national energy program was popular in some parts of Canada when it was introduced in 1980 in response to soaring world oil prices, but it devastated Alberta's economy.
The province has yet to negotiate a new royalty deal with the two largest oilsands players, Syncrude and Suncor, which account for nearly half of Alberta's oilsands production. Stelmach has said he wants those negotiations wrapped up within 90 days, but it won't be easy.
"Those companies aren't simply going to give up on a contract that's going to cost hundreds of millions of dollars," said Gobert.
Stevens and Knight both expect the government will get blamed for any job losses in the energy sector, even if they have no relation to the impending higher royalties. Natural gas prices have been weak for 18 months, starting well before any talk of royalty reform, Stevens noted.
Widespread polling will soon let the government know whether its lagging popularity will get a boost over the royalty issue. But Knight said he's already feeling that people in his own community in the Peace River area are feeling "much, much more positive" than they were two weeks ago.
Oberg said the new higher royalties will be price sensitive, and in the case of natural gas, volume sensitive, and this will be an easy sell once it's fully understood.
"Realistically, when oil is $90 a barrel, the amount that the Alberta government should get should be more and no one has argued with that point," he said. "I think people are going to be seeing that over the next couple of days."
The Alberta government started an advertising blitz immediately after Thursday's royalty announcement. Full-page newspaper ads appeared on Saturday and will be followed by radio advertising and weekly newspaper ads.
The ads have a definite pre-election tone, with the slogan "Building Tomorrow. A plan to secure Alberta's future" appearing across the bottom of the page in the blue and gold colours of the Tories.
Delegates at the party's policy conference appeared upbeat Saturday as they prepared to talk behind closed doors about strategy for an election the premier says he plans to call sometime in the next 12 months.
