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Alberta Election Keeps Door Open for Royalty Hikes

As results of the Alberta election sank in last week, a senior oil and gas business leader, faced with the very real possibility that oil and gas royalties will likely climb 20% next year, glumly described the industry as learning a hard lesson about its political standing.

"I guess we were singing to the choir," said the executive, speaking frankly on condition of anonymity. His verdict was an expression for talking and winning support only among the already converted.

The chief natural gas-producing province's ruling Conservatives romped to re-election. The Tory majority in the 83-seat legislature leaped to 72 from 60. The party increased its share of the provincewide popular vote to 53% from 47% in the last election in 2004.

"We thought that if there was any Alberta election that would make a change, this one would be it," the industry executive said.

The Tory regime was 37 years old. The ruling party had a new leader, Conservative Premier Ed Stelmach, who is a former farmer of Ukrainian extraction who sports a fur hat in winter and is soft-spoken to the point that opponents and academic pundits poked fun at him for suffering from a "charisma gap."

Prior to the campaign the industry bombarded Stelmach, Energy Minister Mel Knight and Alberta voters with four months of dire warnings that provincial oil and gas royalty increases they introduced last fall will cause investment, drilling and employment to drop (see NGI, Oct. 29, 2007; Oct. 8, 2007; Sept. 24, 2007). With a year to go before announced increases go into effect, Alberta royalties and faltering natural gas drilling swiftly emerged as an issue after Stelmach called the provincial election for March 3.

Last month opposition Liberal leader Kevin Taft called for a shuffle of the burden, suggesting that gas royalty rates should be reduced to counter depressing Canadian market developments but the treasury should be kept whole by increasing charges on oilsands production (see NGI, Feb. 11). But the Tories prevailed last Monday even in the industry capital of Calgary by winning 19 of the city's 23 provincial constituencies. The Liberals, the main opposition party, only gained one Calgary seat to raise their total in the city to five.

The political capital of Edmonton, meanwhile, renounced its nickname of Redmonton by electing Tories in 13 of its 18 legislature constituencies and taking all 12 of the mixed suburban and rural ridings that ring the inner city. The Liberals were cut down to three seats in the city and a total of eight across the province, or half their representation in the 2004-08 legislature. The avowedly socialist New Democrats were cut in half to two seats.

Along with the government's industry critics, Alberta pundits and academics sighed that the results mean more terms under the Tories because the premier is still only in his mid-50s. The election showed that Stelmach has electoral coattails, making it difficult if not impossible for the right wing of his party to challenge the premier and his cabinet on issues like gas royalties from within the government caucus.

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