Small oil protests royalty hike

'They're trying to punch Big Oil, and they're going to end up hurting the little guys'

By JAMES STEVENSON, CP

Unsure of how Big Oil's procession of multibillion-dollar warnings is weighing on Alberta Premier Ed Stelmach, small energy players appear ready to play a more prominent role in the lobbying effort against royalty increases.

Over the past week, four major energy companies have come out with vocal opposition to a recent royalty review report that says Alberta should boost its take by nearly 20% or $2 billion annually.

Firms like EnCana and Talisman Energy even put a price on the plan, saying they'd hack between $500 million to $1 billion in annual spending from Alberta if royalties rise.

Others like Petro-Canada and ConocoPhillips were more vague, warning that they -- and the rest of the industry -- would simply take their money and go elsewhere.

But with a decision from the Alberta government expected within about a week, it's unclear whether the missives from Calgary's tallest oil towers are being taken as stark reality or fear-mongering.

"Mr. Stelmach is a proud man who doesn't react well to threats," says David Taras, a political science professor at the University of Calgary.

Energy executives concede privately recent lobbying by the oilpatch's largest and richest players could have the opposite effect by angering Stelmach and ordinary Albertans.

Particularly when a recent report by Alberta's auditor general also said the province has lost billions annually in recent years for not boosting royalty rates sooner.

"They're trying to punch Big Oil, and they're going to end up hurting the little guys the most," says one player.

A "Grassroots Oilworkers Rally" on the grounds of the Alberta legislature is being planned by tiny Quattro Energy Services Inc. for Oct. 17.

"Bring your hard hats and let's show them what Alberta is about," says Quattro president Derrick Jacobson.

Gary Leach, executive director of the Small Explorers and Producers Association of Canada, says the suggested royalty hikes "will be quite devastating" on his members. "And their budgets will be cut back in a major way next year if these proposals go ahead."

Leach says the perception that the oilpatch is trying to blackmail the Alberta government into not increasing royalties is simply not helpful.

"We think Albertans really need to understand the consequences of this."

Leach says the junior companies are already finding it harder to raise cash from jittery investors.

Last week, Stelmach said: "I promise you we will make a decision that is fair, realistic and one that recognizes the need for long-term competitiveness of our energy sector."