Some energy stocks defied expectations by gaining value Friday, a day after Alberta introduced a controversial increase to the fees charged to oil and gas companies in the province.
Alberta royalties will rise to $1.4 billion more per year starting in 2009.
(CBC)
Starting in 2009, the industry will pay $1.4 billion more per year in royalties for the right to develop Alberta's non-renewable resources, Premier Ed Stelmach announced Thursday.
The long-awaited decision accepted about half of the recommendations made by a royalty review panel in September that concluded Albertans were not getting their fair share of the energy pie.
Enbridge, which operates the world's longest crude oil pipeline system, gained just over two per cent, while Talisman Energy slipped by only 0.41 per cent.
Other big oil and gas companies, including Suncor and EnCana, slipped slightly, but the declines did not come close to the bloodbath some analysts projected. The TSX energy index finished up 0.23 per cent.
The Alberta announcement on royalties coincided with a rise in international oil prices by $1.40 US a barrel to a close of $91.86 US on Friday.
Industry slams royalty increase
Big companies said they would not respond to the new royalty formula until they had time to review it thoroughly, but industry representatives are warning of long-term consequences.
"If you take a billion and a half dollars or $2 billion out of the energy cycle, it will force them to look at how they do their investments in Canada, how much, where — I don't think anybody knows yet," said Pierre Alvarez, president of the Canadian Association of Petroleum Producers.
Premier Ed Stelmach announced the royalty hike at a news conference in Calgary on Thursday.
(Jeff McIntosh/Canadian Press)
However, Petro-Canada said late Friday it will continue with early engineering work on $15 billion worth of new oilsands projects, despite the royalty hikes.
Under attack by the industry, Stelmach also came under fire from opposition parties and environmentalists who said the royalty hike isn't big enough.
Cities struggle with growth pressures
Melissa Blake, mayor of the regional municipality of Wood Buffalo that includes oil-rich Fort McMurray, said time will tell if Stelmach made the right decision.
"When it comes to our community I think six months out will tell us another story and then three years out will probably tell us a different one yet again, so it's tough to tell. I think we just have to be cautious in our approach to infrastructure planning," Blake told CBC News on Friday.
The oilsands boom has brought pressing growth issues to northern cities like Fort McMurray, where there is a crisis in affordable housing and infrastructure.
Minister sells plan to U.S. investors
A campaign to sell the new royalty formula to the public ramps up this month with newspaper ads in Alberta and a trip to the U.S. by Energy Minister Mel Knight.
The province announced Friday that Knight will make an Oct. 28 to Nov. 4 trip to Washington, New York, Boston and Chicago to reassure government officials, investment firms and industry representatives that royalty changes will not destabilize Alberta's energy output.
With files from the Canadian PressRelated
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