What's Ed to do?

So the royalty review report by a panel set up by the Alberta provincial government is now out. The ink is barely dry on the report and the oil industry is already spreading gloom and doom. This, of course was not unexpected for an industry that prior to the release of the report was parading it's CEO's through Calgary spreading the same gloom and doom about any change to the royalties. I even heard a caller to the CBC morning show here in Cowtown complain that the review was just a provincial version of the NEP. All this for a non-binding report that suggests we change our royalties from giveaway levels to fire-sale levels.

Industry whining aside, the report puts the Stelmach government in a tough spot. Generally, the people of Alberta support an increase of the royalty. This means that supporting the report would be politically popular for the Stelmach Tories. It also means that rejecting the report outright would drive the Alberta PC's poll numbers even lower. So the simple solution, you'd think would be to embrace the report then wait to reap the rewards of higher poll numbers. It, of course, isn't that simple. The Alberta PC's are heavily dependent on corporate donations to keep the party going. Much of that money comes from oil companies. Companies that have donated millions to the party over the years and the people in the oil companies who arranged the donations would like their politicians to stay bought. Any change to the next-to free ride the oil companies have been enjoying vis-a-vis the royalty regime would cause a lot of that money to dry up. Therein lies the Tory dilemma heading into their caucus meeting today in Calgary to discuss the government response to the report. If they go for votes, allowing them to keep their majority, they'll lose money in the form of donations from the oil industry. If they maintain the status quo, they'll send the signal to the voter that the current Tories are the same, tired old Tories we've always had, and they'll continue their slow sinking in the polls.

Now in the past, it would have been simple to say what the Tories would do. They'd shelve the report, and continue on as if nothing had happened. However that was before the boom in the oil industry that has stretched the province's infrastructure to the breaking point. People in Alberta are also now demanding a fair return for the selling of their resource to the oil companies. This means there might be actual consequences to simply ignoring the report. Due to this, it has become more difficult to predict the Tory response to the report, but not impossible. I suspect that the Tories will do some tinkering around the edges of the royalty system. They'll reset the rate ever so slightly so they can say to the voter, "look we increased the royalties" and still tell the oil industry "hey, we could have gone with the report". This would be an attempt to please everyone. It all comes down to who'll buy in. If there's only a token increase to the royalty, then the oil companies will publicly continue to scream blue murder, while in the back rooms clink their champagne glasses in celebration on how they're continuing to screw over the people of Alberta. The wild card here is the people of Alberta. Would they continue to swallow the Tory kool-aid and accept a token increase as being tough on the oil companies. In the past the answer would be a categorical yes. Now, however, it's not so easy to say, after all Calgary returned a Liberal to Edmonton in the last by-election in a riding that had only ever returned Tories.

This report could very well spell the beginning of the end of the Alberta Tories being the government here in Alberta. There's no way for Ed and Co. to really win with a decision on the report. Siding with either the voter or the Oil industry will cost votes or the ability to run a well resourced campaign. Going somewhere in the middle risks costing votes and the ability to run a well resourced campaign. Of course I probably put too much faith in the Alberta voter to be able to see through any token increase of royalties and there's probably not much risk to the Stelmach government if the government does just the barest minimum to make it look like they're doing something.