April 8, 2008 / 1:15 AM / 10 years ago

Alberta report disputes missing royalty billions

CALGARY, Alberta (Reuters) - An Alberta government report recommends a series of improvements to the oil rich-province’s royalty system but said it found no evidence it failed to collect billions of dollars in previous years.

Former Auditor General Peter Valentine, who authored the report, said on Monday the system for collecting economic rent from the oil and gas industry is “generally well-designed, if not always well-executed.”

Valentine made 13 recommendations to bolster the accountability, processes and transparency of Alberta’s royalty system, which gained worldwide energy-industry attention last autumn when Premier Ed Stelmach said his government would hike rates by as much as 20 percent a year.

That raised the ire of oil companies, many of which threatened to drastically chop spending in the province, which has the largest oil reserves outside the Middle East, in favor of more business-friendly jurisdictions .

Last year, reports by Stelmach’s royalty review committee and the province’s current auditor general, Fred Dunn, said the system failed to keep pace with rising commodity prices so billions of dollars were potentially left uncollected.

In his report last October, Dunn sharply criticized the government, charging it sat on reports by the Energy Ministry’s own staff that concluded there was room to raise the economic rent paid by the industry while staying competitive as a place to invest.

He said the department did not follow the principles of transparency and accountability by providing analysis to support its stewardship of the royalty system.

But Valentine said Alberta has the appropriate controls and processes to support the goal of optimizing revenues.

“I could find no substance to support the claims made over the last year that over a billion dollars of royalties were not collected,” he wrote in his report, entitled “Building Confidence.”

He declined to comment on the previous studies.

Energy Minister Mel Knight said his government collected the proper amount of royalty cash based on the policies in place at the time.

The Valentine report recommends a detailed review of the ministry’s organizational structure, a study of the royalty system versus that in other jurisdictions, better public explanation of the system, a review of the compliance and auditing group, cabinet approval on major changes to the system, among other things.

Knight said the government will adopt all of the measures.

($1=$1.01 Canadian)

Reporting by Jeffrey Jones; editing by Rob Wilson

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