05/06/2015 05:00 EDT | Updated 05/06/2016 05:59 EDT

Alberta Election 2015: Energy Sector Braces For Change With NDP Win

Alberta's energy sector is bracing for change today, as the Progressive Conservatives' more than 40 year reign comes to an end. In their place -- the NDP.

Rachel Notley's NDP government is expected to have a different approach to managing corporate Alberta, in general and the oilpatch, in particular. Energy royalties are on the table, corporate income taxes will increase, and bitumen pipelines will lose at least some direct government support.

Royalty review

Notley said during the campaign that she would initiate a review of Alberta's energy royalties, a regime that has a reputation for charging energy companies low royalties, relative to other energy jurisdictions.

It is also a system that is extremely complex, with every oil and gas well in the province paying a tailored royalty based on energy prices, the depth, type and age of the well and how much it produces.

Notley's stance on royalties threw the energy sector into high alert, in part because of the poorly managed royalty review of 2007, which led to further royalty changes in 2010.

"It's our perspective that a review is not required at this time," said Jeff Gaulin of the Canadian Association of Petroleum Producers (CAPP). "And it would in fact create uncertainty at the very time that it would destabilize jobs in Alberta.  So we don't think a review is required at this time and we hope that it would be taken off the table." 

Altacorp Capital, a Calgary investment bank that is partly owned by the provincial government, expressed a similar view in a report earlier this week, before the election.

The report pointed out that energy investors, especially those based outside of Canada, have lots of options when it comes to investing. 

"Unfortunately, with Alberta possibly heading for a third royalty change in eight years now, we believe global investors will add a degree of caution with the province's ability to maintain a stable investable environment."

Notley said that she will appoint a Resource Owner's Rights Commission that would propose recommendations for a new provincial royalty structure and that the commission would report within six months.

Corporate income taxes

Another key plank in the NDP platform was around the corporate income tax rate, which it pledged to increase from 10 per cent to 12 per cent. 

Amber Ruddy is a senior policy analyst with the Canadian Federation of Independent Business. She says that she hopes small business will see a break. 

"I understand that they need to balance their budget," said Ruddy. "But we have to think of the independently owned businesses, they can't be caught up in this economic downturn and have the government piling on." 

The burden of that corporate income tax increase will be borne by the energy industry, something that CAPP is also unhappy with.

"We have long said that increased cost burden on industry at this time is very sensitive," said Gaulin. "Jobs have already been lost in Alberta, jobs are further at risk in Alberta." 

Market reaction

Rafi Tahmazian is a portfolio manager with Canoe Financial in Calgary. He'll be watching the markets closely this morning.  

"The national and international community is going to send a sign of some degree and hey, they may surprise me, and I hope they do, but at this point, it's too late, As an investor in the oilpatch, you're going to get your teeth kicked in, probably. At the very least, negligible returns."

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Alberta Election Day 2015