On Wednesday, November 6, 2013, Bill 34: Building New Petroleum Markets Act (“Bill 34”) passed first reading at the Alberta Legislature.1
Bill 34 proposes important amendments to the Petroleum Marketing Act 2 that have the potential to significantly expand the scope of operations of the Alberta Petroleum Marketing Commission (the “Commission”). These amendments include giving the Commission the power to seek out new opportunities for the province’s royalty hydrocarbons as well as to offer financial support and other assistance to energy industry players through a number of different tools.3
The Commission’s Current Mandate
The Commission is presently tasked with selling hydrocarbons that the Alberta government receives in lieu of cash royalties. As a result of the implementation of the province’s Bitumen Royalty-In-Kind policy (“BRIK”),4 the Commission, currently responsible for nearly 70,000 barrels per day of conventional oil the province receives as its royalty share, will also be responsible for Alberta royalty bitumen, which could reach 400,000 barrels per day by 2015.5
Under the existing Petroleum Marketing Act, the Commission is a corporation which, subject to that Act, has the rights, powers, and privileges of a natural person.6 However, the Commission’s role is presently limited to accepting delivery of and dealing with the province’s royalty share of hydrocarbons in a manner that is, in the Commission’s opinion, in the public interest of Alberta.7
The Proposed Amendments
The proposed amendments to the Petroleum Marketing Act under Bill 34 have the potential to broadly expand the scope of the management and operation of the Commission, and include the following:
- Creating a board consisting of up to seven directors (an increase of four from the current maximum of three Commission members) which may, in addition to managing or supervising the management of the business and affairs of the Commission, delegate the board’s powers8 to any director or committee of the board;9
- Allowing the Commission “to engage in other hydrocarbon-related activities, in a manner that is, in the Commission’s opinion, in the public interest of Alberta”10 (which, on its face, is significantly broader than merely accepting delivery and dealing with the Crown’s royalty share);11
- Enabling the Commission12 to guarantee any obligation of the Commission as well as the obligation of any person,13 directly or indirectly purchase shares, make loans or acquire existing loans and, in transactions involving the payment of any money, enter into joint ventures or partnerships for the purposes of fulfilling its responsibilities;14
- Allowing the Minister of Energy to issue directives that the Commission, the Commission’s board, or both must follow in carrying out their powers and duties and which must be implemented in a prompt and efficient manner;15 and
- Removing the currently existing requirement for the Commission to annually prepare a detailed report summarizing its transactions and affairs during each past fiscal year.16
In discussing the changes to the Petroleum Marketing Act proposed under Bill 34, Ken Hughes, Alberta’s Minister of Energy, is reported to have expressed:
- That this will be the vehicle the government uses for strategic initiatives to ensure that access to markets is obtained and that value is added, where there is a direct role for the province;
- That with an expanded role for the Commission, its work will become more complex, and will require wider expertise that might be found today only in the Alberta Department of Energy;
- That Bill 34 also clarifies the financial tools available to the Commission, which could include providing loans or making equity investments in projects, when authorized by the government; and
- That projects could be looked at that require strategic support from the province to enable them to happen.17
The government has also broadly stated that these amendments will support the Commission’s increased strategic mandate to execute the BRIK and related policy goals, including enhancing market access and increasing value-added activity.18
The Commission, should Bill 34’s amendments be proclaimed, will be expressly entitled to “engage” in undefined “hydrocarbon-related activities” which are, in its opinion, in the public interest of Alberta.19 This will grant the Commission potentially significant power to participate in the private development of oil and gas resources and infrastructure beyond the mere marketing of hydrocarbons it receives in lieu of cash royalties.
In effect, the Commission could potentially be used by the province as a corporate vehicle to implement government policy through direct contractual and financial relationships with energy industry stakeholders, as long as its undefined “hydrocarbon- related activities” are, in the Commission’s opinion, in the public interest of Alberta.
The introduction of the province as a potentially significant shipper with the ability to creatively spur private development of energy infrastructure could be a boon to industry, but it remains to be seen how active the newly constituted Commission will be and whether it will have the experience or resources to manage complex legal relationships and be effective in its proposed new role.
Bill 34 was adjourned at second reading on November 7, 2013.20 If passed, the bill will come into force upon its proclamation.21