Following Finance Minister Lyle Oberg's recent announcement of an Alberta royalty review committee, opposition parties and some members of the media focused attention on committee members rather than on the fact that most Albertans have little knowledge of how royalty rates work or how resource revenues impact their lives.

Essentially, royalty rates are the price which Albertans sell their non-renewable resources, like oil and gas, to oil and gas companies.

Of course, this is an oversimplified explanation of royalty rates, as in fact, they are extremely complicated.

Not only do royalty rates differ depending on the type of resource (oil, gas, oil sands, etc), but also when the pool of resource was discovered. It is further complicated by differing rates based on well production volume, density, well classification and the current market price of the resource. Then there are various credits, royalty reductions and exemptions for specialized extraction and drilling.

As such, royalty rate formulas often look like they were stolen off the blackboard of a university mathematics class.

While complicated, setting royalty rates is also one of the most important jobs our government has. These non-renewable resources can only be extracted and sold once. Getting the maximum possible from their sale is paramount.

The Alberta government received over $14 billion in royalty revenues from non-renewable resources in the last fiscal year. To put that into context, the government collected $6 billion in income taxes from Albertans. Resource revenues bring in more than double what income taxes deliver.

Furthermore, (and unfortunately) these revenues pay for a significant chunk of government spending. The first $5.3 billion of resource revenues to go directly into program spending each year (up from $3.5 billion in 2003). The remainder (over $9 billion last year) flows through the Sustainability Fund into the capital account to pay for the lion's share of infrastructure building in the province, is spent on "emergencies," stays in the Sustainability Fund for future spending, or gets put into the Heritage Fund (a mere $1.4 billion was put into the Heritage Fund last year).

Moreover than just satisfying our government's insatiable appetite to spend, resource revenues also represent a potential for a tax-free future, depending on whether Albertans demand such foresight.

Had the Alberta government put 50 per cent of resource revenues into the Heritage Fund starting in 2005, after we became debt-free, the Heritage Fund would now have over $25 billion in it, rather than the current $16.3 billion. That would generate over $2 billion in interest each year, money that could be used to eliminate taxes like the regressive health care premium tax.

With so much of our government spending based on resource revenues, and with so much of our future potential hinged on resource revenues, Albertans have the right to ask: "Are we getting the most possible for the sale of our asset "

While the expert committee figures out how to maximize our resource revenues, Albertans have an equally important decision to make. Are we going to continue to spend all of our one-time resource revenues now on our own wants, leaving a massive revenue void when the resources prices tank Or do we have the foresight to put a significant portion of these revenues into savings, so that a few years from now the interest from these revenues provides real choices