Rising oil and gas prices have encouraged governments to increase their take from
oil and gas development. In the last seven years, both Alaska and Alberta updated their fiscal regimes to ensure they received their 'fair share' from petroleum projects. The fiscal changes implemented in both jurisdictions have proven to be extremely
controversial and provoked a strong debate over the best royalty design. In North
America, the debate over fiscal regimes is often too politically charged to take account of the economics behind achieving the most efficient regime. This paper will argue that the political debate over oil and gas fiscal regimes does not reflect the economics of efficient oil and gas taxation. To make this case, this paper will examine the economics of oil and gas royalties and the politics surrounding the fiscal changes in Alaska and Alberta. The political experience in both jurisdictions is illuminating as they share many similarities and offer excellent case studies for how royalty changes occur. This paper will conclude by providing some insight into how politics and economics have collided to produce less than efficient results.