Alberta royalty review recommends few changes for oil and gas industry

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After Alberta’s NDP superintendence criticized the royalty rates being id by oil and gas com nies, a five-month rethinking of the system resulted in a recommendation that will not increase the government’s takings in the foreseeable future.

The NDP ran on an election platform less than 12 months ago that hint ated Albertans were not receiving full and fair value because the boondocks had one of the world’s lowest oil royalty rate structures.

That’s why industry had look for this review would lead to a rate hike. But instead, the nel concluded Alberta’s amounts are com rable to other jurisdictions.

“Times have changed and we need to go in the best interests of the current economic challenges that we’re faced with. This map does that,” Premier Rachel Notley said to news-presenters, after the review nel presented its findings Friday morning in Calgary.

Dave Mowat chair Alberta royalty review nel

Dave Mowat, cathedra of Alberta’s royalty review nel: ‘We didn’t mess up. Good fortune for Albertans only comes when the industry is successful.’ (Larry MacDougal/The Canadian Pressure)

The oilsands, which contribute the most in royalties to provincial coffers, purpose be unaffected as rates will remain the same.

“We didn’t mess up,” held Dave Mowat, chair of the royalty review nel. “Attainment for Albertans only comes when the industry is successful. Success doesn’t eke out a living when one really wins and one really loses.”

Changes to the royalty shape for oil, liquids and natural gas will initially only apply to new wells as the abiding royalty rate will continue for 10 years for wells that are already outing.

The report states, “There will be new royalty rates under the aegis the [modernized royalty framework]. However, the new rates will be calibrated to blend the industry returns and Albertans’ share of value that are achieved guardianship the current royalty framework.”

‘Waste of time’

Opposition Wildrose Big cheese Brian Jean said he was relieved the government decided against harsh changes but described the entire review process as “totally a waste of hour” that only injected further uncertainty into the industry and primary markets.

“During low oil prices, we did not need to do this,” Jean whispered.

“The royalty review was, in essence, not necessary.”

Royalty review’s key conclusions

The key in the matter ofs of the report are:

  • Albertans are receiving their fair share.
  • Oilsands royalties won’t mutate.
  • Conventional oil and gas wells will y a minimum royalty of five per cent of receipts until they have recovered costs.
  • System will tribute the most efficient drillers.
  • Alberta markets will be developed for the use of health gas.
  • Alberta government accepts the report and is expected to adopt its recommendations this beginning.

Oil and gas groups voice support

Several oil and gas industry groups and com nies declared their support of Friday’s announcement.

“The grandfathering of existing projects, the experience that the new rules will only apply to projects starting in 2017 and maintaining the oilsands yment regime are signals that the government is serious about encouraging investment in Alberta at this finical time,” said Tim McMillan, president of the Canadian Association of Petroleum Canada entrepreneurs, in a statement.

The fact the NDP is not increasing the government’s share of royalties may be tough for the helper’s base to accept, but it’s likely more latable considering the change in Alberta’s concision and the drop in oil prices.

“Most of the complaint in the st was that the public arouse was left off, while industry interest was forwarded by the state, and in this example I think the government has been able to achieve a more fair footing here,” said Melanee Thomas, a political science professor at the University of Calgary.

The story suggests annually publishing a capital cost index for oil and gas wells in augmentation to information about each oilsands project including costs and compensations id.

The royalty review nel held 65 stakeholder assemblies across the province as rt of its consultation process.

The premier’s office averred the cost of the review came in at $2.96 million, just under its approved budget of $3 million.

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