Royalties unchanged for oilsands projects in Alberta

CALGARY -- Alberta's NDP government is introducing an industry-friendly royalty system that won't change the province's take from oilsands projects.

See Full Article

The province's royalty review panel did recommend, however, tweaks to the royalty framework for conventional oil and natural gas wells so that royalty rates better take into account the costs of drilling, instead of just production rates and commodity prices.

A flat five per cent royalty rate will be applied on those wells until their revenues equal a cost allowance, after which rates will go up.

The province will determine in the coming months how those cost allowance numbers will be crunched. The panel, led by ATB Financial's Dave Mowat, also says the system should be agnostic about what type of resource a well produces.

Today's system -- in which different rates apply to oil, natural gas and natural gas liquids -- has been criticized as being too complex and making companies reluctant to explore because they don't know what resource their drill bits will encounter.

The new system will take effect in 2017. Wells drilled prior to that will be subject to the existing rules for 10 years.

The panel's recommendations have been accepted by the Alberta government.

"Our new royalty framework recognizes the reality of our economy today," Premier Rachel Notley said in a speech Friday.

"It responds to the pain and the uncertainty that workers and families are feeling across our province. It is designed to encourage more investment and more jobs than we'd otherwise have."

For oilsands, the royalty rates structure will be unchanged, but the panel said there was room for changes. For instance, disputes between companies and governments over what costs can be deducted "generate uncertainty" and "breed cynicism."

In a statement, three industry players praised the new framework, saying it provides certainty for their businesses.

Kevin Neveu, CEO of Precision Drilling Corp. (TSX:PD), said it "ensures that Alberta remains a competitive jurisdiction." Pat Carlson, CEO of Seven Generations Energy Ltd. (TSX:VII), called the report "thoughtful and comprehensive."

Mowat said the focus of the panel was less on the rates charged to producers and more on how to make the system work better.

The panel recommends further examination into ways to encourage more "value-added" processing in the province -- making more lucrative products out of raw resources, like petrochemicals from natural gas liquids.

The framework aims to reward oil and gas drillers whose costs are better than average. A capital cost index will be calibrated every year, so that it reflects the latest business conditions.

Cost stemming from the province's new climate change policy will be baked into the cost allowance.



Advertisements

Latest Economic News

  • Union representing 2,000 Quebec workers unsure about CSeries Airbus deal

    Economic CTV News
    MONTREAL -- Quebec workers with Bombardier's CSeries plane program have mixed feelings about the deal with Airbus giving the European aerospace giant a controlling stake in the aircraft, a union representative said Tuesday. David Chartrand, Quebec co-ordinator for the International Association of Machinists and Aerospace Workers, said the deal means access to a massive market and possibly more jobs. Source
  • Sears Canada's registered retirement plan appoints new administrator

    Economic CTV News
    VANCOUVER -- Morneau Shepell is taking over administration of Sears Canada Inc.'s registered retirement plan. The Financial Services Commission of Ontario says in a statement that the Ontario Superintendent of Financial Services appointed the human resources consulting and technology company after a competitive tendering process. Source
  • Liberals to narrow scope of passive-income measure for private corporations

    Economic CBC News
    The federal government is moving to pare down its controversial tax proposal on passive income so that it will only affect three per cent of private corporations. Finance Minister Bill Morneau will be in New Brunswick on Wednesday to unveil changes to his passive investment proposal so that it only targets unfair tax advantages used by the wealthy, a senior government official told The Canadian Press. Source
  • Freeland calls U.S. NAFTA demands 'troubling' and 'unconventional'

    Economic CBC News
    Foreign Affairs Minister Chrystia Freeland accused the United States of deliberately trying to undermine the North American Free Trade Agreement, calling its list of unconventional proposals "troubling." Her remarks came during a tense joint news conference as the fourth round of NAFTA talks wrapped up in Arlington, Va. Source
  • Veteran investor booted from Sprott board after racist comments

    Economic CTV News
    TORONTO -- Veteran investor Marc Faber was asked to resign from the board of directors at Sprott Inc. after comments he made in his investment newsletter that America was better off because it was settled by white people instead of black people. Source
  • Veteran investor Marc Faber booted from 3rd company after racist comments

    Economic CTV News
    TORONTO -- Veteran investor Marc Faber has resigned his board seats at three companies based in Canada on Tuesday following comments he made in his investment newsletter that America was better off because it was settled by white people instead of black people. Source
  • Missouri appeals court tosses $72M US award in talcum powder case

    Economic CBC News
    A Missouri appeals court on Tuesday that vacated a $72 million US award to an Alabama woman who claimed her use of Johnson & Johnson products that contained talcum contributed to her ovarian cancer has thrown the fate of awards in similar cases into doubt. Source
  • Latest NAFTA round ends in a stalemate with plans to extend talks into 2018

    Economic CTV News
    WASHINGTON -- U.S. Trade Representative Robert Lighthizer says NAFTA talks are being extended into 2018 -- a tacit admission that negotiators aren't going to meet their original deadline for a deal by year-end. The proposals tabled at the latest round have revealed huge chasms in negotiating positions, on everything from dairy and autos to even the basic architecture of an agreement -- and the tone of Tuesday's news conference made clear the talks have turned downright frosty. Source
  • Veteran investor Marc Faber booted from Sprott board after racist comments

    Economic CBC News
    Veteran investor Marc Faber was asked to resign from the board of directors at Sprott Inc. after comments he made in his investment newsletter that America was better off because it was settled by white people instead of black people. Source
  • White House says Fed search down to 5 finalists

    Economic CTV News
    WASHINGTON -- A White House official says U.S. President Donald Trump has narrowed his search for the next Federal Reserve chairman to five final candidates. A decision is expected before the president begins a trip to Asia on Nov. Source