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Not many changes in royalty review report … for now

Posted on February 2, 2016 by 40 Mile Commentator

By Jamie Rieger
Many Albertans breathed a big sigh of relief last week when the provincial government announced there would be few changes with the royalty review.
Premier Rachel Notley in making the announcement, said, “Our new royalty framework recognizes the economic context of Alberta’s energy industry and the need to protect and promote good jobs. Our new system will gradually deliver greater revenue to Albertans while building a more competitive energy sector enhanced by greater transparency and performance measurements to allow Albertans to hold government and industry to our commitments.”
The royalty changes for oil, liquids, and natural gas, which take effect in 2017, will apply only to new wells, while maintaining the current royalty structures on existing wells for 10 years. Once in place, the royalty rates will be based on industry returns. The royalty review report, released last week, itemizes key changes including:
-Ensuring that Albertans are receiving their fair share,
-that Oilsands royalties won’t change,
-conventional oil and gas wells will pay a minimum of five percent of revenue until they have recovered costs,
-most efficient drillers will be rewarded
-Alberta markets to be developed for use of natural gas
The report is expected to be adopted by the Alberta government this spring.
While the report is allowing industry to take a deep breath, others are saying the royalty review which did not hold many changes, was a waste of time, costing the province valuable investors.
“I am glad the NDP has abandoned some of their plans and listened to the Wildrose Party, but I am disappointed that in the past eight months they have scared off investors between the not knowing what was going to happen with the royalty review, the carbon tax, and the corporate tax,” said Cypress-Medicine Hat MLA Drew Barnes.
According to a statement released by the Wildrose Party following the NDP announcement, a number of corporations have withheld or moved investment out of Alberta during the royalty review.
“l am grateful the panel agreed with Wildrose’s position to provide stability in royalty rates for our energy sector, and that Premier Rachel Notley accepted,” Wildrose Leader Brian Jean said in the statement. “Our heart goes out to the Albertans who suffered job losses because of the instability caused by calling the royalty review. The next step is to recover from the damage done by this review and the series of poorly thought out policies that are harming our energy sector. Alberta needs to start seriously evaluating how to restore our competitiveness on the world stage.”
After months of uncertainty and expectations of higher rates (based on Rachel Notley’s election campaign statements), many industry leaders in the were satisfied they could move forward with more certainty.
Some industry leaders have also voiced their approval of the royalty framework.
“Precision Drilling is a very large employer of energy service workers in Alberta with similar operations in 16 U.S. states, and nine countries. We believed our perspectives and input would be helpful for the Panel,” said Kevin Neveu, president and CEO of Precision Drilling Corp. “I was impressed with the efforts of the Panel to understand and balance the interests of the public, the Province and the industry, but I was particularly impressed with how all of the input was considered and integrated to the Modernized Royalty Framework report. I believe the Panel’s recommendations significantly update and improve the Alberta royalty framework which should ultimately encourage investment in Alberta’s resources.”

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