April 21, 2016

Oil and gas producers in Alberta can move ahead on drilling and investment plans for 2017 with new technical formulas now available.

These formulas are part of the next step in implementing Alberta’s Modernized Royalty Framework and will determine royalty rates and certain cost allowances. This milestone is another step towards implementing the recommendations from the Royalty Review Advisory Panel.

This announcement delivers on key recommendations of the panel to:

  • set out a structure to encourage the reduction of costs in the industry, which will increase net revenues shared by Albertans and industry in all price environments;
  • establish new royalty rates on oil and gas wells that preserve existing rates of return at the outset;
  • harmonize allowable drilling costs on oil and gas wells to remove barriers to investment; and
  • incorporate existing incentive programs and ensure they operate appropriately in both low and high price environments.

“From the day we launched the royalty review, our government has said it will be thoughtful, collaborative and that there will be no surprises. We have worked with industry associations, and I’m confident these formulas will meet the recommendations of the review panel, and create the right system for industry to remain competitive, grow and create jobs.”

Margaret McCuaig-Boyd, Minister of Energy

“I commend the Alberta government for its timely approach to create a more modern royalty system through a constructive process. This has led to a royalty system that is true to the principles of the royalty advisory report. The new royalty system helps provide more clarity that investors need to plan for the future.”

Tim McMillan, President and Chief Executive Officer, Canadian Association of Petroleum Producers

“The Explorers and Producers Association of Canada is pleased that the conclusion of this royalty calibration process will allow investors and oil and gas producers to move forward with a clear understanding of the new royalty and fiscal terms. The well-run process allowed the thorough exchange of analysis and information between government and industry. The result is a modernized royalty framework, with more transparency and better suited to support investment and development of Alberta’s future energy resource opportunities.”

Gary Leach, President, Explorers and Producers Association of Canada

The new royalty system will reward producers who innovate to reduce costs below the industry average and increase production. Over time, the effect of the change will be to grow net revenues industry-wide, which in turn will make Alberta’s energy sector more attractive for investment, help create more jobs and increase total royalty revenues to the province.

Related information

Backgrounder: Modernized Royalty Framework

 

Media inquiries

Brad Hartle

780-721-5127
Press Secretary, Energy