Alberta’s royalties unchanged after review

CALGARY - Alberta's royalty review panel has recommended the rates for oilsands projects remain the same, but that the rules around how costs are accounted for be improved.

CALGARY – Alberta’s royalty review panel has recommended the rates for oilsands projects remain the same, but that the rules around how costs are accounted for be improved.

It also says the regime for conventional oil and natural gas wells should be tweaked so that royalty rates better take into account the costs of drilling, instead of just production levels and commodity prices.

A flat five per cent royalty rate will be applied on 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 boss Dave Mowat, also says the system should be agnostic about what type of resource is coming out of a well.

Today’s system applies different rates to oil, natural gas and natural gas liquids, which makes some companies reluctant to explore if they don’t know what resource their drill bit 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.

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