Alberta’s provincial NDP government has released details of its new oil and gas royalty framework. The new system closely adheres to the recommendations of the review advisory panel the NDP commissioned last year. Producers will now pay a five percent flat royalty until their costs are recovered, with subsequent rates ranging up to 40 percent depending on energy prices.
The new system also features a simplified structure with a single rate for crude oil, gas and liquids. Efforts were made to account for recent technical advances such as fracking and horizontal drilling, with producers being rewarded for efficiency.
The Canadian Association of Petroleum Producers, which had reacted positively to the royalty review panel’s recommendations in January of this year, supports the new plan but emphasizes that improved pipeline access is key to helping the industry.
The new framework will apply to newly-drilled wells starting in 2017, with existing wells subject to the current system until 2027.
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