Alberta’s revamped oil and gas royalty scheme ready for early use: Notley by James Wood, July 12, 2016, Calgary Herald
Premier Rachel Notley says oil and gas companies operating in Alberta can choose to immediately start operating under the province’s revamped royalty scheme.
The modernized royalty framework — the product of the NDP government’s royalty review released earlier this year — is supposed to come into effect Jan. 1, 2017.
But Notley told an investors forum at the McDougall Centre Tuesday that oilpatch companies had been asking for the ability to opt in earlier — which the government has granted.
“We are hopeful that this decision will get more rigs going sooner and put more Albertans to work. In particular, those workers who have been hit the hardest — rigs and service industry folks,” she said according to the prepared text of her speech, which was not open to the news media.
The royalty review released in January kept the oilsands royalty regime intact but promised a modernized system for new oil and gas wells as Alberta grapples with a major downturn caused by low energy prices.
Under the revised regime, new oil and gas wells will pay a flat royalty rate of five per cent until payout, followed by a higher rate once those costs are recovered.
The government says these rules will reward producers who reduce drilling costs through innovation and, over time, grow total revenues industry-wide and increase royalties to the province.
Tim McMillan, president of the Canadian Association of Petroleum Producers, confirmed the opt-in clause was something sought by the industry.
He said the changes will allow companies to make investments now that would not have been economic under the current royalty framework.
McMillan said there will be an impact from the changes but acknowledged that it will be small-scale as the industry remains hampered by low oil prices.
“Companies are looking at their capital expenditure plans, for most of them the funding was put in place at the start of the year so they would be adjusting mid-year,” he said.
“To be blunt, it will be incremental change and it will continue to be reflective of what we see in the global marketplace.”
At last year’s Stampede investor forum, her first as premier, Notley declared her newly elected NDP government as a friend to the oilpatch and welcoming to investment.
But the prospect of the royalty review that had just launched hung over the relationship between the government and energy industry.
Economic Development Minister Deron Bilous said he believes the royalty regime is now a selling point for the NDP.
“Investors are looking for stability, they’re looking for certainty,” he said in an interview. “The fact that we’ve completed our royalty review, it’s simplified, it’s been made more efficient and I think, if anything, that’s another attractive aspect.”
Comment by Diana Daunheimer
“There’s a mounting body of shocking questions about the safety and sustainability of shale gas extraction. Other jurisdictions are studying the practice. The PCs don’t really know if it’s safe or sustainable – they’re only consulting CAPP, who has a vested interest in pushing forward,” Notley says.
“An NDP government would put the interests of Albertans first by establishing an open review that is independent, relies on science and consults with the public,” Notley says.
http://www.albertasurfacerights.com/articles/?id=1262
Remember this Premier Notley? Or all those campaign promises to review the mandate of AER, fracking and urban drilling?
Now you have fast tracked using public dollars to subsidize fracking, holding hands with CAPP while you do it.
False virtue and blatant deceit, at its finest.
Original version of above article: Alberta’s revamped oil and gas royalty scheme ready for early use: Notley by James Wood, July 12, 2016, Calgary Herald
Premier Rachel Notley says oil and gas companies operating in Alberta can choose to immediately start operating under the province’s revamped royalty scheme.
The modernized royalty framework — the product of the NDP government’s royalty review released earlier this year — is supposed to come into effect on Jan. 1, 2017.
But Notley told an investors forum at McDougall Centre Tuesday that oilpatch companies had been asking for the ability to opt in earlier — which the government has granted.
“We are hopeful that this decision will get more rigs going sooner and put more Albertans to work. In particular, those workers who have been hit the hardest — rigs and service industry folks,” she said according to the prepared text of her speech, which was not open to the media. [Emphasis added]
Oil and gas drillers welcome new incentives, but raise doubts about the impact by Reid Southwick, July 12, 2016, Calgary Herald
The Alberta government’s new financial incentives to attract more oil and gas drilling drew support from industry Monday, but there were fears the royalty changes may not offset dismal economic conditions and higher taxes to improve production.
As part of its review of oil and gas royalties, the NDP government on Monday introduced two new programs that aim to maximize production from existing reservoirs and encourage new, expensive plays that reap big returns.
Kevin Neveu, president and chief executive of Precision Drilling Corp., called the move a “step in the right direction” to improve costs, but he warned low oil prices, pipeline bottlenecks and stricter environmental laws are already limiting investment in Alberta. [Stricter environmental laws? Where? The AER’s play-based, blanket approval, one size fits all projects are a fracing free for all for industry with the regulator no where to be seen but paid massively excessive salaries and expense accounts lying to and synergizing impacted Albertans. What about Alberta’s strict laws Encana violated when the company frac’d Rosebud’s drinking water aquifers, with the get-away nicely and efficiently enabled by government and regulators? Where are the new laws stopping Encana and other companies from fracing above the Base of Groundwater Protection? Nowhere.]
“It does help offset some of the higher costs of doing business in Alberta,” said Neveu, who helms among the country’s largest drilling companies.
“Right now, in this environment with low commodity prices, it remains to be seen how effective it will be.”
Sagging commodity prices have crippled the drilling sector, which had an average of 65 rigs drilling in June, or 9.5 per cent of the total fleet across Canada, according to the Canadian Association of Oilwell Drilling Contractors. The June rig count was the lowest it has been since 1986, the association said.
One of Alberta’s new drilling incentives, dubbed the Emerging Resources Program, is designed to encourage new investment in high-risk, high-cost projects with potential to unlock big reservoirs. Wells will be charged a flat five per cent royalty until total revenues equal the government-approved costs of the wells.
After that, rates increase to normal levels established by the province’s new royalty regime.
The program, which comes into effect Jan. 1, 2017, replaces a suite of other incentives ushered in by a former Progressive Conservative government and were set to expire mid-2018.
The change means drillers will pay the lower royalty rate for longer, offsetting the initial expense of opening up new plays in untapped areas, said Mark Salkeld, president and chief executive of the Petroleum Services Association of Canada.
Salkeld said the new program will likely attract interest in deep gas reserves in the foothills where there is limited infrastructure, such as roads, pipelines and compressor stations. Building them will put a lot of his members to work, he said, “and we need it desperately.”
“The reserves there are known, but it’s expensive and with the low gas prices today, nobody’s going after it,” Salkeld said.
“Economically and business-wise, by yourself it doesn’t make good sense, but if you can get support from the government, the whole province and the citizens of Alberta benefit in the long run.”
Eligible projects must target reservoirs with large potential that could generate “substantial long-term returns for Albertans,” according to the government’s outline of the program. Projects must also be at a pre-commercial stage and be unlikely to become commercial without the incentive.
A second incentive, dubbed the Enhanced Hydrocarbon Recovery Program, seeks to encourage greater production from existing wells with various methods, such as injecting polymer, water or gas into reservoirs to boost output.
Companies will pay a five per cent royalty on the oil, gas and liquids produced from eligible wells for up to 90 months. The rates will then rise to normal levels.
The Canadian Association of Oilwell Drilling Contractors welcomed the changes, but it questioned whether the incentives would offset “uncertainty” created by the government’s carbon tax and last year’s corporate tax hike that “resulted in companies looking elsewhere to invest.”
“We don’t know how much capital is going to come running back to the province based on these two incentive programs,” said John Bayko, the association’s vice-president of communications.
Gil McGowan, president of the Alberta Federation of Labour, said he was skeptical of the royalty changes because previous incentives brought in by former premier Ed Stelmach created an “unmitigated disaster for Albertans.”
McGowan said an earlier program cost $2.9 billion and failed to create new jobs and investment, though the Progressive Conservatives have previously defended the incentives, arguing they kept Albertans working when recession hit in 2008.
The labour leader called for a cap on funds that will be spent on the program along with targets for drilling and job creation.
The Canadian Association of Petroleum Producers said the new incentives will attract investment at a time that companies have diverted capital spending to other projects, including those south of the border.
“The resource may not be mobile, but capital is mobile, and capital is going to follow where they can get the best rate of return,” said Jon Stringham, an adviser at the association. [Emphasis added]
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