KEY TAKE­AWAYS FROM THE AL­BERTA GOVERN­MENT’S NEW RE­SOURCE ROY­ALTY REGIME FOR 2017

Alberta Oil - - OBSERVER -

• For ex­ist­ing oil and gas wells, the roy­alty regime will re­main the same for the next 10 years. But there will be a “mod­ern­ized” frame­work for those drilled af­ter Jan. 1, 2017. This frame­work will be cal­i­brated to make sure that new wells give pro­duc­ers the same rate of re­turn that they get from ex­ist­ing wells un­der the cur­rent roy­alty regime. The govern­ment won’t gain any ex­tra rev­enue un­der this change • The sys­tem will no longer dis­tin­guish be­tween the types of hy­dro­car­bons found in a well, a “dis­tor­tion” that pre­vi­ously put ex­plo­ration at risk when com­pa­nies found, for ex­am­ple, dry gas while ex­plor­ing for oil

All drilling in­cen­tives with ex­pi­ra­tions in 2016 will be ex­tended

Non-oil sands will see a new roy­alty regime – a sim­pli­fied “rev­enue mi­nus costs” sys­tem. This means that a flat rate of five per­cent will be levied un­til the cu­mu­la­tive rev­enues from the well equal that year’s av­er­age drilling and com­ple­tion cost al­lowance. Then a higher rate will ap­ply that tracks oil prices. Th­ese rates have yet to be worked out

• The govern­ment says it will com­mit to “an un­prece­dented level of trans­parency” in the oil sands. It will pub­lish a new cap­i­tal cost in­dex, and will also show all of the prices, pro­duc­tion vol­umes and al­low­able costs that oil sands roy­al­ties will be based on • The govern­ment says it will also an­nu­ally pub­lish a de­tailed re­port show­ing the fi­nan­cial re­turns to Al­ber­tans. The re­port will as­sess job cre­ation, pro­duc­tion costs, in­vest­ment and en­vi­ron­men­tal per­for­mance

• The govern­ment will “en­hance value-added pro­cess­ing,” and de­velop a value-added nat­u­ral gas strat­egy. It will also in­cen­tivize par­tial up­grad­ing for bitumen

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