New drilling and jobs under Modernized Royalty Framework

Special to the Post

Drilling investment and jobs will increase in Alberta through the rest of 2016 now that drilling has started on the first wells under the Modernized Royalty Framework.

Government has received dozens of drilling applications since companies were allowed to apply for early access to the new framework. Thirty-five new wells have been approved as of Aug. 15. The Canadian Association of Oilwell Drilling Contractors estimates that each drilling rig in operation creates roughly 135 direct and indirect jobs.

Encana is the first company to have its wells approved after demonstrating increased drilling activity beyond what was anticipated for 2016. Its two new wells have begun operation in the Duvernay-Montney basin near Grande Prairie.

This increased activity is a direct result of government’s decision to allow the early adoption of the Modernized Royalty Framework for wells that otherwise would not have been drilled this year.

“Our new royalty framework is good news for all Albertans. It’s putting more rigs out in the field, creating jobs and increasing revenue for our province. We are pleased to see so many applications to drill come in and are encouraged that companies want to accelerate their capital investments – this is exactly what a modern, competitive and responsible royalty framework should do.”

Margaret McCuaig-Boyd, Minister of Energy

“The modernized royalty framework provides certainty and clarity for our industry. As a result of the government’s flexibility in allowing for early opt-in to the modernized framework we have added to our development plans in Alberta this year, a time when investment in our industry is exceptionally important to local economies.”

Richard Dunn, Encana Vice-President, Government Relations

“The modernized royalty framework is a long-term solution that promotes a stable investment environment for continued growth in the sector. It is both flexible to short term market conditions and for long term planning. When Alberta’s oil and natural gas industry is healthy and can compete – that’s good for Alberta’s economy, that’s good for government revenues and that’s good for Alberta families.”

Brad Herald, VP Western Canada Operations, Canadian Association of Petroleum Producers

The Modernized Royalty Framework will not take full effect until Jan. 1, 2017. It harmonizes the way oil, gas and liquids drilled in the province are treated, which removes previous distortions and improves investment certainty. The new framework includes a Drilling and Completion Cost Allowance that creates an incentive for companies to lower operating costs, helping to spur innovation in the sector and optimizing royalty returns for Albertans.

More information about the application process for early adoption of the framework is available at: www.energy.alberta.ca.