On May 27, 2010, Alberta's Energy Minister, Ron Liepert, announced the much anticipated royalty rate curves for oil and gas wells (but excluding oil sands development). He also announced incentive programs for unconventional resource exploration and use of high-cost technologies. These benefits should allow operators to more easily recover their capital costs and help to mitigate the financial risk associated with investment in high cost wells and new technologies.
The royalty rates in Alberta operate on a sliding scale, similar to a curve, whereby the royalty rate increases in correlation to the production from each well. These royalty curves were altered (read increased) in 2007 as part of the Alberta Royalty Framework (ARF), and as mentioned in our last update, these changes, along with broader economic forces, had a serious adverse effect on Alberta's oil and gas sector. Specifically, they became, with the stroke of a pen, less competitive compared with the neighbouring provinces of British Columbia and Saskatchewan. The new royalty curves, along with the reduced maximum royalties previously announced, have brought Alberta's royalty regime more in line with the pre-ARF figures.
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