On October 25, 2007, Alberta Premier Ed Stelmach announced the
New Royalty Framework (New Framework) to be implemented on January
1, 2009. The government stated that the purpose of the New
Framework was to give future generations of Albertans a share in
the development of resources, to provide stability and
predictability to the oil industry, and to assure investors that
Alberta would remain an internationally competitive and stable
place to do business. Government analysts projected that royalties
would increase by approximately $1.4 billion in 2010, a 20%
increase from revenues under the prior regime.
In April 2008, in response to an overwhelmingly negative reaction
from the oil and gas industry, the government introduced two new
royalty programs designed to encourage the continued development of
deep, high-cost oil and gas reserves, to be implemented
concurrently with the New Framework. In November 2008, Alberta
introduced an incentive program making companies drilling new
natural gas or conventional oil wells from 1,000 to 3,500 metres in
depth, eligible for a one-time option to select new transitional
royalty rates. These rates remain applicable between November 19,
2008 and December 31, 2013, and companies to which the transitional
rates apply will be required to shift to the New Framework on
January 1, 2014. The Alberta government estimated that offering the
transitional rates would result in a potential reduction of
projected royalties of approximately $172 million in 2009, rising
to $512 million in 2013, depending on such factors as the number of
new wells paying transitional royalty rates, actual production
rates and commodity prices.
However, as predicted, despite such efforts to soften the blow
to the oil and gas industry, the implementation of the New
Framework appears to have been a significant factor in lower levels
of investment (and resulting lower production) in the Alberta oil
and gas industry during 2009. In response, the Alberta government
announced another incentive program in March 2009, providing a new,
one-year, $200-per-metre drilled royalty credit for new
conventional oil and natural gas wells, and a maximum five percent
royalty rate for the first year of production from new oil or gas
wells. Additionally, the province will invest $30 million in a fund
committed to abandoning and reclaiming old well sites and to
encouraging the clean-up of inactive oil and gas wells. On June 25,
2009, the government extended the March 2009 energy incentive
program by one year, to March 2011, to attempt to alleviate the
significant downturn in the oil and gas industry by encouraging
Since the New Framework was announced, the Alberta government
has introduced a variety of new programs that have increased the
complexity of the regime-precisely what the New Framework was
supposedly designed to avoid. It remains to be seen whether these
new programs will attract much-needed investment into the Alberta
oil and gas industry. What seems clear is that the Alberta
Government has realized its misjudgement of the Alberta royalty
regime and is now taking the steps it deems necessary to try to
rectify the problem.
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The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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