Modernized Royalty System Ready for the New Year

With the approval of a series of regulatory changes, Alberta’s Modernized Royalty Framework is ready for implementation. Since accepting the recommendations of the Royalty Review Advisory Panel last year, government has introduced a number of measures, including:

• technical formulas so oil and gas producers can move ahead on drilling and investment plans;
• early access to the new royalty framework to attract incremental investment this year; and
• two new royalty programs to encourage industry to explore new areas and boost production.

“We are delivering on our promise to have the Modernized Royalty Framework in place for 2017. With cautious optimism emerging around rising commodity process, our new royalty framework will be ready to help our oil and gas industry start out the New Year on stronger, more competitive footing. I’m proud of the progress we have made together with input from Albertans and industry and I’m confident this will improve Alberta’s competitive advantage, deliver the transparency Albertans expect, and optimize the value and benefits derived from our energy resources.”

New regulations establish the Modernized Royalty Framework for crude oil, liquids and natural gas, including for wells that were approved to drill early under the new framework. As of Dec. 15, 149 new wells have been approved for early access to the new framework since this option was announced in July, representing wells that would not have otherwise been drilled in 2016.

New regulations also establish the two strategic royalty programs announced in July. The Enhanced Hydrocarbon Recovery Program and Emerging Resources Program will help projects get more oil and gas from existing pools before they are abandoned, and encourage development of high cost newly emerging resources. Government will accept applications for these programs beginning Jan. 3, 2017.

“The Alberta government has engaged with industry in a constructive process that has led to a royalty system that is true to the principles of the royalty advisory report. The new royalty system helps provide more clarity that investors need to plan for the future and signals that Alberta is taking steps to be more competitive in attracting investment to the province.”

“Following two years of layoffs, the beleaguered oil and gas services sector looks forward to the promise of new opportunities and jobs created as a result of capital spending by its customers who have given favourable reviews of the Modernized Royalty Framework. It is clear this government listened to all stakeholders when designing the MRF and the Petroleum Services Association of Canada was pleased to be part of that consultation, bringing the issues of the oil field services industry to the table.”

“The Explorers and Producers Association of Canada welcomes the release of the regulations that will provide the certainty and clarity needed for the implementation of Alberta’s Modernized Royalty Framework. The MRF reflects the partnership of the province and the energy sector in developing Alberta’s energy resources in the competitive global energy markets of the 21st Century.”