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Alberta's modernized royalty rates

Alberta's modernized royalty rates

Background
The provincial NDP government launched a review of oil and gas royalty rates in the summer of 2015 to assess whether Albertan's were getting their "fair share" from the province's energy companies.
Alberta's royalty rates are highly complex, ranging from 1 to 40% depending of the type of deposit, oil price, production volume, well depth and speed of capital cost recovery.
The Review Panel
ATB Financial's Dave Mowat led the Royalty Review Panel and consulted with:
  • energy industry representatives
  • universities and students
  • aboriginal groups
  • financial institutions
  • environmental protection groups
Objectives
  • optimize returns for Albertans
  • optimize returns for the oil industry
  • encourage diversification and value-add
  • ensure environmental sustainability
Findings

Alberta's royalty rates are middle-of-the-pack when compared to other jurisdictions.

Alberta's current royalty rates are already cost-competitive with other countries.

Alberta has a highly complex geological formation when compared to most other countries (the only other comparable country would be Venezuela). And that's why Alberta's royalty rates are also complex.

The US went from being our biggest customer to our biggest competitor. Their lower cost structure gives them a huge competitve advantage.

A strong energy sector a strong Alberta
Results
Oil wells already drilled will see no change for the next 10 years.
Wells drilled post-2016 will be subject to the new regime, now a flat rate, which will produce the same rate-of-return as the old regime. Royalties will be higher post-payout but will offer incentives to lower cost of production.
No change for oil sands producers!
Next Steps
Rules for capital cost allowances (depreciation rates will be confirmed in March, as well as exact royalty rates for new wells.
Government wants to see better transparency on production volumes, operating costs, tax deductions and royalties paid - a new online portal will be developed
A new task force will be set-up on diversifying Alberta's economy and creating more value-add in the province

Read the full press release from the Government of Alberta and the full report from the Royalty Review Advisory Panel entitled "Alberta at a Crossroads"

ExxonMobil profit falls 58% and cuts capital expenditures by another 25%

ExxonMobil profit falls 58% and cuts capital expenditures by another 25%

Alberta's NDP government leave royalty rates effectively unchanged

Alberta's NDP government leave royalty rates effectively unchanged

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