On Friday, January 29th, Premier Rachel Notley announced the long-awaited Alberta Royalty framework. According to the Alberta Government website, this new framework “encourages job creation and investment, rewards innovation and increases revenue to Albertans over time.”
Although some finer details still remain to be worked out there are some key points available:
- The government will be adopting the recommendations set out by the Royalty Review Advisory Panel Report.
- Oil sands royalty structures will not change. Disclosure on royalty information for oil sands projects will improve.
- A 3 stage approach will be taken for crude oil, liquids, and natural gas.
- Flat rate of 5% royalty will apply until costs are recovered.
- Post-payout royalty rates will be based on commodity prices of various components and a price function.
- When production rate has dropped below a Maturity Threshold, the royalty rates will be adjusted downward.
- Changes apply to oil and gas wells from 2017 onwards. All pre-2017 wells will be covered under the existing royalty structure for 10 years.
Enersight recognizes that a number of our clients rely on the royalty calculations in the software to be accurate and up to date. As such, we have begun work on implementing the royalty changes to our software. We will endeavor to make this a seamless transition for our clients. We will update our clients with progress in implementing these changes.