By OGJ editors
HOUSTON, Apr. 11 -- The Alberta government, citing "unintended consequences" of its "New Royalty Framework," is easing terms for production from deep oil and gas wells.
Energy Minister Mel Knight said the government introduced two programs "to develop those oil and gas resources that are the most costly to access but offer the greatest potential."
As published last year, the New Royalty Framework will take effect next year and raise royalty receipts by 20% above the level projected under the previous regime in 2010 (OGJ, Nov. 5, 2007, p. 34).
Producers and analysts have warned that the increase will discourage drilling, especially for natural gas (OGJ, Mar. 17, 2008, p. 30).
One of two new adjustments to the framework will offer exploratory wells deeper than 2,000 m as much as $1 million or 12 months of royalty offsets for oil production, whichever occurs first.
The other program, for gas wells, applies to wells deeper than 2,500 m. Royalty relief will be applied on a sliding scale by depth, up to $3,750/m.
In other changes, the province will apply four par prices instead of two in calculations of oil royalties. Gas royalties will be calculated according to the sum of vertical drill depth and all laterals in an effort to encourage development of coalbed methane with lateral completions.