(Updates adding quotes, background)
By Julie Gordon
CALGARY, Jan 29 (Reuters) - Alberta's left-leaning
government unveiled a new oil and gas royalty framework on
Friday that left rates unchanged on existing oil wells and oil
sands projects, alleviating fears that costs would rise to
punishing levels amid the worst oil price slump in decades.
The western Canadian province, home to huge oil sands
deposits, along with conventional and unconventional oil and
natural gas, said its new framework following a review that
began in June will drive innovation by rewarding producers who
reduce drilling costs below the industry average.
The government said the new royalty framework, aimed at
bolstering provincial finances over the long-term, would take
effect in 2017, with existing royalty rates remaining in place
for 10 years on wells drilled before 2017.
Royalty rates for oil sands projects will not change, but
the government pledged more transparency and accountability on
costs producers may deduct when paying royalties.
The review panel recommended the government harmonize the
royalty structure across crude oil, liquid and natural gas
wells. New rates are to be unveiled in coming months. Currently,
there are different rates depending on what is produced.
The review, an election campaign promise by the left-leaning
New Democrat government that swept to power in Alberta last May,
had concerned oil and gas executives who warned it could lead to
higher costs and job losses at a time when Canada's energy
heartland is already reeling from the collapse in oil prices.
"Alberta's energy resources are owned by the people of
Alberta. They are the foundation of our prosperity," Alberta
Premier Rachel Notley told reporters.
"At this moment in history, with prices and markets being
what they are, what Albertans need us to do is to help improve
their and the industry's returns by removing distortions and
disincentives in the system and 'grow the pie.'"
The province promised that rates of return to producers
would remain the same at the outset under the new system.
Alberta's current royalty rates vary between 1 percent and
40 percent depending on factors such as type of development, oil
prices, crude volumes, well depths and speed of cost recovery.
The province said the new royalty framework recognizes that
future development in the province will be focused on
unconventional oil and gas wells, which are quicker and cheaper
to develop that major oil sand projects.
"The oil sands are our bonds, the tight gas and oil
formations are our growth stocks," said Dave Mowat, chair of the
review panel.
(Additional reporting and writing by Euan Rocha in Toronto;
Editing by Alan Crosby)