CAPP welcomes Alberta royalty clarity, more work needed

April 21, 2016 - Calgary, Alberta

Alberta’s new royalty system brings greater clarity for producers and investors, and more work is needed to attract new investment and create more jobs, the Canadian Association of Petroleum Producers (CAPP) said today.

Tim McMillan, CAPP president and chief executive officer, commended the Alberta government for its timely approach to create a more modern royalty system through a constructive process.

“This has led to a royalty system that is true to the principles of the royalty advisory report,” he said. “The new royalty system helps provide the clarity investors need to plan for the future.”

The new system harmonizes and simplifies royalty programs for all products and drilling depths, removing distortions from the old system. These changes may encourage activity in some resource plays but less in others. Overall the changes do not significantly alter the economic picture for industry. In general, industry expects to generate comparable returns for comparable activity as under the old system.

With these calibrations in place, industry will continue to engage with government to calibrate what the royalty panel called strategic programs for emerging resources, enhanced hydrocarbon recovery and enhanced oil recovery. These are expected to be finalized by May 31.

“The work to attract more investment to Alberta does not stop,” McMillan said. “On their own, today’s changes will not be enough to restore industry activity across Alberta.”

“Industry is working hard to adjust its own cost structures, and of course an oil and natural gas price recovery is needed as well,” McMillan said. “We remain committed to working with the Alberta government to find common ground to adapt our industry to be more successful. Together, these efforts will help the province to re-establish its competitive edge.”

Royalties are one part of a larger system that drives investment, creates jobs, generates government revenues and builds Alberta communities. More work is required between government and industry on fiscal competitiveness, regulatory effectiveness, environmental innovation and especially the need for new energy infrastructure to connect Canada’s oil and natural gas with new customers.

CAPP shares Premier Rachel Notley’s stated goal to reassert Alberta’s competitive advantage on the world stage, as well as her government’s goal to enhance industry’s already strong environmental performance.

“We support the government using the same timely, credible and open process it had on royalties for discussion on other policies that impact the oil and natural gas sector,” McMillan said.