* 5 percent royalty rates on shale gas, other resources
* Finalizes conventional royalty price curves
* Net C$59 mln benefit seen this year
By Jeffrey Jones
CALGARY, Alberta, May 27 (Reuters) - Alberta handed the oil industry the final breaks in its rejigged royalty regime on Thursday, offering up incentives for shale gas and other unconventional resources for which spending has lagged.
The incentives, along with finalized price curves on royalties for conventional oil and gas, bring to a close the Western Canadian government’s backtrack on such payments, after its previous efforts to wring more money out of its main industry were met with bitter complaints.
Alberta, Canada’s largest energy-producing province, has been left out of the rush to develop shale gas reserves, which has boomed in Texas, Louisiana and Pennsylvania in the United States and in British Columbia in Canada.
The royalty incentives are aimed at bolstering such activity, which requires higher up-front spending on such things as horizontal drilling and rock fracturing technology, Alberta Energy Minister Ron Liepert said.
“Industry and the investment community have asked for stability and predictably and that is what is being provided today,” he told reporters.
The moves — which were applauded by the industry — follow changes to the fiscal regime announced in March by Conservative Premier Ed Stelmach, who had raised royalties after years of study.
Companies had threatened to spend most of their capital outside Alberta, putting jobs and Stelmach’s political future in jeopardy.
The lower royalties and new incentives stem from a “competitiveness review” launched last year in concert with the oil industry.
New breaks include a 5 percent royalty cap on shale gas and coalbed methane, as well as horizontal gas and oil wells.
On shale, the rate lasts for 36 months and there is no limit on volume produced. On coalbed methane, the 5 percent will also be in effect for three years, up to a volume of 750 million cubic feet.
Horizontal gas wells will be subject the rate for 18 months up to a volume of 500 million cubic feet, and the timing for horizontal oil will depend on volume produced.
Alberta also finalized the price curves for royalties on conventional oil and gas beneath lower maximums set in March. Then, the province cut its maximum royalty on gas production to 36 percent from 50 percent and on conventional oil to 40 percent from 50 percent at the beginning of next year.
It left royalties on its vast oil sands resources untouched.
The government expects all the changes to mean C$27 million ($26 million) less in royalties in 2010-2011, but the increased activity, land sales and taxes should mean a net positive benefit of C$59 million, officials said.
The province expects C$311 million less in royalties in 2011-2012, and sees a net C$38 million decrease in revenues.
In 2012-13, the reduction in royalty revenue could total C$1.2 billion, and the province expects a net revenue decrease of C$677 million.
It said the increased economic activity should offset lower royalty revenues sometime after that.
Liepert said his department’s next moves include developing a geological map of Alberta’s shale gas reserves and studying the resource potential of oil resources.
$1=$1.05 Canadian Editing by Rob Wilson