Alberta says oil, gas royalty review to be done by year-end

CALGARY, Alberta (Reuters) - A review of royalties paid by Alberta’s oil and gas industry will be finished by year-end, the government of Canada’s largest oil-producing province said Friday, making good on an election promise to reassess how fairly resource revenues are divided up.

Environment Minister Margaret McCuaig-Boyd said Dave Mowat, chief executive of provincially owned financial services agency ATB Financial, will lead the review.

The left-leaning New Democratic Party (NDP) government’s pledge to review royalties has unsettled many energy companies, which have warned uncertainty about higher costs could lead to capital flight and stall project development.

Alberta, home to Canada’s vast oil sands and the largest source of U.S. crude imports, is already reeling from a global crude price slump that pushed companies to slash capital spending and lay off thousands of workers.

McCuaig-Boyd said any changes to royalties would only come after consultation with all Albertans, and that the government will consider the review panel’s recommendations but not be bound by them.

Producers have been keen for clarity on the review and Friday’s announcement sets out a timetable.

“They (industry) don’t want us to lag too long because they want to have a sense of stability moving forward and what the whole picture is going to look like,” McCuaig-Boyd said.

The terms for the royalty review have not yet been set, but Mowat said he would begin by recruiting additional panel members.

The energy industry, which dominates Alberta’s economy, is also wary of the costs of a new carbon levy announced by the government on Thursday after it had already boosted corporate taxes. The industry says the measures will add about C$800 million ($647 million) to costs over the next two years.

“The cost of new government policies is adding to the growing concern about the future competitiveness of our industry,” said Tim McMillan, president of the Canadian Association of Petroleum Producers.

Alberta’s royalty rates can now vary between 5 and 40 percent depending on factors that include type of development, oil prices, crude volumes, well depths and speed of cost recovery.

A 2007 royalty review by the Progressive Conservative government of the time resulted in land-sales revenues falling, a drop in the Alberta drilling rig count, and the Canadian energy index underperforming its U.S. counterpart, according to data from AltaCorp Capital.

The NDP won a surprise election victory in Alberta last month, ending 44 years of Conservative rule.

Reporting by Nia Williams; Editing by Peter Galloway