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Alberta in battle with Saskatchewan, B.C. to lure drillers

Energy ministers promise incentives for oil and gas sector 

By Dan Healing, with files from Shaun Polczer, Calgary Herald June 15, 2010

 Drillers work on a rig in Fort St. John, BC

Drillers work on a rig in Fort St. John, B.C. The spate of oil and gas royalty holidays and drilling incentives of the past few years is in no way over, energy ministers from Alberta, B.C. and Saskatchewan made clear, as they faced each other in an industry-sponsored debate Monday.

CALGARY - The spate of oil and gas royalty holidays and drilling incentives of the past few years is in no way over, energy ministers from Alberta, B.C. and Saskatchewan made clear, as they faced each other in an industry-sponsored debate Monday.

Setting the tone, just before the debate began, the Alberta government released a 90-day progress report on its regulatory review task force that claims industry will save between $80 million and $170 million annually due to red-tape chopping at its key regulator, the Energy Resources Conservation Board.

"The progress report is just that, but I know, in my meetings with industry, regulatory burden was raised probably even more often than royalties as we led up to a competitiveness review report," said Alberta Energy Minister Ron Liepert after the Canadian Association of Petroleum Producers event.

"So we have lots of work to do there."

The report comes on the heels two weeks ago of the announcement of new lower Alberta royalty rates on coal bed methane and shale gas, as well as the permanent adoption of deep drilling incentives.

The province said the provisions will result in the loss of $27 million in royalties in 2010-11, $311 million in 2011-12 and a shortfall of $1.2 billion in 2012-13.

But it said it expects to gain additional revenue of $86 million, $273 million and $506 million, respectively, in the next three years.

John Wright, president and CEO of Calgarybased Petrobank Energy and Resources, agreed the government's regulatory regime has been an ongoing source of frustration for the industry, but he said it needs substantive change, not tinkering as revealed in the update.

"That's a great big wall of hurt to push right now," he said. "It's not easy for them to undo what they've done."

He said it looks like most of the improvements the government is touting had been done long before the task force was appointed and suggested it's difficult to believe the estimate of industry savings.

The regulatory task force is expected to present its final recommendations by the end of 2010.

David Swann, energy critic for the Alberta Liberals, said he supports the task force's general goals as long as the regulator doesn't shirk its environmental responsibilities.

He added he doubts the savings are real. "If it is true, then I guess the logical question is, 'Why has it taken them so long when these kinds of questions have been raised for many years by industry?' "

Canada's newest energy minister, Bill Bennett, took part in the luncheon event despite just being appointed to his job on Friday after predecessor Blair Lekstrom abruptly quit caucus over the province's plan to blend provincial and federal sales taxes.

But after only 72 hours on the job, Bennett said he knows hitting the oil and gas industry to pay higher taxes or costs is not in the cards.

"The short answer is no and, sitting here between my colleagues from Alberta and Saskatchewan, we will probably all keep each other competitive," he told reporters.

"We all want the business. We consider ourselves to be partners . . . but it's a competitive field and B.C., along with the other provinces, will have to remain competitive if we want our share of the investment."

Saskatchewan's Bill Boyd, whose department introduced a shale gas royalty incentive the same day Alberta brought in its latest changes, said his province offers low and consistent royalty rates and regulatory responsiveness.

"The opportunities, I believe, abound in Saskatchewan," he said.

According to the 90-day task force report, the ERCB has reduced the number of regulatory publications from 205 to 164 in an ongoing program that started six years ago and is in the process of eliminating 10 more.

It says the millions that are expected to be saved result from "near-term enhancements" which include pilot work on a system of co-ordinated compliance inspections, streamlining of pre-disturbance assessments for oilsands developments, simplification of subsurface well spacing requirements and harmonizing regulations with other provinces.

Liepert said the task force will specifically look at speeding up approvals of projects using new technologies to develop unconventional and oilsands resource plays.

"We have to remember, if it is new technology, it does need due diligence," he said. "Where I've heard the greatest concern is where it's not necessarily new technology any longer but it's still being treated by the regulator as though it was . . . it's taking far too long."

He said some companies complain that regulators require new full-fledged environmental assessments for projects when they are essentially identical to projects that have already been proven.

Brian Ferguson, president and chief executive of Cenovus Energy, told reporters earlier at the CAPP conference the Alberta regulatory burden on industry has gotten heavier over the past few years.

"I'm certainly encouraged by the government's focus on regulatory enhancement," he said.

"The whole purpose of the project -- and they have referred to it as 'regulatory enhancement' -- is to reduce overlap and repetition. That is in no way focused on reducing the stringency or the rigour of it, which we certainly encourage and applaud."

CAPP president David Collyer said the industry would like to see closer co-operation between provinces on regulatory matters, adding they could also team up on aboriginal consultations on issues such as pipelines to the West Coast.

"Fiscal policy, clearly, each of the provinces is going to do what's in their respective best interests," he said.

Read more: http://www.thestarphoenix.com/business/Alberta+battle+with+Saskatchewan+lure+drillers/3155483/story.html#ixzz0qwAq09fB