Alberta fosters new gas wells

The Alberta government has introduced a new program to encourage energy firms to drill technically challenging wells in the province.

Under the new rules, shale gas, coalbed methane and horizontal oil and gas wells will have an initial maximum five per cent royalty rate as of May 1, although that is to be reviewed in 2014.

"This initiative to unlock Alberta's unconventional resources offers the potential for decades of employment and community benefits," said Energy Minister Ron Liepert.

"The final adjustments to royalty formulas will help industry make important investment decisions for the fall and winter drilling season and maintain Alberta as a competitive jurisdiction for investment."

For shale and coalbed methane, the lower rate would last for the first 36 months of production, whereas horizontal gas wells would pay that rate for 18 months of production.

For horizontal oil wells, the length of time they are eligible for the five per cent rate depends on well depth.

The province has also fleshed out how its new lower royalty rates on conventional oil and gas wells, announced in March, will be calculated.

The province's royalty take will still rise in tandem with higher commodity prices, but at a much more subdued rate than they would have under the previous regime.

Under the changes announced in March, the maximum royalty rate for conventional oil was cut to 40 per cent of revenues from 50 per cent, and the top rate for natural gas was cut to 36 per cent from 50 per cent.