A mid-September report proposing changes to Alberta's royalty structure, which dates from 1997, has caused a stir in Calgary. Released by a royalty-review panel of the Alberta Department of Energy, the report concludes that Alberta should tax deep gas drilling and the oil sands more heavily to give Albertans their "fair share." The report is "very disturbing...and used data that was either flawed, inaccurate or dated," Tristone Capital Inc. chairman George Gosbee says. "The conclusions do not reflect the basin economics of western Canada. Capital will flow out of the province [if this is enacted]." The most punitive aspects of the report are disincentives to drill for deep gas, the very activity thought to hold the most promise to keep the province's gas production adequate, if not growing, the firm reports. Both EnCana Corp. (Toronto, NYSE: ECA) and Talisman Energy Inc. (NYSE: TLM) have announced drilling cutbacks of up to an aggregate C$2 billion, due to low natural gas prices and in reaction to the royalty report. For more on this, see the November issue of Oil and Gas Investor. For a subscription, call 713-260-6441.
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