On March 8, 2013 Alberta’s Finance Minister, Doug Horner, stated that no changes are planned to the current royalty incentives for horizontal drilling in the province of Alberta. In the provincial budget released last week, the province anticipated a reduction in revenue from crude oil royalties. According to the provincial government, part of the drop can be attributed to the fact that an increasing proportion of production in the province is derived from horizontal wells, which are eligible for the horizontal well royalty rate.
Currently under the emerging resources and technologies component of the royalty framework, horizontal wells receive a 5% royalty on production for the first year and can receive the 5% rate for an additional one to three years depending upon the depth of the well drilled. In order to qualify the well must: (i) be an oil or non-project oil sands well; (ii) be horizontal (as defined by the Energy Resource Conservation Board); (iii) have a Crown interest greater than zero; and (iv) have a spud date after May 1, 2010.