What's New in Alberta: Spring/Summer 2010

In this edition, we look at the new Enhanced Production Audit Program, review the results of how companies feel about climate change, and examine the province’s plan to readjust oil and gas royalties.

Getting ready for EPAP

Alberta’s oil and gas companies will soon be facing a new measurement and compliance program, the Enhanced Production Audit Program (EPAP), implemented by the Energy Resources Conservation Board (ECRB).

“EPAP is a huge undertaking,” says David Whiteley, a director in the Calgary office of PricewaterhouseCoopers LLP. “Controls and responsibilities need to be formalized and documented from within the company to ensure that you are meeting compliance requirements.”

EPAP applies to all operators subject to ERCB measurement and reporting requirements for conventional oil, heavy oil, crude bitumen and natural gas facilities.

In summary, it will serve as an annual declaration by one or more senior officers of a company confirming that they have internal controls in place over their volume metrics measurements and reporting.

Companies will have to adapt fairly quickly, with the first declaration period beginning in January 2011.

Appetite for climate change

While climate change is already an issue for 94% of companies in Canada, the impact is not considered significant. This is according to a new study by PricewaterhouseCoopers LLP.

The Appetite for Change report finds 94% of companies expect further changes over the next two to three years, with one-third of respondents expecting these changes to be significant.

Sixty percent of Canadian respondents think government should have primary responsibility for leading change in relation to environmental behaviour while a further 24% believe responsibility should be shared between government and business.

Companies feel that regulation, tax incentives and tax charges are the most effective tools for encouraging business to reduce their environmental impact.

Royalty reduction

The Alberta government plans to rollback oil and gas royalty rates to help improve the province’s competitiveness.

“The government recognized the new royalty regime that it put in place a couple of years ago was not competitive with other jurisdictions, particularly on the natural gas side, but elsewhere too,” says Scott Bolton, a former partner at PricewaterhouseCoopers LLP in Calgary.

The maximum royalty rate for conventional oil will be reduced to 40% from 50% and the maximum rate for natural gas will be reduced to 36% from 50%.

The new rates will come into effect on Jan. 1, 2011.