On November 19 and again on November 24, 2008, the Alberta Government announced a five-year transitional option to the New Royalty Framework that was introduced in October and that was to take effect on January 1, 2009. These recent announcements were made in response to the global economic crisis and a slowdown in oil and gas drilling in the province of Alberta. Companies will have a one-time option to elect either the new Transitional Option or enter into the New Royalty Framework for new wells that are drilled and that are eligible for the transitional royalty rates.
In light of this recent announcement, producers are now faced with a decision as to which royalty framework they want applied to each of their wells. Many factors and considerations will affect their decisions and will potentially impact them in different ways. This bulletin outlines some of the key questions oil and gas producers should ask themselves as they are faced with the election of either royalty option.