New natural gas royalty structure unveiled for N.B.
Companies will pay smaller costs initially, more as they become profitable, energy minister says
The Alward government has changed the formula for how it will collect shale gas royalties, if the industry develops in New Brunswick.
There will be a two-tier system with lower royalties when companies are setting up and higher rates when they're making profits.
Energy and Mines Minister Craig Leonard says higher rates in the early phases would deter companies from setting up at all.
"A lower percentage will at least attract the investment here, let the projects move to maturity and when they do hit that mature phase, that's when the second tier with the higher rate kicks in, and New Brunswick gets a very significant revenue stream," Leonard told CBC News.
He unveiled the new royalty regime on Monday, at the 38th annual New Brunswick Exploration, Mining and Petroleum Conference.
Under the old natural gas royalty structure, oil and gas companies would pay a 10 per cent fee.
The revised model gives the province the greater of a 25 per cent royalty on the economic rent earned by a project, a four per cent basic royalty calculated on the wellhead price, or a two per cent minimum tax on gross revenues.
It is expected to increase royalty revenues by about 50 per cent over the lifespan of a project, Leonard said.
"As a government, we have to strike a balance between encouraging investment and making sure that New Brunswickers receive the most possible from our resources. We believe this new model will do just that," he said.
The new structure is based on about two years of research, discussion and analysis by the Department of Energy and Mines and Department of Finance, with input from consultants, key stakeholders and First Nations, said Leonard.
It's still not certain there will be a shale gas industry in the province. Companies, such as SWN Resources Canada, have been exploring to find out if there's enough gas to make it feasible.