Calgary

Alberta eases oil production limits as prices increase

The Alberta government is easing mandatory limits to the province's oil production imposed at the start of January, crediting an increase in prices.

Curtailment hasn't ended in Alberta. Instead, the province is changing how to calculate limits

A tanker truck used to haul oil products operates at an oil facility near Brooks, Alta. Oil production has been limited since December. (Todd Korol/Reuters)

The Alberta government is easing mandatory limits to the province's oil production imposed at the start of January, crediting an increase in prices.

On Wednesday, Premier Rachel Notley said in a news release that the province would increase allowed production in February and March to 3.63 million barrels per day.

That's a jump of 75,000 barrels per day from the limit that the government imposed at the start of January.

"We're not out of the woods yet, but this temporary measure is working," Notley said in the statement.

"While it hasn't been easy, companies big and small have stepped up to help us work through this short-term crisis while we work on longer-term solutions, like our investment in rail and our continued fight for pipelines."

New curtailment rules

Under the altered curtailment rules, the first 10,000 barrels each company produces per day remain exempt from any limits. That leaves only 28 of the more than 300 Alberta oil producers affected.

Each company's highest level of production during its best single month from November 2017 to October 2018 will be used as the baseline production measurement.

The original formula had established that level based on a company's highest six-month average over the same time period.

The province said the production increase comes in response to storage levels dropping ahead of schedule, decreasing by roughly one million barrels per week since the year began — on track to clearing the glut.

Concerns from industry about the initial formula and advice from the provincial energy regulator were weighed to account for companies in the process of ramping up production, the province said. 

But not all producers are happy about the change.

Last week, Calgary-based Canadian Natural Resources said it was "extremely concerned" about the prospect of changes to the curtailment rules, warning jobs could be hurt.

The company said the amended calculation is discriminatory and forces it to take a larger cut than its share of production.

"The revised methodology is flawed and clearly discriminatory to Canadian Natural and as a result directly impacts the heavy oil regions of Alberta," the company said.

Notley said there's an argument to be made that Canadian Natural benefited significantly from the old policy.

"When we made the decision to curtail we knew at the very outset that it was a big decision, it was a bold decision and it was a difficult one because not everyone agreed," she told reporters during a public appearance on Wednesday.

She said the curtailment continues to be a temporary move as the province works toward securing more rail cars and market access.

"In the long term, we don't want to have to curtail for any length of time… so we're going to continue to work with industry to find the right balance."

Tristan Goodman, the head of the Explorers and Producers Association of Canada, said he's glad the government is moving in this direction.

"They had the reaction they needed, they need to start pulling back from that, so I'm glad there's a sensible approach to do it," he said.

With files from Colleen Underwood, Rachel Ward and Sarah Rieger

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