Oil and gas drilling that isn’t cost effective may get relief from the new royalty structure adopted last year, according to Premier Stelmach.

Stelmach responded to a report that Energy Minister Mel Knight wrote to the chairman of the Canadian Association of Petroleum Producers (CAPP) saying the government was going to work with the industry on addressing economic issues related to higher cost deep gas wells in some areas of the province.

“The royalty framework is in place, there are discussions, ongoing discussions with conventional oil and gas, talking about certain definitions, specifications, talking about a series of wells that may not be cost effective,” said Stelmach.

“But, the framework itself, in terms of capturing higher prices, but also sharing in the risk if prices drop, is in place and is going to stay in place.”

The premier maintains that the government has always been open to discussions regarding well definitions that may not have been properly explored within the confines of the royalty agreement outlined in October 2007.

Aside from deep natural gas drilling, other areas up for discussion are high cost, high productivity wells, sour oil and other multiple spur natural gas drilling.

Liberal Leader Kevin Taft thinks the provincial government has gone about the consultation process in a backward fashion.


“Energy Minister Mel Knight is now considering changing the details of the royalty plan to deal with some unforeseen consequences, particularly regarding natural gas. We feel this is the right gesture but it is unfortunate that this has gone on this long,” said Taft in a statement.

The leader of the newly-formed Wildrose Alliance was also critical of the Stelmach government’s handling of the royalty framework, saying the new regime should be scrapped.

“Minister Knight is destroying his own message,” said Paul Hinman.