Alberta softens oil royalty change, cites downturn

CALGARY, Alberta (Reuters) - The Alberta government said on Wednesday it is softening its shift to higher oil and gas royalties in hopes of stemming a downturn in drilling and a loss of jobs in Canada's biggest energy-producing province.

Alberta, facing skidding oil prices and a global credit crisis, said it will offer energy companies lower transitional royalty rates for new oil and gas wells for up to five years.

"This is all about accessing risk capital and ensuring that the jobs are maintained here in the province of Alberta," Premier Ed Stelmach told reporters.

The province is set to raise the rates it charges its biggest industry for producing oil and gas on January 1. The changes were announced in late 2007 to the sector's chagrin.

The government stressed the move is not a royalty holiday but an incentive to prevent a massive drop in drilling as higher royalties combine with weak oil and gas prices.

Oil has fallen to just above $50 a barrel from the summer's high of more than $147. Natural gas prices are about on par with last year.

Alberta said companies can choose between transitional rates or the new framework when drilling gas or conventional oil wells 1,000-3,500 meters (3,300-11,480 feet) deep. All wells will shift to the new framework in 2014.

Existing wells and oil sands projects will move to the new framework as planned.

The move could cost Alberta C$512 million ($410 million) in forgone royalties by the end of 2013, the government said.