Alberta and Suncor reach deal on oil sands royalties

Tue Jan 29, 2008 7:01pm EST
 
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Suncor Energy Inc will pay up to 20 percent more in royalties on oil sands output under a new deal that frees the Alberta government from a contract that would have left terms unchanged for another eight years, the two sides said on Tuesday.

Under the agreement, which has been in the works since Alberta hiked royalties in October for all the players in its main industry, Suncor will pay the higher rates for its oil sands mining operations starting in 2010.

Then in 2016, it will pay the same rates as other oil sands producers, which begin for them next year.

In return, Alberta agreed not to impose any new taxes on the operation outside the new royalty framework or change key financial aspects of Suncor's oil sands project, such as allowed costs.

It also pledged not to take oil in lieu of cash payments from Suncor's oil sands project before 2012.

However, the government of Premier Ed Stelmach did not give the operator of the country's second-largest oil sands operation monetary compensation for breaking the contract.

Syncrude Canada Ltd -- the only other oil sands operator with a contract for royalty terms that was due to expire at the end of 2015 -- has yet to strike a deal with the province and talks are still going on, Alberta Energy Minister Mel Knight said.

Suncor Chief Executive Rick George acknowledged that his company's costs will rise, but said he was pleased to have certainty on the issue.   Continued...

 
<p>Alberta Premier Ed Stelmach pictured in Calgary, Alberta, October 25, 2007. Suncor Energy Inc will pay up to 20 percent more in royalties on oil sands output under a new deal that frees the Alberta government from a contract that would have left terms unchanged for another eight years, the two sides said on Tuesday. REUTERS/Todd Korol</p>