CALGARY, Alberta (Reuters) - The Alberta government said on Tuesday it has reached a deal with Suncor Energy Inc that will see the oil sands producer pay 20 percent more in royalties on its mining operations.
The government has been negotiating the increase since it unveiled royalty hikes for the province’s oil and gas producers last year.
Suncor, the No. 2 oil sands firm, and Syncrude Canada Ltd, the biggest, both paid royalties set by contracts that had to be renegotiated. Suncor’s new rate starts on its oil sands mining operations in January 2010.
“We have reached a deal that provides a fair return to Albertans as owners of the resource, while also giving Suncor the certainty we need to plan for the future growth of our business,” Rick George, Suncor’s chief executive, said in a statement.
Talks with Syncrude are still ongoing.
Under a 1997 agreement designed to spur development of the oil sands, Suncor was subject to royalties that were 1 percent of gross revenue until project costs were recouped, then 25 percent of net revenue following payout. That rate was to have expired in 2016.
With the new agreement, only Suncor’s royalties from its mining operations are subject to the hike. After January 1, 2016, the new rate will apply to all Suncor’s projects, the government said.
The agreement was announced after markets closed. Suncor shares rose 63 cents to $91.10 on Tuesday on the Toronto Stock Exchange.
Reporting Jeffrey Jones, writing by Scott Haggett; Editing by Rob Wilson