Changes that revised Alberta’s royalty regime earlier this year to the benefit of the province’s natural gas and oil producers were the impetus for record lease sales last week, provincial leaders said.

The province sold C$117 million in oil and gas land sales, bringing the total sales for the calendar year to C$1.86 billion, higher than any year in history. The previous record, set in 2005, was C$1.83 billion.

“Alberta’s oil and gas industry is expressing renewed investment confidence through record lease and license sales,” said Alberta Energy Minister Ron Liepert. “Changes to the royalty structure encouraging the deployment of new technologies were a significant factor supporting larger than expected lease and license sales.”

Provincial leaders in March cut the royalty rate for all types of drilling (see Daily GPI, June 1; March 15; Jan. 15). The maximum royalty on all types of gas development was cut to 36% from 50%, regardless of how high prices go in the future. For shale, a 5% royalty rate for the first year of production was set for all wells.

The move by Alberta to cut the royalty regime followed a move by British Columbia, which set a lower royalty rate that appears to have spurred gas development there (see Daily GPI, July 19).

Alberta has estimated that the regime changes could create an annual 13,000 jobs by 2013 and raise the reinvestment level by 2%.

The September lease sale results “illustrate that Alberta can now continue to be competitive in attracting new investment,” said Liepert. “These sales mean new jobs and new opportunities for industry and that’s good news for Alberta, and for Albertans.”

The record sale comes just two months after the province established a new high for the average price per hectare. The July 7 land sale netted an average price of C$2,185.03/hectare, exceeding the previous record of C$2,084.86.

Natural gas and petroleum rights owned by the province may be acquired through a sale held every two weeks. Five land sales remain this year.

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