Quebec said Thursday a new royalty regime for shale gas will take effect in the province once it concludes a two-year strategic environmental assessment of the industry.

The new royalty rate -- outlined in the 48-page report "A Fair and Competitive Royalty System for Responsible Shale Gas Production" -- would vary from 5% to 35%, depending on the market price of natural gas and the productivity of an individual well.

Producers currently pay a fixed royalty rate in Quebec based on the market value at the wellhead. The rate is 10% at wells that produce 2,966 Mcf/d or less. At more productive wells, the rate is 10% on the first 2,966 Mcf/d, and 12.5% on the remainder.

"It is now reasonable to believe that Quebec's subsoil holds substantial shale gas potential," Raymond Bachand, the province's finance minister, said Thursday of Quebec's portion of the Utica Shale play. "If the gas potential can be developed economically and respectfully in regard to the environment and the public, Quebecers will benefit from their fair share of this resource."

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