FREDERICTON – New Brunswick has released a new royalty plan for natural gas that the province’s energy minister says will encourage exploration and give the province a greater share of profits.
But industry opponents say they fear the government is forging ahead without listening to their concerns, particularly over shale gas development.
Craig Leonard said it was necessary to come up with a new royalty regime.
“We needed to get the regime in place so industry could see what it would be costing for the resource in New Brunswick so they can base their investment decisions on that,” Leonard said in an interview Monday.
Under the new plan, companies will pay a four per cent royalty based on the wellhead cost until a company pays off its capital costs and starts making a profit. At that point, the royalty jumps to 25 per cent of the well’s profits.
Leonard said the previous royalty structure, whereby the province received up to 10 per cent of the costs of a wellhead, was not good enough for the industry or the government.
“This new model corrects that by providing an upfront royalty rate at the early stages that is relatively low and competitive with other jurisdictions, but when the project hits its stride, the profits will share quite extensively,” he said.
“We have to strike a balance between encouraging investment and making sure that New Brunswickers receive the most possible from our resources.”
Terry Wishart of the Fredericton chapter of the Council of Canadians said the release of the royalty regime is discouraging.
“Obviously it is a sign they are intending to move forward,” Wishart said.
“That’s not going to be a reality for them because we plan to stop the industry from taking root here.”
He said the government needs to take a lesson from Newfoundland, where the government announced Monday it is imposing a moratorium on hydraulic fracturing, or fracking. The process involves injecting water and chemicals into a well to fracture layers of shale rock to release trapped pockets of natural gas.
But Wishart says his group wants an outright ban on shale gas development because of environmental concerns.
Wishart and other opponents plan to demonstrate in Fredericton on Tuesday as a new session of the provincial legislature opens.
Leonard said the province will now begin work on a revenue-sharing formula to determine how much of the 25 per cent royalty fee will go to landowners and First Nations.
A spokesman for Leonard said the new royalty plan is expected to take effect in the next few months.