Saskatchewan quietly fills coffers

Being overlooked as Canada’s second largest combined source of oil and natural gas doesn’t especially bother Saskatchewan.

Not when the province of just under 1 million people pocketed C$1.12 billion from oil and gas royalties in 2005-06 and conservatively projects another C$1.18 billion in 2006-07.

Anticipating a drop in commodity prices for the new fiscal year to US$58.75 per barrel for oil and C$6.86 per gigajoule for gas from US$59.10 and C$8.36 for gas in 2005-06, the government expects to collect C$990 million from oil royalties and C$186 million from gas.

Resources Minister Eric Cline said the variations in returns are influenced about half by commodity prices and half by reforms of the province’s royalty structure.

Crude oil production reached 152.9 million barrels in calendar 2005, down from 154.7 million barrels in 2004, while gas showed a slight increase to 336.8 billion cubic feet last year from 334 bcf.

Otherwise, Cline is hoping the Canadian government will join Saskatchewan in a jointly funded C$20 million construction of a clean-coal project featuring a plant with close to zero emissions and carbon dioxide capture for enhanced oil recovery.

The province is pumping another C$1.8 million over three years into a program aimed at developing a more environmentally sensitive and energy-efficient enhanced oil recovery process for heavy oil reservoirs.

Tax cuts that will affect the oil and gas industry include lowering resource surcharge rates to 3 percent from 3.6 percent and trimming a fourth-tier oil and gas production rate to 1.7 percent from 2 percent. In mid-2008, Saskatchewan will also slash its corporate income tax rate to 12 percent from 17 percent.

—Gary Park