Oil industry cautions province on proposed new royalty regime

The association representingoil companies with operations in Newfoundland and Labrador is worried about the pace at which the government is moving ahead on a new generic offshore oil royalty regime.

But Premier Davis says now is not to time to apply the brakes.

• Provincelooking to overhaul offshore oil royalty regime by November

The province has suggested it plans to unveil a new regime prior to the deadline forbids on exploration rights for 11 parcels in the Flemish Pass Basin on Nov. 12.

The province released seismic data of the region Thursday indicating the potential for 12-billion barrels of oil. The parcels cover an area of 24,000 square miles, but representsjust two per cent of the province's offshore.

Talk of a generic royalty regime first surfaced more than six years ago, and picked up steam over the past 12 months.

The province has been holding consultations with oil companies and other oil industry players.

Concerned about royalty increases

Paul Barnes, the manager for Atlantic Canada with the Canadian Association of Petroleum Producers (CAPP), toldCBC News Thursday that "we are concerned over the fact they plan to increase the generic oil regime and we just want to make sure they take the time to get it right."

Barnes said the Newfoundland and Labrador government should follow the lead of Alberta, which is allotting an 18-month consultation period.

"The government here should do the same," said Barnes.

CAPP members have seen an "initial document," Barnes added, and regular discussions have been taking place since early August.

He said "our biggest fear is that it is not competitive and industry would start to invest elsewhere."

But Davis refused to waiver Thursday, saying now is the time to finalize a new regime.

He said oil companies have been asking for one, and the province is committed to ensuring the maximum amount of benefits for Newfoundlanders and Labradorians.

He said the regime will also be fair and internationally competitive.

"Now is not the time for us to back away from looking for royalties. Now is the time for us to protect our best interest and say, 'let's figure out this royalty regime and have a close look at what the framework is going to be like.'"

Davis addedthe prospects for offshore Newfoundland and Labradorare more optimistic than ever before, and "now is the best time to make sure we get the best value for (our resources)."

Davis also dismissed any suggestionthat the pace at which the regime is being finalized is connected to the Nov. 30 provincial general election.

He would not say how much the province wants to increase the royalty rates, but added,"We're not looking to gouge anybody. We're looking for what's right for Newfoundlanders and Labradorians."