Suncor Energy has reached an agreement with the Province of Alberta to transition to the rates announced by the government in its New Royalty Framework for the generic oil sands royalty regime. The transition agreement could result in Suncor paying up to 20% more in oil sands royalties than it would have paid under the previous terms.
Beginning Jan. 1, 2010 through to Jan. 1, 2016, the agreement provides that Suncor will pay between 25% and 30% of net profits (depending on oil prices) on the bitumen derived from its oil sands mining operations. In 2016, the company's royalty rates for oil sands mining will reflect the new generic royalty regime. (This agreement is applicable to Suncor's oil sands mining operations only. Suncor's in-situ operation is already subject to the new generic royalty regime, including previously announced royalty rate increases.)
In return, the government has provided Suncor certainty until January 1, 2016, for various matters, including bitumen valuation methodology, allowed costs, royalty in-kind and certain taxes.
"We have reached a deal that provides a fair return to Albertans as owners of the resource, while also giving Suncor the certainty we need to plan for the future growth of our business," said Rick George, president and chief executive officer.
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