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Quebec plans price-sensitive shale gas royalties

Finance Minister Raymond Bachand receives applause upon tabling the provincial budget March 17, 2011, at the Quebec National Assembly.

Jacques Boissinot/THE CANADIAN PRESS

Energy companies developing shale gas reserves in Quebec will pay up to 35 per cent in royalties under a price-sensitive system to come into force once a current ban on drilling is lifted, the province said Thursday.

The revised royalty rates, to vary based on well productivity and gas prices, will be similar to those in British Columbia, where some of North America's biggest shale gas deposits are being developed, Quebec Finance Minister Raymond Bachand said in his 2011-12 budget statement.

Quebec's shale gas resources are seen as bright prospects for the energy industry, although the government suspended exploration this month after a report said the province needed a complete environmental assessment.

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"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," Mr. Bachand said.

Quebec joins other jurisdictions such as Pennsylvania, New York and Louisiana as relatively new exploration and development regions for unconventional gas.

Applications of technology such as horizontal drilling and multistage rock fracturing have allowed development of reserves that had been trapped in shale formations. Some governments have questioned the methods, fearing the environmental impact of chemicals pumped into well bores.

In Quebec, companies currently pay 10 per cent to 12.5 per cent in royalties, although development of the resource in the mainly French-speaking province is in its early stages.

The government has earmarked $7-million for its environmental assessments and will spend another $6-million over three years to step up inspection of shale gas facilities, the government said.

It will also pay municipalities $100,000 per well in production over 10 years, it said.

In other resource measures, Mr. Bachand said Quebec will renew its Silvicultural Investment Program for another year. That and new measures for forestry seedling production will total $45-million.

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