Alberta’s Smith unveils new oil sands royalty regime

The Alberta government plans to lower royalties on some new oil sands production next spring as an incentive to lure investments to the province in a bid to increase crude production.

The Alberta Oil Sands Growth Program, announced Friday by Premier Danielle Smith in Calgary, stems from talks between Ottawa, Alberta and five major oil sands companies aimed at delivering new policies to boost production. The companies are Imperial Oil Ltd. IMO-T, ConocoPhillips Co. COP-N, Suncor Energy Inc. SU-T, Cenovus Energy Inc. CVE-T and Canadian Natural Resources Ltd. CNQ-T.

Any new greenfield or brownfield expansion that can meet a 5,000 barrel per day production threshold will be eligible for the program. While qualifying projects will be able to use existing oil sands infrastructure, they cannot be located within the boundary of a previously approved project.

The program guarantees a 10-year royalty framework, in which producers pay a 2 per cent royalty rate for the first five years, increasing by one percentage point annually until reaching 6 per cent in years nine and 10.

At the end of the 10-year period, the project will return to Alberta’s regular oil sands royalty framework.

Ms. Smith wants to double oil production in Alberta to eight million barrels per day. With new pipeline capacity on the way – including expansions to the existing Trans Mountain system and the proposed Pacific Link – the province needs major new investment to increase production and fill those pipelines, she said.