Alberta changing royalty system to encourage oilsands production, new investment

The Alberta government is implementing a new royalty payment program aimed at encouraging new oilsands investment and boosting production, in preparation for a proposed pipeline to the West Coast. The Oilsands Growth Program would provide companies with a guaranteed 10-year royalty schedule for eligible new projects and expansions, starting with a two percent royalty rate for the first five years.

This rate would then increase by one percentage point annually until reaching six percent. After the 10-year period, projects would revert to Alberta’s existing royalty framework. Former Alberta Petroleum Marketing Commission CEO Richard Masson believes the program will attract more investment due to the reduced financial burden on companies during the early stages of new projects.

Premier Danielle Smith stated that the program intends to spur growth in the oilsands, increase production, and ultimately supply the proposed Pacific Link pipeline. The existing royalty system has resulted in a provincial budget tied to fluctuating oil prices, creating a "resource revenue rollercoaster." Oil companies currently pay royalties based on the benchmark price of oil and the capital invested in a project.

The Oilsands Growth Program would guarantee a two percent royalty rate for the first five years, before gradually increasing to six percent. Masson predicts that the program, combined with the federal government's productivity mega deduction, will lead to a decade of solid growth in the oilsands sector.