Alberta changing oil royalty regime to spur growth, premier says

Alberta plans to change the fees it charges oil companies to encourage investment in the industry and grow production to fill a proposed million-barrel-a-day pipeline , the province’s premier says.

The revised royalty regime, to be announced in November, will be structured to encourage Canada’s oil sands companies to invest in new production, Danielle Smith said at the Oil Sands Expo in Fort McMurray on Wednesday.

Alberta’s government sets royalties for oil and gas development because it owns most of the mineral rights in the resource-rich province. The current rules had been guaranteed by the government to not be changed within a 10-year period starting from 2019.

Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.

A welcome email is on its way. If you don't see it, please check your junk folder.

The new framework will be similar to the preferential royalty environment deployed in the past, Smith said. It’s needed, she said, because the message the industry was told for the past decade was they would be winding down operations rather than ramping up.

“You can imagine getting shareholders and companies to be in a different mindset has taken a little bit of time,” she said.

The Canadian government this week announced a cut on taxes for capital investments that would extend to the oil industry. Alberta is pushing forward an effort to build a new oil pipeline that would largely run along the existing Trans Mountain Corp. pipeline route and terminate at a deepwater port south of Vancouver.

Smith said Alberta is expecting a formal endorsement for the project from the federal Major Projects Office in October and final regulatory approval by September of next year.

Once the new royalty framework is announced, “I suspect that you’re going to see a lot of interest in being able to fill that pipeline,” she said, “but there is a little more work we need to do.”