The Alberta government is introducing a royalty incentive program it says will help with the province’s plans to double current oilsands production goal by 2035 by easing the capital investment needed to kickstart new developments.
The Oil Sands Growth Program (OGP) announced Friday offers a steady 10-year royalty framework for new and expanding oilsands projects.
The program gives approved projects a reduced two per cent royalty rate during their first five years of production. The rates then increase by one percentage point annually until reaching six per cent during the ninth and tenth years.
The province says the OGP is designed to lower upfront financial barriers to new projects and expansions, particularly as proponents of the Pacific Link pipeline look for companies to fill upcoming capacity.
“Oilsands projects require significant upfront capital and long-term certainty,” Brian Jean, Alberta’s energy and minerals minister, said in a Friday statement.
“By providing a predictable royalty framework during the critical early years of eligible projects, the Oil Sands Growth Program will help companies turn investment decisions into a new windfall for Albertans.”
The OGP does not replace the existing royalty program, according to a statement from the Alberta government.
The statement also added that does not guarantee a project’s approval or sidestep environmental or Indigenous consultation requirements; that eligibility will not be limited to the five members of the Oil Sands Alliance; and that approvals will be done on a project-by-project basis and can include expansions.
According to the government, existing oilsands projects will not be eligible for the OGP, and companies will return to the regular royalty regime after 10 years or if they cannot meet production, environmental or regulatory requirements.
The Alberta government plans to launch the OGP this spring, but says qualifying projects announced after Nov. 15 will still be eligible. The province will review the program’s effectiveness in December 2029.
“Today’s announcement is a positive step toward creating a globally competitive fiscal and regulatory environment in Alberta that attracts and incentivizes capital investment for growth in the oil sector that will benefit Albertans and Canadians for decades to come,” said Rich Kruger, CEO of Suncor Energy, in a statement.
The province expects the program to create tens of thousands of jobs and deliver billions of dollars in property taxes to rural municipalities.
Premier Danielle Smith has said she wants oilsands production to double to eight million barrels per day by 2035. A provincial statement released Friday predicts doubling output could generate roughly $205 billion in cumulative additional revenues by 2040 and more than $1.3 trillion by 2060.
“Alberta has the resources, the expertise and the ambition to remain a global energy leader. The Oil Sands Growth Program will make the province even more attractive for investment, help get new oil sands projects moving and grow production for the long term,” said Smith in a statement.
