Alberta Royalty Framework
The Alberta royalty review has led to a balanced report that sets the stage for more work between industry and government to ensure Alberta’s oil and natural gas sector is competitive in North America to attract investment and create more jobs and value for Albertans, the Canadian Association of Petroleum Producers said today. Read more
What is a Royalty?
Alberta’s natural resources belong to Albertans. In exchange for the right to develop these resources, companies pay the government a royalty. This is a percentage of revenues generated from the sale of oil and natural gas products, or in some cases takes the product in-kind for the government to sell.
Royalties are just one way oil and natural gas producers contribute to government revenues. Many different government taxation policies affect exploration and development of Alberta’s natural resources.
What are Royalties Used For?
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Alberta has attracted the people and the capital to develop a world-class economy that is integrated into all Albertans’ lives. Royalties are an important part of the Alberta economy and are used to:
- Fund provincial government operating and capital costs;
- Fund healthcare and education, build roads and pay for programs and services for Albertans; and
- Save for the future (Alberta Heritage Savings Trust Fund).
What is CAPP’s Perspective?
A royalty structure that is appropriate to the jurisdiction helps attract investment, creates jobs, generates government revenue and builds communities.
Alberta’s competitiveness is affected by the cumulative cost of government policies - royalties, climate and other policy changes. Considering all factors that impact this industry helps to keep it healthy and protects the jobs of Albertans.
Conventional oil and natural gasOn May 27, 2010, the Government of Alberta introduced the Emerging Resources and Technologies Initiative, which was intended to encourage new exploration, development and production of natural gas resources within coal seam, shale gas, and horizontal oil and gas wells. The initiative consists of four programs that established a maximum five per cent New Well Royalty Rate for shale gas, coal bed methane, horizontal gas and horizontal oil wells In addition to these four programs, the provincial Natural Gas Deep Drilling Program provides royalty relief to deep natural gas wells with a minimum TVD 2,000 metres which makes Alberta Foothills, Deep Basin and Montney/Doig plays the primary recipients of the program.
For oil sands, the royalty sliding scale was introduced in January 2008:
- Pre payout changed from 1% to a sliding scale of 1% to 9% of Gross Revenues, dependent on the average WTI Price for the month
- Post payout changed from 25% to a sliding scale of 25% to 40% of Net Profits (R-C), dependent on the average WTI Price for the month