Alberta offers 2% royalty to new oil sands projects

Alberta announced an oil sands growth program on Friday that promises approved new projects a guaranteed 10-year royalty schedule, starting at two per cent of revenue for the first five years.

After that, the rate climbs one percentage point a year until it reaches six per cent in years nine and 10, the province said. Projects would then return to the regular royalty framework. BNN Bloomberg reported the details from the government’s release, and The Canadian Press reported the same schedule.

Premier Danielle Smith said the program will stimulate investment and grow production over the long term, including enough oil to fill the Pacific Link pipeline the province is trying to build to the West Coast. At a media availability, she said her government is taking a page out of Ralph Klein’s playbook.

Energy and Minerals Minister Brian Jean described the program as voluntary, targeted and application-based. The province said eligible projects announced after Nov. 15 will be grandfathered into it, and that projects still face regulatory approval, environmental requirements and Indigenous consultation where appropriate.

Oil companies now pay on a sliding scale. A project that has not yet recouped its costs pays between one per cent and nine per cent of gross revenue, depending on the price of West Texas Intermediate, with the top rate applying at US$120 a barrel, The Canadian Press reported. West Texas Intermediate traded at about US$88 a barrel Friday afternoon. Because the two per cent rate sits within that existing pre-payout range, the larger change is the guarantee of a fixed schedule for a decade.

The government said its goal is to double oil production to eight million barrels a day, which it estimated could generate about $205 billion in cumulative additional revenue by 2040 and more than $1.3 trillion by 2060. It plans to review the program by Dec. 31, 2029.

Industry leaders welcomed it. Cenovus chief executive Jon McKenzie called it a material step in the right direction. Suncor chief executive Rich Kruger said it will benefit Albertans and Canadians for decades. Strathcona Resources executive chairman Adam Waterous said the company plans to grow from 125,000 barrels a day to 300,000 by 2036 and that the program gives it confidence to invest in new projects now.

Janetta McKenzie of the Pembina Institute said it seems like it may be too much public financial support for what are ultimately very profitable companies. University of Calgary energy expert Richard Masson said it matters a lot to get it right and warned of the overheating seen the last time Alberta changed its royalty system.

The announcement follows a strong run for producers. Suncor posted record cash flow and lifted its dividend 10 per cent, and Enbridge sanctioned the Long Lake expansion. Imperial Oil has been aiming for a Nov. 15 target on the Pathways carbon capture agreement. Alberta also reported a $2.2-billion surplus for 2025-26.

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