Royalty Questions and Answers
What will government’s changes mean?
Will government put the additional revenues into savings?
How long will it take to implement these changes?
Will any of these changes impact freehold mineral rights holders?
How do these changes ensure that more upgrading and refining of bitumen occurs in the province?
What will government’s changes mean?
Under Alberta’s New Royalty Framework, energy royalties are expected to increase by approximately $1.4 billion in 2010, an increase of 20 per cent over revenues forecast for that year under the current regime. Actual revenues will depend on future prices and production levels in the province.
Actual revenues will be driven by a number of variables including production levels, world prices for oil and natural gas, and exchange rates.
Will government put the additional revenues into savings?
One-third of any additional revenues generated by Alberta’s New Royalty Framework will be put into savings and invested for future generations of Albertans, while two-thirds will be committed to capital-spending projects that meet the needs of our growing economy.
Expenditure proposals based on a sound plan for the future with clear objectives will be developed while revenues from royalty, tax and all other sources will be estimated.
The two will be brought together and a fiscally responsible budget will be tabled each year.
How long will it take to implement these changes?
The changes will come into effect January 1, 2009.
This will provide sufficient time to pass legislation and regulations to provide authority for the necessary changes and to make the details clear for implementation.
What do these changes do to help ensure that our environment is better protected from future development?
While these changes do not specifically address environmental issues, they are part of our overall plan to ensure the environmentally responsible and sustainable development of our energy resources.
Alberta does not approve any energy development project until we are satisfied that environmental concerns are addressed.
Our initiatives to reduce greenhouse gas emissions and assessing overall impacts to land, air and water and setting regional limits are proof of our commitment to environmental protection.
Without the oil sands severance tax, isn’t the province foregoing royalties that would have been otherwise paid by companies that currently have Crown Agreements under the old regime?
The government is in discussions with Syncrude and Suncor, whose Crown agreements expire in 2016, to participate in the new oil sands royalty regime.
Government will work with Syncrude and Suncor over the next 90 days to reach an agreement on a transition plan to the new royalty framework. In the event the agreement cannot be reached, the government will take other measures to ensure a level playing field for all industry stakeholders.
Will any of these changes impact freehold mineral rights holders?
No. The province will not change the current freehold mineral rights structure at this time. However, it will be reviewed to ensure it is fulfilling its intended objectives.
How do these changes ensure that more upgrading and refining of bitumen occurs in the province?
The government will consider other ways to attract investment in the construction of additional upgraders and refineries in Alberta. This will include studying a possible upgrader credit.
The province will also exercise its right to take raw bitumen in lieu of cash royalties to supply upgraders and refineries in our province. Doing this will encourage more of our resources to be upgraded and refined by Albertans, in Alberta.
