Bitumen Royalty-in-Kind (BRIK) Frequently Asked Questions
What is Bitumen Royalty-in-Kind (BRIK)?
Who will pay BRIK?
What is the Alberta government trying to accomplish?
How does “Royalty-in-Kind” work?
Will this mean more bitumen upgraded in Alberta?
What is Bitumen Royalty-in-Kind (BRIK)?
In Alberta, royalties are a share of production from resources that are owned by the Crown in right of the Province of Alberta. In other words, the government owns the resources on behalf of Albertans. Under the Mines and Minerals Act, the government has the option to take its royalty share either in cash or in-kind. Currently the Government takes in-kind its share of conventional crude oil production, and collects in cash its royalty share for other resources.
The decision to exercise the in-kind option for bitumen was identified in October 2007 as a way for the Crown to use its share of bitumen strategically to supply potential upgraders and refineries in Alberta, and to optimize its royalty share by marketing those volumes.
Who will pay BRIK?
Currently there are numerous projects producing an estimated 1.3 million barrels per day of bitumen in Alberta. The BRIK regulations take effect in 2012 and will address all bitumen production in Alberta. Initially, BRIK volumes will not include Alberta’s integrated operations.
What is the Alberta government trying to accomplish?
The Crown can increase its return on its royalty volumes of bitumen through value-added activities in Alberta (such as upgrading, refining and petrochemical manufacturing), which can serve to also increase economic activity and facilitate petroleum product diversification in Alberta.
Diversification may lower the government’s risk around bitumen commodity pricing, and improve returns from overall production and processing, to provide greater overall return to the citizens of Alberta.
How does “Royalty-in-Kind” work?
Bitumen producers will be required to deliver in-kind the Crown’s royalty share of bitumen production. The ultimate collection points will likely be the distribution hubs in Edmonton and Hardisty. The bitumen will then be marketed by an agent designated by the government.
Will this mean more bitumen upgraded in Alberta?
One of the objectives of the RFP is to support additional investment in the value-added sector. This is expected to result in more bitumen upgrading or refining.
