Alberta eyes greater share of oil wealth

Alberta is quietly studying how it could boost its take from the oil sands, as the gap widens between the province’s royalty income and the industry’s revenue.

There has been a growing chorus of calls to rewrite the decade-old rules for the oil sands and boost royalty rates, which critics say amounts to a massive subsidy of an industry enjoying huge profits.
So far, the provincial Conservative party has rejected those demands for a radical overhaul of the fiscal regime, put in place in the mid-1990s with the aim of spurring investment by lowering royalties. Premier Ralph Klein loudly proclaimed earlier this month that the province is not engaging in a wide-ranging royalty review.

Behind the scenes, however, Alberta is examining small, but crucial, changes to the royalty system that could shift tens of millions of dollars, perhaps hundreds of millions, from industry profits to the province’s coffers each year.

It might seem paradoxical that Alberta is concerned about losing out on royalties at a time when oil is selling for more than $70 (U.S.) a barrel, and the province is awash in energy revenues. Although the oil sands account for a quarter of Alberta’s production of oil and gas, they make up just over a tenth of its total income from non-renewable resources, a reflection of the extremely low royalty rates much of the sector is currently paying.

In addition, most oil sands projects do not pay royalties on expensive crude oil; instead, they pay the levy on much cheaper bitumen, which this winter sold for less than $40 a barrel.

That discrepancy has caught the eye of the Alberta government, which is now trying to determine why bitumen is selling at such a steep discount — and whether it needs to intervene to increase its revenue from the oil sands.

Globe and Mail