Alberta announces royalty program as part of plan to double oilsands

The Alberta government is introducing a lower-rate royalty program it says will help ease the capital investment needed to kickstart new developments and expansions in the oilsands.

Through the Oil Sands Growth Program (OGP), approved projects will get a reduced two-per cent royalty rate during their first five years of production. The rates will increase by one percentage point annually until they reach six per cent during the ninth and tenth years.

Premier Danielle Smith predicts the program will lure investors, especially as the province aims to hit 8 million barrels of oil per day by 2035. On Friday, Smith said Alberta is generating around 5 million barrels.

“To meet our goal of doubling oilsands production in the coming decade or so, we need hundreds of billions of dollars in new investment and we need to do that while competing with the United States and Venezuela,” Smith said during a news conference in Calgary, where the government announced the new program.

“The competition for global investment is real. Major energy projects require billions of dollars in capital and years of planning.”

Smith says the OGP will lower upfront financial barriers to new projects and expansions, particularly as proponents of the Pacific Link pipeline look for companies to fill upcoming capacity.

Alberta Premier Danielle Smith, flanked by Pembina Pipeline CEO Scott Burrows and Prime Minister Mark Carney, at a press conference north of Fort McMurray, Alta. on Oct. 1, 2026 to announce the declaration of the Pacific Link pipeline as a project in the national interest. (Vincent McDermott/CBC)

The OGP won’t replace the existing royalty program or guarantee a project’s approval, Smith said, adding it also won’t sidestep environmental or Indigenous consultation requirements. 

Eligibility will not be limited to the five members of the Oil Sands Alliance, which represents the country’s five largest oilsands companies. Approvals will be based by project and can include expansions.

Companies will return to the regular royalty regime after 10 years, or if they cannot meet production, environmental or regulatory requirements.

Steam-assisted gravity drainage (SAGD) pads at Cenovus Energy’s Christina Lake oilsands facility, located southeast of Fort McMurray, Alta., on Wednesday, April 24, 2024. Company representatives say this pad, using the most current technology, requires less energy per wellhead to harvest bitumen than earlier versions. (Amber Bracken/The Canadian Press)

The Alberta government plans to launch the OGP this spring, but says qualifying projects announced after Nov. 15 will still be eligible. Smith says the province will review the program’s effectiveness three years from now, in December 2029.

Unlike the current royalty plan,…