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Alberta’s oil and gas royalty regime

Hydrocarbon Engineering,

The Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada (SEPAC) are to jointly release a new report on Alberta’s oil and gas royalty regime. The report, ‘Alberta Oil and Gas: Benefits to Alberta and Canada, Today and Tomorrow’ provides information on the royalty system in regards to conventional oil and gas and unconventional gas.

The report details the current state of resource potential and development in Alberta; the benefits to Alberta and Canada; the costs of operation; and the importance of investment certainty.

Resource potential

The historic success of Alberta’s oil and gas industry has been based on the development of conventional oil and gas fields. Enhanced recovery technology is being used to extend the life of maturing conventional oil and gas fields. As these resources mature, investment and interest is moving to less conventional resources such as deep gas, coalbed methane, and tight sands and shale gas. These unconventional resources are more challenging and costly to produce and require innovative approaches for development.

Benefits to Alberta and Canada

New jobs are created in technical, trades and professional fields, and new business opportunities to provide goods and services from pipelines and equipment to research, trucking, and restaurants, environmental and accounting services. All of these contribute to Alberta’s economic growth.

Prices and costs

While prices have risen over the past few years, so have costs. This trend seems unlikely to change in the short term. Oil and gas prices are unpredictable, rising and falling frequently. Alberta’s conventional royalty structure automatically adjusts for price and productivity, but does not adjust for escalating costs. It is important to look at both costs and prices together as it is revenues less costs that drive economic development.


The existing fiscal regime, with its combination of upfront lease bonuses, production royalties and corporate income taxes, has produced growth, jobs and continuing benefits for the province. These factors, combined with Canada’s political stability and sound fiscal policies, are what make Alberta an attractive place to invest.

Adapted from a press release by Emma McAleavey.

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