Alberta is planning to reduce the royalties oil sands companies pay on new production for 10 years as part of an effort to attract billions of dollars in investment and double the province’s oil output.
Under the proposed Oil Sands Growth Program, announced on Nov. 13, approved projects would pay a 2 percent royalty rate for the first five years. That rate would increase by 1 percentage point annually until reaching 6 percent in the ninth and 10th years.
Energy and Minerals Minister Brian Jean said the lower rates would encourage companies to invest billions of dollars in new projects while eventually generating more revenue for the province.
The voluntary program would be available to companies building new oil sands projects or expanding existing operations, provided they produce at least 5,000 barrels per day, the province said.
Jean said that if Alberta’s regular royalty rates fall below the program’s rates during the 10-year period, companies would pay the lower amount. After 10 years, projects would return to the regular system.
Under the existing system, oil sands producers generally pay royalties of between 1 and 9 percent of gross revenues before recovering their initial investment costs. After recovering those costs, they pay between 25 and 40 percent of net revenues, or the applicable gross revenue royalty if that amount is higher.
Premier Danielle Smith said the program was inspired by former premier Ralph Klein’s efforts in the 1990s to encourage oil sands investment through lower initial royalties.
Alberta said it wants to double oil production to 8 million barrels per day by 2035, up from approximately 5 million barrels today. The government estimated increased production could generate $205 billion in additional revenue by 2040 and more than $1.3 trillion by 2060.
Finance Minister Jason Nixon told reporters the province expects new investment to begin almost immediately and could see improvements in its finances within four to five years.
Nixon estimated that increased oil sands development could create between 200,000 and 600,000 jobs and generate between $80 billion and $250 billion in additional royalties, depending on investment and economic conditions. However, he could not say how much companies would save under the proposed rates or how much additional oil production the program would generate.
Nixon added that the lower rates would apply only to new production, leaving existing royalty arrangements unchanged.
Smith said the program won’t reduce Alberta’s royalties when asked whether reducing royalty rates could hurt provincial finances if oil prices declined.
“Keep in mind, this is new development that doesn’t exist. So if it doesn’t exist, we’re getting $0 off of it,” she said. “If it does exist, then we delay our shares so that the companies can pay their investment back so that we can benefit later.”
The government said increased production would help fill new pipelines, create jobs, and provide more money for hospitals, schools, roads, and other public services.
Oil Sands Alliance President Kendall Dilling welcomed the proposal, saying companies need stable government policies before committing billions of dollars to projects that take years to complete. He said more than $100 billion in investment could be needed to increase production enough to fill the expanded Trans Mountain pipeline, the proposed Pacific Link pipeline, and other projects.
Asked why oil companies needed lower royalty rates when the industry was reporting substantial profits, Dilling said investment decisions were based on expectations over many years rather than current earnings.
“This is a cyclical commodity business, and we’re not making these investments based on today’s oil prices, even next year’s oil prices,” he said. “We’re trying to predict what oil prices are going to be five, 10 years down the road.”
Dilling added that no major new oil sands project had begun in the past decade, saying that uncertainty about government policies had discouraged investment.
The program is expected to launch in spring 2027, although qualifying projects announced after Nov. 15, 2026, would also be eligible.
Projects would still require environmental and other government approvals, along with consultation with indigenous communities where required.
The province plans to review the program by Dec. 31, 2029, to determine whether changes are needed.
