Royalty Review Panel

Date PublishedNovember 26, 2015
CompanyCanadian Association of Petroleum Producers (CAPP)
Article AuthorTim McMillan
Article TypeNovember 2015 Issue
CategoryArticles, Oil & Gas
Tags, , ,
PULSE Interactive

Royalty Review Panel

The key to maximizing and diversifying the value of oil and gas for Albertans is to ensure the province is globally competitive and connected to more customers in new markets.

Alberta is losing its competitive edge. The United States, Alberta’s number one customer for oil and gas exports, is quickly becoming its top competitor. Our industry is challenged not only by price, but transportation to existing and new markets, and increasing costs.

The collective opportunity, therefore, is to diversify the customer base and extract more value for Alberta’s oil and gas resources. Overall, CAPP urges the government to:

Re-establish Alberta as a place that attracts capital investment.

Pursue market access.

Recognize that cumulative costs work against competitiveness.

Support innovative technology for its ultimate and ongoing value to Albertans.


The oil and natural gas industry is Alberta’s number one economic driver and job creator. Industry employs approximately one in three Albertans, generates 42 per cent of Alberta’s GDP and is responsible for 36 per cent of provincial revenues, including royalties, corporate and personal taxes and fees. This includes the substantial benefits created in related sectors such as hospitality, transportation, food services, consultation, construction and real estate.

Finding the right balance on royalties means the province can continue to develop its resources to improve the quality of life in Alberta. The right balance will encourage more production and exports, generating more revenue for government, communities and industry while creating jobs.

Capturing the value of oil and gas first requires the resources be developed. That means royalty and other government actions need to keep Alberta competitive with rival jurisdictions to attract capital investment. Once resources are developed, the best way to increase value is to sell the products, at the best price, to the most customers.

We recommend to the panel that increasing investment and greater access to global markets will give Albertans full value for their resources. Policies that discourage investment or constrain access only add to the challenges facing the province.

CAPP’s royalty review panel submission makes 60 recommendations to simplify and improve Alberta’s current royalty system. Our recommendations are grouped in four areas linked to the review panel’s principles:

Encourage Investment

Ensure the royalty system is stable, predictable and competitive; Create an annual performance and benchmarking report to strengthen royalty system transparency for Albertans; Ensure changes are forward-looking; Recognize cumulative costs affect competitiveness.

Responsible Development

Support more research and development to improve returns and reduce environmental impacts; Focus on the abandonment/reclamation development model; Develop an incremental clean infrastructure royalty allowance program.

Optimizing Returns To Albertans

Encourage investment to develop additional resources as opposed to taking a larger share of the existing resource; Ensure royalties reflect global prices and Alberta production volumes; Recognize all the benefits industry provides, including economic growth and employment.

Innovation And Diversification

Allow the industry to reach more customers in more markets, generating diverse opportunities and greater resilience for the province; Explore opportunities such as more cogeneration and using natural gas to produce electricity; Support value-added initiatives only if the value created is greater than the investment required.

Policies that discourage investment or
constrain access only add to the challenges facing the province.

These recommendations can provide Alberta with a competitive, predictable and durable royalty system that Albertans can trust. Alberta needs to be a place with government rules that are certain and clear, where competitiveness attracts capital investment to build communities, and that protects and grows jobs.royalty-review-panel-CAPP

All Albertans will benefit as we pursue new markets, encourage innovation so we can diversify within our strengths, and recognize that compounding costs can work against generating greater returns for Albertans.


PART 2: The CAPP Royalty Review Submission To The Alberta Government

Tim McMillan
President & CEO







Originally published in the 

November 2015 issue of Oilfield PULSE