Alberta cuts oil sands fees with new 10-year royalty regime for new projects

By Amanda Stephenson

CALGARY, Nov 13 (Reuters) - Alberta is reducing the fees it charges oil sands producers in an effort to spur companies to invest in new projects and boost oil output to fill a new proposed crude pipeline to Canada's west coast.

• Canada's main oil-producing province said Friday it is introducing a new 10-year royalty regime that will apply only to new oil sands development, not to existing production.

• Starting in 2027, companies will be eligible to submit projects for consideration for the new rate, which will only apply to brand-new oil sands developments or expansions of existing projects of at least 5,000 bpd capacity.

• Under the new regime, companies will pay a two per cent royalty rate (based on gross revenues) for the first five years, increasing by one per cent annually each year until reaching six per cent in years nine and 10.

• This compares to Alberta's existing approach, through which companies pay a royalty of between 1 and 9% until costs of the project are recovered, and then 25 to 40% net revenue after that.

• Projects approved under the new royalty regime will revert to the existing framework after 10 years.

• Officials said the cost savings for industry will vary depending on the project, but the aim is to make it more attractive to build and expand oil sands projects.

• Canada is the world's fourth-largest oil producer, and its oil production has been rising. But ​the last major new oil sands project, Suncor's Fort Hills, started operating in 2018. Since then, companies have concentrated on smaller expansions of existing projects and have been reluctant to make the kind of major new capital investments that spur job creation and economic growth.

• Prime Minister Mark Carney has also made efforts to spur oil sands growth. He has cut the tax rate on new capital investment, and ​pledged to back Alberta's new proposed crude pipeline to the country's west coast.