Alberta’s energy minister is hoping that by changing the way the province receives royalties from oilsands bitumen, it may give pipeline companies the certainty they need to build new projects connecting Canada’s resources to global markets.
The province currently takes royalties from conventional production in-kind, or in oil itself, rather than cash. It can then sell that crude via its commercial oil and gas agency, the Alberta Petroleum Marketing Commission.
The Alberta government has announced royalties from bitumen, the thick, heavy oil that comes from the oilsands, can now also be collected this way.
“It gives Alberta flexibility,” Brian Jean, the minister for energy and minerals, said Tuesday in an interview from Houston, where the major energy conference CERAWeek is being held.
Jean gave the example of a pipeline like Northern Gateway, the proposal by Enbridge Inc. that would have sent Alberta oil to a tanker port on the northern B.C. coast, enabling sales in Asia. It was the subject of intense environmental scrutiny and a West Coast tanker ban ultimately spelled the project’s demise several years ago.
In order to move such a proposal ahead, Jean said he would help support the long-term business case by committing to provide as much oil as the proponent needed.
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The move comes as Canada’s trade relationship with the United States—the biggest buyer of Canadian oil exports—deteriorates amid a flurry of tariff announcements in recent weeks from President Donald Trump.
The Canada Energy Regulator says in 2023, Alberta produced 3.4 million barrels a day of raw oilsands bitumen and 1.2 million barrels a day of synthetic crude oil, which is bitumen that has been upgraded into a high-quality, easily refined product.
Jean said he sees the province receiving no more than 150,000 barrels of oilsands crude a day in-kind two or three years from now.
“Do recognize that we’re taking baby steps on this,“ he said. ”It’s important not to shake up the industry and to make sure that there’s stability and certainty in the contracts and to make sure as well that each and every deal is done right.”
In a news release late Monday, the province said Premier Danielle Smith has been in talks with a multinational oil and petrochemical player about selling two million barrels per month of province-owned heavy oil.
It said in the release that there was a meeting on Monday, but it did not identify the company or say what part of the world the firm is based in.
Jean declined to provide further details, but said the company is “very interested and wants to ink a deal.” He said other international players are also looking to buy Alberta oil.
The bitumen royalty in-kind program “gives the province greater say in where we sell our oil,” Smith said in the release, and would help it “become one of the most significant players in the heavy oil market and garner more value for Albertans.”
Adrian Begley, CEO of the Alberta Petroleum Marketing Commission, said the agency will seek deals that are commercially prudent and make sense for Alberta and its energy industry.
“The opportunity exists to find transactions that will directly and indirectly secure extra value for Albertans, and the experienced team at APMC is committed to doing just that.”
Richard Masson, a former CEO of the APMC who is now an executive fellow at the University of Calgary’s School of Public Policy, questioned the move.
“It looks like it’s going to add complication, potentially cost, and at a time when we’re already facing tariffs and a whole bunch of uncertainty,” he said.
During Masson’s tenure at APMC, there was a discussion about taking bitumen royalties in-kind to support what is now the Sturgeon Refinery near Edmonton, which turns oilsands bitumen into diesel and other products. The thinking was that it would allow the refinery to have a stable supply of raw product for decades.
“When we looked at it, we said, ‘Look, this doesn’t make a lot of sense because the royalty share is up and down each month,’” Masson said, citing crude prices and currency swings among the variables.
It turned out that buying bitumen in the market, and having the Alberta government pay a stable toll, was a better option.
Masson said he sees it working well that way for any new pipelines that may be proposed.
“That’s what a company wants to see that allows it to go out and get a pipeline built or financed,” he said.
“You don’t need to have bitumen for that. There’s lots of bitumen in the market. This doesn’t create any more bitumen. What it does is potentially take bitumen away from producers that we’re going be selling it anyway.
“So this isn’t going to help (Jean) get a pipeline built. It’s a distraction.”
