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41-627: The Alberta Energy and Utilities Board regulated energy resource development, pipelines, transmission lines, and investor-owned electric, water, and natural gas utilities, as well as certain municipality-owned utilities. It reported to the Executive Council through the Ministry of Energy, although it operated and made its formal decisions independently and autonomously. On January 1, 2008 the Alberta Energy and Utilities Board (EUB)

82-423: A concessionary system or a contractual system. The principle of the concessionary license system is that the state transfers its ownership of resources in the subsurface to a commercial entity, often a partnership of companies. The companies obtain exclusive rights to extract crude oil and natural gas in a defined area for a limited time. If more than one company are assigned a license, the government will provide

123-529: A country is a set of laws, regulations and agreements which governs the economical benefits derived from petroleum exploration and production . The regime regulates transactions between the political entity and the legal entities involved. A commercial or legal entity in this context is commonly an oil company , and two or more companies may establish partnerships to share economic risks and investment capital . Although petroleum , oil and gas , and hydrocarbons are not technically mineral resources,

164-472: A joint operating agreement which states each partners equity share. One of the companies is often assigned the operator role, who carry out the actual work on behalf of the group. In contractual systems, the state retains its ownership to hydrocarbon resources. A commercial entity, the contractor company, is being engaged to extract petroleum according to some contract. The countries using this type of systems, often have their state-owned oil company to represent

205-626: A loss position becomes increasingly complex when vertically-integrated multi-national energy companies are involved. Suncor claims their realized losses were legitimate and that Canada Revenue Agency (CRA) is unfairly claiming "$ 1.2-billion" in taxes which is jeopardizing their operations. "Bitumen Valuation Methodology (BVM) is a method to determine for royalty purposes a value for bitumen produced in oil sands projects and either upgraded on-site or sold or transferred to affiliates. The BVM ensures that Alberta receives market value for its bitumen production, taken in cash or bitumen royalty-in-kind, through

246-675: A military style chain of command and system of ranks. Fish and Wildlife Division were more flexible and less formally structured. Public Lands were more bureaucratic and mechanistic. The Fish and Wildlife division who emphasized long-term research and monitoring are under the auspices of the Fish and Wildlife Act. Fish and Wildlife division were with the Department of Recreation and Parks before joining Energy and Natural Resources (ENR) in 1979. The Mineral Resources division had very high status and power because of their client groups, which included

287-445: A permanent feature of the royalty system. The maximum royalty rate for conventional oil will be reduced to 40 per cent, down from the current level of 50 per cent. The maximum royalty rate for conventional and unconventional natural gas will be reduced at higher price levels from 50 to 36 per cent. In 2010 the oil and gas industry accounted for 30 percent of Alberta's GDP and 147,000 direct jobs. The decision to lower royalty rates to make

328-506: A project's gross revenues until the project's investment costs are paid in full at which point rates increased to 25 per cent of net revenue. These policy changes and higher oil prices after 2003 had the desired effect of accelerating the development of the oil sands industry. "A revised Alberta Royalty Regime was implemented on January 1, 2009. through which each oil sands project pays a gross revenue royalty rate of 1% (Oil and Gas Fiscal Regimes 2011:30). Oil and Gas Fiscal Regimes 2011 summarizes

369-509: Is "far less than in 2011-2012, less than the 30% recorded in 2010 and in the four year period from 2005-06 to 2008-09." It is forecast at $ 9.2 billion, $ 582 million, or 6.7% higher than in 2013-14, with increased bitumen royalties partly offset by lower crude oil royalties. Revenue is forecast to increase by an average of 4.6% in 2015-16 and 2016-17, with substantial growth in bitumen royalties, mainly due to rising production, obscuring decreasing crude oil and natural gas royalties. Resource revenue

410-647: Is a body of ministers of the Crown in right of Alberta , who along with the lieutenant governor , exercises the powers of the Government of Alberta . Ministers are selected by the premier and typically (but not always) sit as a member of the Legislative Assembly (MLA). It is the provincial equivalent to the federal Cabinet of Canada . Executive councillors are styled "the Honourable". A change

451-629: Is a concessionary license system taxation, to tax a high proportion of the resource rent. In the United Kingdom , it is known as Petroleum revenue tax (PRT) , where a 50% tax is accounted for income from each oil field . In Norway, special tax can be up to 50% on top of 28% corporate tax, however, the income and taxes are calculated for the entire portfolio of fields in which the company participates, and losses can be carried forward from previous years. In this way, profit from one oil field can be balanced against loss on another field, which lowers

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492-425: Is a onetime fee for the assignment and securing of a license, paid irrespective of economic success for the contractor or licensee. Not all states use bonuses, but the government may charge a minor fee for handling license applications. Corporate tax is the standard company income tax used in many countries, and will similarly apply to oil companies. Royalties are shares of the extracted hydrocarbons entitled to

533-558: Is expected to reach $ 10.1 billion by 2016-17, and account for 21% of total revenue. Budget 2014 forecast that the 2014-2015 West Texas Intermediate (WTI) - Western Canadian Select (WCS)- differential, would be 26% with the WTI price at US$ 95.22. By December 2014 4 December 2014 WTI had dropped to $ US67.25 bbl and WCS to US$ 50.70 with a differential of 16%. Executive Council of Alberta The Executive Council of Alberta (the Cabinet )

574-474: Is funded through oil and gas revenues. Bitumen royalties represent about half of that total." In 2009/10 royalties from the oil sands amounted to $ 1.008 billion (Budget 2009 cited in Energy Alberta 2009. In order to accelerate development of the oil sands, the federal and provincial governments more closely aligned taxation of the oil sands with other surface mining resulting in "charging one per cent of

615-403: Is rooted in rent theory and the assumption that oil and gas resources provide an extraordinary rate of resource rent ( economic rent ). The term "resource rent" expresses the difference between the values of hydrocarbons extracted from a deposit and the total costs of exploring and producing the hydrocarbons, synonymous with excess profit . Resource rents will be distributed among the state and

656-584: The Cabinet of Canada . As federal and provincial responsibilities differ there are a number of different portfolios between the federal and provincial governments. The lieutenant Governor , as representative of the King of Canada , heads the council, and is referred to as the Governor-in-Council. Other members of the Cabinet, who advise, or minister to, the vice-regal representative, are selected by

697-422: The petroleum fiscal regimes for the western provinces and territories. The Oil and Gas Fiscal Regimes described how royalty payments were calculated: After an oil sands royalty project reaches payout, the royalty payable to the Crown is equal to the greater of: (a) the gross revenue royalty (1% - 9%) for the period, and (b) the royalty percentage (25% - 40%) of net revenue for the period. Effective January 1, 2009

738-456: The Canadian dollar price of West Texas Intermediate (WTI) (Oil and Gas Fiscal Regimes 2011:30) to a maximum of 9%). When the price of oil per barrel is less than or equal to $ 120/ bbl indexed against West Texas Intermediate (WTI) "payout." Payout refers "the first time when the developer has recovered all the allowed costs of the project, including a return allowance on those costs equal to

779-468: The Government of Canada long-term bond rate ["LTBR"]. In order to encourage growth and prosperity and due to the extremely high cost of exploration, research and development, oil sands and mining operations pay no corporate, federal, provincial taxes or government royalties other than personal income taxes as companies often remain in a loss position for tax and royalty purposes for many years. Defining

820-610: The NRR industries more competitive was based on the economic argument that the decrease in royalties revenue would be offset by an increase in land sales and tax revenue. The net result will be a decrease in revenue in 2012-13 of $ 363 million. This includes a decrease of $ 785 million in forecast royalty revenues, directly attributable to the changes, partially offset by an increase of $ 131 million in royalty revenues generated by increased activity, $ 143 million in land sale revenue and $ 148 million in tax revenue from increased tax revenue. Following

861-526: The Norwegian fiscal regime, it is known as area rental fee and is only paid for "passive licenses", and for exploration areas before a Plan for Development and Operations is submitted to the government. If an oil company has found all or parts of an exploration area of little interest, the area can be relinquished to the state, to save expenses for fees. Other countries enjoying surface fee include Algeria , Angola , Benin , Cameroon , Mauritania . This

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902-403: The advice of the premier of Alberta and Executive Council of Alberta. The lieutenant governor is restricted by custom and constitutional convention . The Lieutenant Governor performs constitutional, ceremonial and social duties. The current premier is Danielle Smith , who was sworn in as the 19th premier on October 11, 2022. The Executive Council of Alberta is similar in structure and role to

943-533: The costs incurred during development by the contractor (cost oil), while the state receive an increasing share of production after costs are recovered (profit oil). This is a specific contractual license system arrangement. Surface fee is a yearly fee, paid per square kilometre or square mile occupied by the license or leased area. This type of fee is used in Brazil for the exploration phase, and for large production volumes, named "Occupation or Retention Fees". In

984-478: The fiscal regime, however, a licensing system has its distinct function: to grant rights for petroleum exploration and production to commercial entities. Because each country has distinctive legislation, there are theoretically just as many different fiscal regimes as there are countries in the world with petroleum resources, but the regimes can still be categorized based on their common characteristics. Motivation for introducing special taxes on petroleum production

1025-750: The form of royalties that fund in part programs like health, education and infrastructure. In 2006-7 the oil sands royalty revenue was $ 2.411 billion. In 2007/08 it rose to $ 2.913 billion and it continued to rise in 2008/09 to $ 2.973 billion. In their response to the 2010 competitive review with input from the Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada, Alberta Energy lowered non-renewable resource (NRR) royalty rates. The rate cuts included, The current five per cent front-end rate on natural gas and conventional oil will become

1066-425: The host state. The state can agree with the licensees to take it in kind or in cash. This arrangement applies to both crude oil and to natural gas, both in concessionary and contractual license systems. The body of a production sharing contract layouts the production share between the contractor(s) and the state or its state-owned oil company. Typically, most of the early production will be set aside for recovering

1107-419: The maximum tax burden. This is country specific for UK, it is a tax of 30%. A ' ring fence ' prevents taxable profits from being reduced by losses that the oil company experiences from other activities. According to Norwegian fiscal regime, a CO 2 tax is paid per volume liquids and gas burnt or emitted directly to air on the continental shelf. It is classified as a deductible operating cost, hence reducing

1148-574: The oil and gas industry, who are "powerful actors on the Alberta scene." In 1982 the Alberta Forest Service had a staff of 765 and a budget of $ 123 million and the Fish and Wildlife division whose clients were often environmental groups, had 414 positions and $ 20 million. Royalty rates in Alberta are based on the price of WTI. That royalty rate is applied to a project's Net Revenue if the project has reached payout or Gross Revenue if

1189-671: The oil companies engaged in extracting hydrocarbons in a license. The rents must recover costs undertaken by the companies, give some company profit and give income for the state (in US the landowner) to compensate for the takeout of natural resources. Income tax and special petroleum tax to the state may also apply and carried by the resource rents. For most countries, a selection of the elements of fees and taxes listed below applies, very few countries, if any, have implemented all elements. There are different flavours: signature bonus, discovery bonus, first oil sales, production bonus. Signature bonus

1230-473: The other taxes paid to the state. An example of a unique implementation of government take is State's Direct Financial Interest (SDFI), the Norwegian state directly owned shares of exploration and production licenses on the Norwegian continental shelf . Although SDFI gives a take effect similar to royalties, it is not classified as royalties by the government, reasoned by that this arrangement also commits

1271-544: The premier and appointed by the lieutenant governor. Most cabinet ministers are the head of a ministry , but this is not always the case. In the construct of constitutional monarchy and responsible government , the ministerial advice tendered is typically binding (although the royal prerogative belongs to the Crown, not to any of the ministers) and ministers account to the legislature for their portfolios. The current cabinet has been in place since June 9, 2023. Petroleum fiscal regime The petroleum fiscal regime of

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1312-418: The project has not yet reached payout. A project's revenue is a direct function of the price it is able to sell its crude for. Since WCS is a benchmark for oil sands crudes, revenues in the oil sands are discounted when the price of WCS is discounted. Those price discounts flow through to the royalty payments. The Province of Alberta receives a portion of benefits from the development of energy resources in

1353-496: The revised Alberta Royalty Regime it fell in 2009/10 to $ 1.008 billion. In that year Alberta's total resource revenue "fell below $ 7 billion...when the world economy was in the grip of recession." In February 2012 the Province of Alberta "expected $ 13.4 billion in revenue from non-renewable resources in 2013-14. By January 2013 the province was anticipating only $ 7.4 billion. "30 per cent of Alberta's approximately $ 40-billion budget

1394-547: The royalty formula. Western Canadian Select (WCS), a grade or blend of Alberta bitumens, diluents (a product such as naphtha or condensate which is added to increase the ability of the oil to flow through a pipeline) and conventional heavy oils, developed by Alberta producers and stored and valued at Hardisty, AB was determined to be the best reference crude price in the development of a BVM." By 2014 NRR revenue dropped to 21% of total revenue from 30% in 2010. The 2014 Provincial Budget reported that future anticipated NRR revenue

1435-465: The royalty percentage of net revenue is also indexed to the Canadian dollar price of WTI. It is 25% when the WTI price is less than or equal to $ 55/bbl, rising linearly to a maximum of 40% when the price reaches $ 120/bbl. For royalty purposes, net revenue equals project revenue less allowed costs." When the price of oil per barrel is less than or equal to $ 55/bbl indexed against West Texas Intermediate (WTI) (Oil and Gas Fiscal Regimes 2011:30)(Indexed to

1476-414: The state to contribute in investments with the same proportion of capital as they take out their share of the revenues.   Production sharing contract Pure service contract Risk service contract Buyback contract Technical assistance contract Within fiscal regimes where the state owns the mineral rights, the governments have generally selected one of two types of licensing system:

1517-461: The term mineral rights is used to denote rights to exploit oil and gas resources from the underground. Onshore, in United States , the landowner possesses exclusive rights for mineral rights, elsewhere generally the state does. For this reason, the fiscal regime of US is divergent from that of other countries. The petroleum licensing system of a country may be considered interwoven with

1558-512: Was based on the premise that with proper planning and management, land can support a variety of uses, such as, timber, recreation and wildlife. However few were ideally compatible creating a climate of competition and conflict. In 1986 the Department of Energy and the Department of Forestry, Lands and Wildlife were created. The original resource agencies continued and interdepartmental planning took place under Resource Evaluation and Planning (REAP). The Resource Evaluation and Planning (REAP) division

1599-427: Was created in 1976 to provide coordination and data gathering services. In the 1980s REAP oversaw an integrative planning system using a team approach to decision-making. It was a challenging time of transition. More established agencies like the Alberta Forest Service supported preservation of traditional attitudes and behaviour and felt threatened. By the 1980s Alberta Forest Service had a strong authority system with

1640-496: Was made to the protocol in 2022 and former members who were living on February 6, 2022 (the Platinum Jubilee of Elizabeth II ) are now honorary members of the council and are styled "the Honourable" for life (unless removed from membership for an indictable offence). Members and honorary members use the post-nominal letters "ECA". The executive powers in the province lie with the lieutenant governor and are exercised on

1681-494: Was realigned into two separate regulatory bodies: In 1984, the Alberta Department of Energy and Natural Resources (ENR), was a complex multi-divisional organization, with a permanent staff of 2, 605 and a budget of $ 499 million, that was responsible for the management of energy, mineral, forest and fish and wildlife resources as well as public (crown owned lands) which constituted 62% of Alberta's land base. ENR policy

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