Alberta’s New Royalty
Framework
Royalties and the price on carbon
Alberta’s new royalty framework sets out to encourage industry to bring down their costs, just as a
price on carbon encourages companies to bring down their emissions. All companies will pay a price
on carbon, as detailed in the Climate Leadership Plan. The amount that any company may have to
pay depends on their greenhouse gas emissions. With respect to royalties, the price on carbon will
be treated as a cost.
Oil and Gas
New wells:
 Increases in costs of drilling will be
captured by the Drilling and Completion
Cost Allowance.
 Since the Drilling and Completion Cost
Allowance will be set based on the
industry average, the carbon costs
included in the allowance will also be
based on the industry average and will be
updated annually.
 Once a well’s revenues exceed the
Drilling and Completion Cost Allowance,
the price on carbon will have no further
effect on its royalty rate, since costs do
not impact the royalty rate at this point.
All wells:
 In collaboration with industry,
environmental organizations, and affected
First Nations, Alberta will implement a
methane reduction strategy to reduce
emissions by 45% from 2014 levels by
2025.
Oil sands
 There is no change to oil sands royalty
formulas, and as such there will be no
anticipated change to how the carbon
price is treated in oil sands royalties.
 The price on carbon is part of allowable
capital and operating costs.
 There will be a higher level of
transparency and accountability on
allowable costs, including carbon costs
incurred by a project.
 Until 2023, only purchased fuel for well
operations will be subject to the price on
carbon.
 In 2023, all fuel use will be subject to the
carbon price.
Supporting Jobs, Supporting families
www.royalties.alberta.ca
February 2016