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Plucking the Golden Goose: Higher Royalty Rates on the Oil Sands Generate Significant Increases in Government Revenue

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  • Kenneth J. McKenzie

    (The School of Public Policy and Department of Economics, University of Calgary)

Abstract

The Alberta government’s 2009 New Royalty Framework elicited resistance on the part of the energy industry, leading to subsequent reductions in the royalties imposed on natural gas and conventional oil. However, the oil sands sector, subject to different terms, quickly accepted the new arrangement with little complaint, recognizing it as win-win situation for industry and the government. Under the framework, Alberta recoups much more money in royalties — about $1 billion over the two year period of 2009 and 2010 — without impinging significantly on investment in the oil sands. This brief paper demonstrates that by spreading the financial risks and benefits to everyone involved, the new framework proves it’s possible to generate increased revenue without frightening off future investment. The same model could conceivably be applied to the conventional oil and natural gas sectors.

Suggested Citation

  • Kenneth J. McKenzie, 2011. "Plucking the Golden Goose: Higher Royalty Rates on the Oil Sands Generate Significant Increases in Government Revenue," SPP Communique, The School of Public Policy, University of Calgary, vol. 3(3), September.
    • Handle: RePEc:clh:commun:v:3:y:2011:i:3
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    Cited by:

    1. Bev Dahlby, 2012. "Reforming the Tax Mix in Canada," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 5(14), April.

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