Alberta Premier Danielle Smith has indicated that her government is open to discussions about stimulating investment in new oilsands projects, potentially mirroring a historic agreement from nearly three decades ago. Speaking at a Calgary Chamber of Commerce breakfast on Thursday, Smith said she is willing to engage with industry leaders to explore ways to encourage greenfield developments, which could supply a proposed new bitumen pipeline to the British Columbia coast.
Historic Context and Current Stakes
In 1996, the federal government under Jean Chretien and Alberta Premier Ralph Klein reached a landmark understanding that spurred a wave of oilsands investment. That deal established a uniform royalty rate and federal tax changes, including accelerated capital cost writeoffs, which helped offset the high upfront costs of new projects. Today, the stakes are similarly high as Alberta seeks to double oil production to eight million barrels per day by 2035 and build a one million barrel per day pipeline to access Asian markets.
Industry Push for Fiscal Framework
The Oil Sands Alliance, representing five major producers, is advocating for an improved fiscal framework as they consider moving forward with the Pathways carbon capture project. This multibillion-dollar initiative is tied to federal approval of a new oil pipeline to the West Coast. Alberta has already offered a 12 percent grant for the carbon capture network, and Ottawa provides a federal investment credit of up to 50 percent. However, industry concerns remain about the competitiveness of the sector under Alberta's rising industrial carbon price, which is set to reach an effective rate of $130 per tonne by 2040.
Smith noted that economic modeling suggests the higher carbon price would add between 80 cents and $1.10 per barrel in costs. She also highlighted that a new pipeline could reduce the oil price differential on Western Canadian Select heavy oil by $2 to $3 per barrel, improving returns for producers.
Openness to Conversations
“In this province, we have always had a preferential royalty regime for greenfield oilsands development,” Smith stated. “We’re open to having those types of conversations, that if there is some way that we have to stimulate greenfield investment, those are the kind of conversations we are going to be able to have.” This signals a potential shift in policy to attract capital, similar to the 1996 agreement that ignited a previous wave of investment.
The coming weeks will be critical as stakeholders negotiate the details of any new fiscal measures. The outcome could determine the pace of new oilsands projects and the viability of the proposed pipeline, which is seen as essential for accessing higher international prices and reducing Canada's reliance on the U.S. market.
