Alberta Record

· Order in Council / Bitumen Royalty-in-kind Regulation · in-force

Bitumen royalty in kind regulation

Establishes the Bitumen Royalty-in-kind Regulation, enabling the Commission to direct oil sands lessees to deliver the Crown's royalty share of bitumen directly, rather than as monetary payments, and outlines associated obligations and pro…

High impactCentralization of powerThe public, directlyIndependent watchdogs

What changed

  • A new regulation, the Bitumen Royalty-in-kind Regulation, is created under the Mines and Minerals Act and Petroleum Marketing Act.
  • The Commission is empowered to issue directions requiring oil sands lessees to deliver royalty bitumen directly to the Crown.
  • Lessees and their designated delivery agents are required to act as agents of the Crown for managing and delivering the directed royalty bitumen.
  • A framework is established for determining 'just and reasonable consideration' and handling allowances for lessees providing services related to in-kind delivery.
  • Specific delivery points are defined for the transfer of royalty bitumen from lessees to the Commission on behalf of the Crown.
  • Repeals and replaces section 26.1 of the Petroleum Marketing Regulation (AR 174/2006).
  • Defines 'supplier' broadly to include lessees, battery operators, pipeline operators, and other persons involved in crude oil transportation or storage.
  • Grants the Alberta Petroleum Marketing Commission (APMC) authority to direct suppliers to transmit crude oil via pipeline to a Commission-designated storage facility or point in Alberta.
  • Grants the APMC authority to direct suppliers to accept and store crude oil in their storage facility.
  • Specifies that if an agreement on 'just and reasonable consideration' for transmission cannot be reached, section 110 of the Public Utilities Act applies.
  • Prohibits the APMC from directing storage in underground formations unless the Alberta Energy Regulator has previously approved the scheme.

Why it matters

  • Shifts the method of collecting bitumen royalties from solely monetary payments to include direct physical delivery, potentially altering provincial revenue management strategies.
  • Expands the Commission's authority by granting it the power to issue binding directions for the physical delivery of a public resource.
  • Introduces new operational and financial obligations for oil sands lessees, requiring them to act as agents of the Crown for a portion of their production.
  • Centralizes control over a portion of Alberta's bitumen resources by enabling the Crown to take physical possession directly.
  • May impact market dynamics for Alberta's bitumen by allowing the Crown to directly participate in the supply chain.
  • Expands the operational authority of the Alberta Petroleum Marketing Commission over crude oil logistics within the province.
  • Centralizes decision-making regarding the transmission and storage of crude oil required by the Commission.
  • Introduces new obligations for crude oil suppliers to comply with Commission directives for transmission and storage.
  • Establishes a mechanism for determining compensation for directed transmission services, referencing existing legislation.
  • Maintains a regulatory check by requiring Alberta Energy Regulator approval for specific types of storage directives.

Other governance concerns

  • Increased direct government involvement in resource marketing and logistics.
  • Potential for altered market conditions due to Crown's direct participation in bitumen supply.
  • New compliance burdens and agency responsibilities for private sector operators.
  • Increased regulatory burden on crude oil suppliers.
  • Potential for disputes over 'just and reasonable consideration' for services.
  • Expansion of executive branch authority (via the Commission) into operational aspects of crude oil transmission and storage.

Primary sources (2)