Petroleum Industry Development In Alberta, Canada - The Relationship Between Governments And The Private Sector
Authors: Day Michael J. 
Published: March 2010

Canada is a federation of ten provinces and two territories. The provinces own and manage their petroleum resources. The location of these resources differs considerably from the markets in which they are consumed.

Sustaining the petroleum industry in Alberta necessitates a close working relationship between the federal and provincial levels of government, both of which have taxation-related powers, and a large, complex private sector comprising integrated and nonintegrated explorers, producers, marketers and contractors.

This relationship recognizes the competitive nature of the petroleum industry and the priorities of the various governments within which the industry must operate. Fluctuations in international petroleum price, supply and demand cause priorities between governments, between industry and government, and within industry itself, to shift dramatically.

Key policy areas for any jurisdiction wishing to sustain a petroleum industry include over-all political and business stability, taxation, repatriation of capital, local participation, exploration access, acquisition, retention and return of petroleum rights, worksite safety, environmental protection, information disclosure, resource revenue and conservation, upgrading, transporting, domestic and export marketing and end-product pricing. Frequent consultation with industry associations is critical to maintaining an effective policy balance.

The Canadian Constitutional Framework

Canada is a self-governing federation within the British Commonwealth comprising ten provinces and two territories. Each province owns the petroleum and mineral rights to its lands, except where they have either been retained by the federal government, are owned by Indian bands pursuant to treaties, or were granted historically to trading companies, railways and early settlers.

In Alberta, 81% of the petroleum and other mineral rights are owned by the province in the name of the Crown and are administered by the Alberta Department of Energy. The province leases these mineral rights to industry for development and takes a share of production as royalties. The revenues from leases, as bonuses, rentals and royalties, are a major source of income for the province.

Alberta also has taxation powers, including taxing the production of those minerals which are not owned by the Crown, taxing fuels at their point of end use, and taxing other goods and services. For purposes such as petroleum industry drilling, production and resource conservation, provincial control extends hroughout the province.

The federal government has wide-ranging powers regarding interprovincial and international trade, as well as corporate and personal income taxation (the revenues from which are shared with the provinces). Responsibility for energy regulation is shared among the federal and provincial governments and several major agencies. The National Energy Board regulates the construction of interprovincial and international pipelines and power lines, establishing minimum construction and operating standards and ensuring (in cooperation with the provinces) minimal environmental impact. It has the power to expropriate land for these purposes. It also forecasts national energy supply and demand and is empowered to grant licences for the export of energy considered to be surplus to "reasonably foreseeable" needs. The Board interacts with industry primarily through public hearings. Its Alberta counterpart is the Alberta Energy Resources Conservation Board. the responsibilities of which are described later.