A former member of the government-appointed royalty review panel also raised concerns, arguing Albertans are not receiving a fair share for the oil sands and that the province knew it would be losing out on revenue from its contracts with Suncor and Syncrude.

All told, the Alberta government collected hundreds of millions of dollars less in royalties in the first quarter this year from its two major oil sands players than it did a year ago, due to its new royalty plan, deflated energy prices and renegotiated deals.

“These days the government is virtually giving away the oil sands,” Liberal energy critic Kevin Taft told the Calgary Herald.

The recently reworked royalty framework determines how much money the province takes in from companies developing the province’s oil sands.

First-quarter filings by Canadian Oil Sands Trust, the largest partner in oil sands giant Syncrude, show the government collected only 48 Canadian cents (US$0.41) per barrel of bitumen amid the low-price environment of recent months, down from C$14.57 per barrel a year ago.

Total royalties paid by Canadian Oil Sands in the first quarter were C$4 million, compared to C$131 million in the same period last year.

Quarterly reporting by Suncor showed it also paid 97% less in oil sands royalties — C$8 million in the first quarter this year, compared to C$282 million in the same period a year earlier.

The two industry heavyweights account for more than half of Alberta’s oil sands production, the newspaper said.

The drop is partly the result of depressed commodity markets and a new price-sensitive royalty regime that took effect 1 January.

But it is also largely due to the government’s contracts with Syncrude and Suncor that now allow the companies to pay royalties on lower-priced bitumen instead of more valuable synthetic crude.

The Liberals partly blamed the lost royalties on the government’s decision to eliminate its long-held target of collecting 20% to 25% of the industry’s net revenue.

“We’re giving away our treasure, and for the life of me I can’t understand why,” Taft told the Herald.

Premier Ed Stelmach and Energy Minister Mel Knight said the government’s new royalty framework, along with renegotiated contracts with Suncor and Syncrude, offer up breaks to companies during a low-price environment and collect more during boom times.

“The new royalty regime that’s in place shares risk and also reward,” Stelmach said.

“Producers have seen a break in the size of their royalty.”

Knight explained the companies pay a low royalty — 1% rather than the regular 25% — when revenues are low and costs remain high.

Both oil sands companies paid the minimum royalty of 1% during the first quarter, but may see their rates ratchet back up if oil prices continue to improve.

“There’s a narrow margin and that’s what we’re collecting royalty on,” Knight said.

“It’s a snapshot. It will correct itself in short term.”

Andre Plourde, a University of Alberta energy economist and a member of a provincial government-appointed panel that reviewed the royalty framework before the government made changes, said Albertans are not getting their fair share of the oil sands.

“The owners of the resource, which are Albertans, are entitled to get an appropriate return on their assets, and right now I don’t think that’s happening,” Plourde told the newspaper.

“It’s not credible to argue (the government) didn’t know the consequences of those contracts. This isn’t surprising.”

Syncrude, the largest oil sands producer in the world, reached a deal with the province in November on a new royalty framework, which allows it to pay royalties on lower-valued bitumen.

As part of the deal, Syncrude will pay $975 million to provincial coffers between 2010 and 2015.

Suncor previously announced a deal with the government that saw existing agreements transitioned over to the new royalty rates effective 2016, rather than this year, based on a sliding scale between 25% to 30%.

Published: 13 May 2009 23:11 GMT  | Last updated: 14 May 2009 06:36 GMT