October 7, 2021
Alberta Should Scrap its Outdated Bitumen Valuation Methodology
- Given the substantial contribution of Alberta’s oil sands to both the province and Canada’s economy, a stable, competitive and fair oil sands regime is essential, according to a new report released by the C.D. Howe Institute.
- Authors Joel Balyk, Benjamin Dachis and Charles DeLand examine the Bitumen Valuation Methodology (BVM), a government regulation that sets the price for the royalty paid for bitumen that changes hands through non-market transactions – usually between affiliates, such as when oil sands production is sent to an upgrader owned by the same company. They argue that the royalty price for all bitumen sales should be determined by market prices, not formulas.
- Designed to approximate a market price for the royalty share of non-arm’s-length bitumen, the authors found that between 2016 and 2020, BVM mining projects were assessed a higher price than their non-BVM counterparts in every year.