Oil production limit

What’s going on

Since January 2019, production limits have aligned production with export capacity, protecting the value of the province’s oil by helping prevent Canadian crude from selling at large discounts. The limits were intended as a short-term measure, but ongoing delays to pipeline projects have led to the curtailment policy being extended through December 2021.

At the same time, due to the COVID-19 pandemic and the resulting economic downturn, current forecasts show that inventories are expected to remain low, with sufficient export capacity to allow the system to operate efficiently on its own well into 2021. This is why, starting in December 2020, government will only put monthly oil production limits into effect if emerging market conditions make it absolutely necessary. This means that industry will be free to produce at their discretion for the foreseeable future.

Production limits

As of December 2020, monthly oil production limits are no longer in effect.

Government will closely monitor production, pipeline capacity, and rail shipments to ensure that production matches what the province can export. Should forecasts show storage inventories approaching maximum capacity in the upcoming 4 to 6 months, government will put production limits back in place, giving industry 30 to 60 days of advance notice to enable companies to plan their production.

Monthly production limits for raw crude and bitumen are set at:

• November 2019: 3.80 million barrels per day
• December 2019 to November 2020: 3.81 million barrels per day
• December 2020 (ongoing): No production limit

Production limit rules

Should monthly production limits become necessary in 2021, the same rules will continue to apply:

Exemption for new conventional wells

Effective November 8, 2019, new wells drilled for conventional oil will be exempt from the production limit.

This exemption will encourage the drilling of new conventional oil wells, increased investment, and the creation of more jobs for Albertans.

Conventional oil is defined as any oil produced outside the oil sands designated areas and formations.

Special production allowance

Effective December 2019, operators can apply, on a monthly basis, to increase oil production – if the additional product is moved by new rail capacity – in order to meet increasing demand.

The special production allowance will give producers temporary curtailment relief equivalent to incremental increases in rail shipment. This short-term approach will help address the continued lack of takeaway capacity caused by pipeline delays that are negatively impacting Alberta’s oil and gas sector.

Under this special allowance:

• all additional product must be moved out of the province by new rail capacity and producers cannot overproduce their allowance
• volumes moved under an allowance by rail cannot be applied to pipelines

How to apply

Operators who decide to apply for a special production allowance will submit an application to Alberta Energy.

If approved, a Ministerial Order will be issued and include all terms and conditions that the operator is subject to.

Operators will be held accountable through info provided during the application process, as well as validation after the production month concludes.

Industry information

The Alberta Energy Regulator administers production limits when they are in place on behalf of the government. The government’s authority to limit production ends December 31, 2021.

Under the formula that determines how space is allocated under a production limit, each company’s baseline production level is based on its highest level during their best single month from November 2017 to October 2018.

• production limits apply to both oil sands and conventional oil, it does not apply to pentanes or natural gas
• the first 20,000 barrels produced by each operator are exempt
• refining operations can access the oil supply required to meet their refining needs as there is still significant oil available

An AER panel will review company-specific concerns and make policy recommendations back to the Government of Alberta. The panel can be reached at [email protected].

Industry information

• Special Production Allowance Application Form (PDF, 371 KB)
• Special Production Allowance Application Data Form (XLSX, 50 KB)
• Special Production Allowance Volume Verification Officer's Certificate (PDF, 438 KB)
• Special Production Allowance Terms and Conditions (PDF, 34 KB)
• Presentation to Industry - December 6, 2018 (PDF, 455 KB)
• Curtailment rules presentation - February 8, 2019 (PDF, 784 KB)

Visit Energy Information Letters for all industry notices.

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