Canadian Oil Sands Trust
TSX : COS.UN

Canadian Oil Sands Trust

November 18, 2008 23:59 ET

Syncrude Elects Pre-Existing Bitumen Royalty Option and Reaches Agreement With Alberta Government on New Royalty Terms

CALGARY, ALBERTA--(Marketwire - November 18, 2008) - Canadian Oil Sands Trust (TSX - COS.UN) ("Canadian Oil Sands", or the "Trust") today announced that the Syncrude joint venture owners have elected their pre-existing option to convert to a bitumen-based royalty. Effective January 1, 2009 and consistent with the rest of the oil sands industry, Syncrude will begin paying royalties based on bitumen product, less its associated operating and capital costs, rather than paying royalties calculated on fully upgraded synthetic crude oil. As part of this conversion, the Province of Alberta will recapture previous royalty deductible Upgrader Growth Capital ("UGC") expenses of about $5 billion related to the value associated with the expansion of the upgrading facility. This UGC is downstream of the bitumen production facilities and no longer associated with the royalty base. The royalty deductions previously received by Syncrude's owners on the UGC will be recaptured by the Alberta government over a 25-year period, effectively providing the Province of Alberta with an additional $1.25 billion plus interest in Crown royalties.

In addition to the parties reaching an agreement on the bitumen royalty methodology, the Syncrude joint venture owners and the Alberta government reached an agreement to establish new transition Crown royalty terms for the Syncrude project. Under such agreement, and until December 31, 2015, the Syncrude owners will continue to pay base Crown royalty rates (being the greater of 25 per cent of net bitumen-based revenues, or one per cent of gross bitumen-based revenues) plus an incremental royalty of up to $975 million. The incremental royalty is subject to certain minimum bitumen production thresholds and is to be paid in six annual payments, as per the schedule below:



--------------------------------------------------------------

2010 2011 2012 2013 2014 2015 Total

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$75 $75 $100 $150 $225 $350 $975

million million million million million million million

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This agreement is in lieu of the Syncrude owners converting to the proposed New Royalty Framework announced in October 2007 that is to be effective January 1, 2009. Post January 1, 2016, the rates under the New Royalty Framework will apply to the Syncrude project.

The new royalty terms provide the Syncrude owners with fiscal certainty until January 1, 2016 on matters including:

- bitumen valuation methodology;

- no new incremental royalties to the Alberta government;

- no royalty in-kind through 2012, and subsequently only to the extent

that it applies to the rest of the oil sands industry;

- upgrading of royalty in-kind barrels through 2015 only on terms

commercially acceptable to the Syncrude owners, and the ability to

substitute bitumen from alternative sources; and

- confirmation that Syncrude's current leases are all considered as a

single mining project for royalty purposes.

"Syncrude's owners and the Alberta government have mutually agreed to new royalty terms that still respect the fundamental principles of Syncrude's current Crown agreement with the government," said Marcel Coutu, Canadian Oil Sands' President and Chief Executive Officer. "These agreements provide greater certainty for both Alberta and Syncrude. For Albertans, we believe that the payment of additional royalties that do not fluctuate with the price of crude oil provides enhanced revenue security, particularly during this time of unprecedented market volatility. For the Syncrude project, the joint venture owners can proceed with increased confidence in its operations and expansions now that the royalty terms are clear and stable, and that the calculations will be on a commercially-based bitumen value."

The 2007 reserve report disclosed in Canadian Oil Sands' annual information form (the "AIF") dated March 15, 2008 assumed royalties would be paid on synthetic crude oil and that the original Crown agreement would be in place until December 31, 2015. Using the same forecast prices and cost assumptions and bitumen valued at 50 per cent of the light, sweet crude oil price at Edmonton, total proved plus probable after-tax future net revenues increase by approximately 12 per cent on an undiscounted basis and approximately 13 per cent on a 10 per cent discounted basis from that disclosed in the AIF. For further information, please see page 48 of the AIF. The preceding estimates of future net revenues and the impact of the royalty changes have a significant level of uncertainty. In addition to the assumptions regarding the bitumen valuation methodology, these reserve estimates make several additional assumptions, including, but not limited to, the extraction recovery and bitumen yield achieved and the proportion of total capital and operating costs related to bitumen production. As a result, actual results may be different than the estimates provided, and these differences may be material.

Copies of the royalty agreements and the AIF can be found at www.sedar.com.

Located near Fort McMurray, Alberta, Syncrude Canada operates large oil-sands mines and an upgrading facility that produces a light, sweet crude oil on behalf of its joint venture owners, which include Canadian Oil Sands Limited, ConocoPhillips Oilsands Partnership II, Imperial Oil Resources, Mocal Energy Limited, Murphy Oil Company Ltd., Nexen Oil Sands Partnership, and Petro-Canada Oil and Gas.

Canadian Oil Sands provides a pure investment opportunity in the Syncrude Project through its 36.74 per cent working interest. The Trust is an open-ended investment trust managed by Canadian Oil Sands Limited and has approximately 481.5 million units outstanding, trading on the Toronto Stock Exchange under the symbol COS.UN.

Forward-looking statements in this release include, but are not limited to, statements with respect to: the expected benefits to be realized from these agreements with the Alberta government and the certainty that such agreements provide to the Syncrude owners. You are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Although the Trust believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this release include, but are not limited to: the risks associated with any contract, and in particular, those that are with sovereign bodies and such other risks and uncertainties described from time to time in the reports and filings made with securities regulatory authorities by the Trust. You are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the forward-looking statements contained in this release are made as of the date of this release, and the Trust does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this release are expressly qualified by this cautionary statement.

Canadian Oil Sands Limited

Marcel Coutu, President & Chief Executive Officer

Units Listed - Symbol: COS.UN

Toronto Stock Exchange

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