A net present value model with simulation analysis and a binomial real options model are developed to examine the impact of changes in emission compliance costs on the decision to invest in a representative steam assisted gravity drainage project in Alberta's oil sands. The project used in this analysis is found to generate positive returns when emission compliance costs increase from $15.00 to $100 per tonne when accounting for the option to abandon the project. This result is driven in part by the treatment of emission compliance costs in the calculation of royalties. The implications of removing abatement costs from the list of allowable expenses for the purpose of royalty calculations is also discussed.