Overview

In January 2016, the government accepted the recommendations of the Royalty Review Advisory Panel report.

The panel recommended two programs that would:

  • promote expanded production potential
  • generate long-term returns to Albertans

Read the report at: Alberta at a Crossroads.

The Emerging Resources Program (ERP) is one of the panel-recommended programs. It came into effect January 1, 2017. It encourages industry to open up new oil and gas resources in higher-risk and higher-cost areas that have large resource potential. This will promote industry innovation and learning in order to generate greater royalties and other benefits to Albertans.

Objectives

The objectives of the Emerging Resources Program are to:

  • provide appropriate royalty treatment for strategic emerging oil and gas resources that are high cost and high risk
  • promote innovation and industry experience to accelerate the development of these resources
  • generate incremental royalty revenue for Albertans over the long term

Program design

For the purposes of the ERP, a “project” consists of:

  • a defined geographic area
  • a target formation
  • a set of wells
  • associated infrastructure

Program benefits

Cost allowance

Without the ERP, a well is assigned a Drilling and Completion Allowance (C*) (PDF, 106 KB).

Under the ERP, eligible wells will be assigned a program-specific cost allowance (C*ERP). This can range from 150% to double the C*.

How we calculate C*ERP

A C*ERP is calculated for each eligible well in a project. The cost allowances will then be pooled.

C*ERP is determined based on:

  • existing activity in the vicinity of the project at the time of application
  • time elapsed from the start of the project

An assessment of existing development in the same resource in the vicinity is conducted at the time of application. For projects with little existing development, the increase to the normal drilling and completion cost allowances will be greatest.

The C*ERP will vary from well to well. Program benefits available to eligible wells will decrease over time. An approved project’s earlier wells will receive a larger C*ERP than those subsequently drilled. This acknowledges the project’s early development.

Royalty rates

The wells pay a flat royalty rate of 5% until their combined revenue equals their combined program-specific cost allowances.

After that, wells will be subject to normal royalty rates under the Modernized Royalty Framework (MRF).

Maximum benefits

Wells may be eligible to generate program benefits for:

  • up to 10 years from the start of the project
  • an additional 5 years after that, to draw on any C*ERP remaining in the pooled cost allowance

We determine the length of the benefit period at the time of application. It is based on assessment of existing development in the same resource in the project’s vicinity.

Projects with very little existing activity nearby will receive the longest benefit period.

Program eligibility

The Minister of Energy will determine whether a proposed project is in the public interest. If it is, and meets the following criteria, it will be eligible for the ERP.

The proposed project must:

  • target a resource that has a large hydrocarbon potential and can generate substantial long-term returns for Albertans
  • develop a resource that is at an early and pre-commercial stage of development
  • be uncommercial and unlikely to become commercial without this program. In addition, a line of sight must be provided as to how the project could achieve commerciality within a reasonable timeframe with the program.
  • provide incremental net royalty revenues with the assistance of the program in comparison to the royalty that would have been collected without the program
  • be high risk and high cost
  • include a minimum of 18 to a maximum of 144 sections.
  • forecast a peak production capacity of at least 5,000 BOE/day

Limits and exemptions

  • The project cannot include freehold lands
  • A limited number of producing oil and gas wells in an approved project are eligible to receive benefits. No more than the first 15% of total projected well inventory are eligible.
    Wells that are not eligible include:
    • those that are part of a Crown agreement
    • those that utilize enhanced hydrocarbon recovery methods
    • those that are in a proposed project with a surface area outside the required range

How to apply

You can find information on the application process using the links below:

Project amendments

You may amend a project, within certain constraints. This may involve applying again.

You will need to submit a new application if:

  • your project has expanded and you want to increase the number of wells eligible for program benefits
  • your project has decreased in size by more than 20%

Contact

To contact the technical team supporting industry for Alberta Oil and Natural Gas royalties:

Hours: 8:15 am to 4:30 pm (open Monday to Friday, closed statutory holidays)
Email: mrfprograms@gov.ab.ca