Overview
In January 2016, the government accepted the recommendations of the Royalty Review Advisory Panel report.
The panel recommended 2 programs that would:
- promote expanded production potential
- generate long-term returns to Albertans
Read the report at: Alberta at a Crossroads.
The Enhanced Hydrocarbon Recovery Program (EHRP) is one of the panel-recommended programs. The EHRP came into effect January 1, 2017, replacing the Enhanced Oil Recovery Program, which ends December 31, 2026.
Alberta has significant amounts of oil and gas remaining in legacy fields that could be produced through enhanced recovery projects. The EHRP will help to promote incremental production through enhanced recovery methods and generate additional royalties and other benefits to Albertans.
In 2021, the EHRP was amended to include wells that had enhanced recovery approval under section 10 of the Oil Sands Conservation Act. This allows Non-Project Oil Sands schemes that are not part of an Oil Sands Royalty (OSR) to participate fully in the program. These well that are in the oil sand area that produce heavy oil or crude bitumen within a pool or oil sand deposits must have already had undergone primary production to access the program.
The EHRP statistics can be found in the department's annual report.
Below is a high-level summary of the program. For detailed information on the program, eligibility, and application process, refer to the EHRP guidelines and regulations below.
Objectives
The objectives of the EHRP are to:
- provide appropriate royalty treatment for incremental hydrocarbon production to account for the higher costs associated with enhanced recovery methods
- generate incremental hydrocarbon production through enhanced hydrocarbon development
- collect incremental royalty revenue for Albertans
Program design
The EHRP consists of 2 main components where primary production has already occurred. The first component targets tertiary recovery schemes which enhance recovery of hydrocarbons from a hydrocarbon pool or oil sands deposit by miscible flooding, immiscible flooding, solvent flooding, chemical flooding or other methods approved by the Minister.
The second component targets secondary recovery schemes which enhance recovery of hydrocarbons from a hydrocarbon pool or oil sands deposit by water flooding, gas cycling, gas flooding, polymer flooding or other methods approved by the Minister.
Under both components of the program, a company will pay a flat royalty of 5% on crude oil, natural gas and natural gas liquids produced from wells in an approved scheme for a limited benefit period. After the benefit period ends, wells in these schemes will be subject to normal royalty rates under the Modernized Royalty Framework.
Program benefits
Schemes approved under the program can receive benefits for up to a maximum of 90 months. The length of the benefit period depends on:
- recovery methods used
- estimated additional amount of hydrocarbons that can be recovered using enhanced recovery methods
Benefits for tertiary recovery schemes
For tertiary recovery, the benefit term for the 5% royalty rate is determined to be between a minimum of 2 consecutive calendar months and a maximum of 90 consecutive calendar months, based on the scheme’s incremental recovery factor.
Benefits for secondary recovery schemes
For secondary recovery, the benefit term for the 5% royalty rate is determined to be between a minimum of 2 consecutive calendar months and a maximum of 72 consecutive calendar months, based on the schemes incremental recovery factor.
See the EHRP guidelines for additional details.
Program eligibility
The Minister will determine if the scheme application meets the program criteria after performing an economic and technical review, and whether a proposed scheme is in the public interest. Only then will the application be eligible for the EHRP benefits.
The proposed scheme eligibility criteria:
- must produce more hydrocarbons from the pool or deposit than could be produced from the base recovery scheme for that pool or deposit by adopting either secondary or tertiary recovery methods to inject substances into a hydrocarbon pool or deposit
- the field, pool or deposit must have already undergone the primary production phase
- must demonstrate that costs are significantly greater than operating the base recovery scheme
- must provide a net royalty benefit to the Crown over the life of the scheme
- must be granted technical approval from the Alberta Energy Regulator (AER) after December 31, 2016 for petroleum and natural gas enhanced recovery
Tertiary recovery schemes
These enhance recovery of hydrocarbons from a hydrocarbon pool or deposit by:
- miscible flooding
- immiscible flooding
- solvent flooding
- chemical flooding
- other methods approved by the Minister
Secondary recovery schemes
These enhance recovery of hydrocarbons from a hydrocarbon pool or deposit by:
- water flooding
- gas cycling
- gas flooding
- polymer flooding
- other methods approved by the Minister
Scheme amendment or expansion
Scheme amendment
Revised operating strategies, must continue to meet eligibility requirements and conditions set out for the EHRP approval and conditions set by the AER.
Scheme expansion
An expansion to an existing scheme area requires that a new application for EHRP be submitted to Alberta Energy and Minerals. This requires at least one new injection well and new producing well to create a new injection pattern.
For an expansion of an old EORP scheme, only the expanded area will receive royalty benefits under EHRP, the pre-expansion area will continue to receive benefits under the EORP scheme.
Enhanced Oil Recovery Program
The Modernized Royalty Framework identified that the Enhanced Oil Royalty Program will terminate on December 31, 2026. After December 31, 2026, wells enrolled in the program’s schemes will transition to post royalty rates under the Modernized Royalty Framework. They will not transition to the EHRP.
Limits and exemptions
- The schemes cannot include freehold lands.
Non project well events must meet the definition in the Oil Sands Conservation Act, and not be part of a Project.
How to apply
Enhanced Hydrocarbon Recovery Royalty Regulation
Application process information:
Enhanced Oil Recovery program
Royalty rates after the program ends
After December 31, 2026, wells in the program’s schemes will be subject to royalty rates under the Modernized Royalty Framework. They will not transition to the EHRP.
Making changes
Under this program, new program applications are required if:
- a scheme is expanded to include a new injection pattern
- the recovery technique changes
Since January 1, 2017, these types of applications must be submitted to the EHRP and will be reviewed under that program for scheme eligibility.