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 Enhanced Hydrocarbon Recovery Program (EHRP) is one of the panel-recommended programs. It 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 program will help to promote incremental production through enhanced recovery methods and generate additional royalties and other benefits to Albertans.

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 two main components. The first component targets tertiary recovery schemes which enhance recovery of hydrocarbons from an oil or gas pool 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 an oil or gas pool 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

The benefit period was partly determined using the Enhanced Oil Recovery Program schedule. The Modernized Royalty Framework is applied to make sure the scheme is better aligned with new royalty rates.

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

Refer to EHRP guidelines for details.

Benefits for tertiary recovery schemes

For tertiary recovery, the benefit term for the 5% royalty rate is determined between two consecutive calendar months and maximum of 90 consecutive calendar months, based on the scheme’s incremental recovery factor.

See the EHRP guidelines for additional details.

Benefits for secondary recovery schemes

For secondary recovery, the benefit term for the 5% royalty rate is determined between two consecutive calendar months and maximum of 72 consecutive calendar months, based on the schemes incremental recovery factor.

See the EHRP guidelines for additional details.

Drilling and Completion Cost Allowance (C*)

Under the Modernized Royalty Framework, new wells drilled on or after January 1, 2017 receive the above benefit. This will also apply to new wells drilled in an enhanced recovery scheme approved under the:

  • Enhanced Oil Recovery Program
  • Enhanced Hydrocarbon Recovery Program

Program eligibility

The Minister will determine whether a proposed project is in the public interest after performing an economic and technical review of the project application.

If the project application is in the public interest and meets the program criteria, it will be eligible for the EHRP.

Refer to the EHRP guidelines for the complete list of eligibility criteria.

The proposed scheme:

  • must produce more hydrocarbons from the pool than could be produced from the base recovery scheme for that pool by adopting, either, secondary or tertiary recovery methods to inject substances into an oil or gas pool
  • the field/pool 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

Tertiary recovery schemes

These enhance recovery of hydrocarbons from an oil or gas pool by:

  • miscible flooding
  • immiscible flooding
  • solvent flooding
  • chemical flooding
  • other methods approved by the Minister

Secondary recovery schemes

These enhance recovery of hydrocarbons from an oil or gas pool by:

  • water flooding
  • gas cycling
  • gas flooding
  • polymer flooding
  • other methods approved by the Minister

Limits and exemptions

  • The project cannot include freehold lands

How to apply

Enhanced Hydrocarbon Recovery Royalty Regulation

EHRP guidelines

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

Scheme Amendment or Expansion

Refer to EHRP guidelines for complete eligibility criteria.

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.

Refer to EHRP guidelines for complete eligibility criteria.

Scheme Expansion

An expansion to an existing scheme area requires that a new application for EHRP be submitted to Alberta Energy. 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

Royalty rates after the program ends

After December 31, 2026, wells in the program’s schemes will be subject to new royalty rates. They will be 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. They will be reviewed under that program for scheme eligibility.

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: [email protected]