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 new program 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 Enhanced Hydrocarbon Recovery Program 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 per cent 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

The benefit period for these was partly determined using the Enhanced Oil Recovery Program schedule until January 1, 2017 when the EHRP came into effect. We apply the Modernized Royalty Framework to make sure the scheme is better aligned with new royalty rates. This reduces the benefits by 25%.

Benefits for secondary recovery schemes

The benefit period for these is determined on a case-by-case basis.

Drilling and Completion Cost Allowance (C*)

Under the Modernized Royalty Framework, new wells drilled on or after January 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

Reviewing benefit periods

After 2 years of program implementation, how we determine royalty benefit periods will be reviewed. This is the case for both tertiary and secondary recovery methods.

At that time, the benefit period may be revised to better align with the Modernized Royalty Framework’s cost allowance approach.

Program eligibility

Enhanced recovery schemes must meet all of the following eligibility criteria:

  • the well is classified as a crude oil, natural gas or natural-gas liquids
  • 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;
  • 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)

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

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

Extending a scheme

To be eligible, a new, approved scheme must be in a pool or part of a pool where the following has not occurred:

  • water flooding
  • gas cycling
  • gas flooding

The operator can extend the scheme vertically to target a pool or part of pool where these activities have not previously occurred.

The operator will have to prove the extended portion is in rock that has not been impacted by an existing water flood. To prove this, the operator must provide the necessary:

  • geologic data
  • engineering data

Amended schemes

Amended schemes can be approved for entry in the EHRP, as long as; the amendment is made due to a change in injection method.

  • A copy of the AER amendment approval is required for amendments.

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 when:

  • 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: mrfprograms@gov.ab.ca