Emerging Resources Program


In January 2016, government accepted the recommendations laid out in the Royalty Review Advisory Panel's Report: Alberta at a Crossroads. The Panel recommended two strategic programs to promote expanded production potential and generate long-term returns to Albertans.

The new Emerging Resources Program came into effect January 1, 2017. It will encourage 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.

​For more information on the application process please refer to the application proceduresPDF icon, checklistPDF iconand required spreadsheetsExcle icon.

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;

  • To promote innovation and industry experience to accelerate the development of these resources; and,

  • To generate incremental royalty revenue for Albertans over the long-term.

Program Design
For the purposes of the program, a project consists of a defined geographic area, target formation, set of wells and associated infrastructure.

Wells that receive program benefits will pay a flat royalty rate of 5 per cent 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.

Program Benefits
Under the program, eligible wells will be assigned a program specific cost allowance (C*ERP) that will replace a well’s normal Drilling and Completion Cost Allowance (C*). The C*ERP could range from 150 per cent of the normal C* to double the C*. The C*ERP will vary from well to well and earlier wells in an approved project will receive a larger C*ERP than subsequently drilled wells to acknowledge the project’s early development.

A C*ERP will be calculated for each eligible well in a project and will be combined to create a project cost allowance for use by all eligible wells in a given project (i.e. cost allowances will be pooled).  Eligible wells will pay a flat royalty of 5 per cent until their combined revenue equals the total project cost allowance.

Only a limited number of producing oil and gas wells in an approved project, no more than the first 15 per cent of the total projected well inventory, will be eligible to receive benefits.

An approved project will have up to 10 years to drill wells eligible under the program. The length of the project’s benefit period will be determined at the time of application based on an assessment of existing development within the same formation in the vicinity of the project. This acknowledges the project’s proximity to other development activity.

An additional 5 years will be provided for eligible wells to deplete the project cost allowance after the Project's benefit period ends.

Program Eligibility
To be eligible, a proposed project must be in the public interest, as judged by the Minister of Energy, and meet the following criteria:

  • Large Resource Potential: The proposed project must target a resource that has a large hydrocarbon potential and can generate substantial long-term returns for Albertans.

  • Early Stage of Development: The proposed project must develop a resource that is at an early and pre-commercial stage of development.

  • Strong Potential of Commerciality: The proposed project must 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.

  • Net Royalty Benefit to Albertans: The proposed project must provide incremental net royalty revenues with the assistance of the program in comparison to the royalty that would have been collected without the program.

Frequently Asked Questions

What types of projects can apply to the Emerging Resources Program?

The program encourages applications from projects that meet all of the following criteria:

  • target strategic emerging resources with large resource potential;
  • are high risk and high cost;
  • are uncommercial and unlikely to become commercial without this program;
  • are at an early stage of development with strong potential to achieve commercial development with the program; and
  • are expected to generate incremental royalty revenue for Albertans.

Each project will be evaluated against all eligibility criteria and must be in the public interest, as determined by the Minister of Energy to be accepted into the program.

Are all projects eligible for the program?

No. Wells that are part of a Crown agreement, or wells utilizing enhanced hydrocarbon recovery methods are not eligible for this program.

What is the minimum and maximum project size?

In order to be eligible for this program, proposed projects must have a minimum surface area of 18 sections and a maximum of 144 sections. Forecast peak production capacity from the project must be at least 5,000 BOE/day.

Which wells within a project will receive program benefits upon project approval under the program?

A limited number of producing wells will receive program benefits in an approved project. No more than the first 15 per cent of total well inventory in the project can receive program benefits and these wells must be drilled within the approved benefit period for the project.

How will the cost allowance for eligible project wells (C*ERP) be determined?

Under the program, a well’s cost allowance (C*ERP) will be determined based on two factors:

  • existing activity in the vicinity of the project at the time of application; and,
  • time elapsed from the start of the project.

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

The program benefits available to eligible wells will also decrease over time. Wells drilled near the start of a project will receive a greater increase to their cost allowance than wells drilled later in the life of a project.

What is the maximum benefit period under the program?

Wells may be eligible to generate program benefits for up to 10 years from the start of the project. An additional 5 years will also be provided for eligible wells to draw on any cost allowance remaining in the pooled cost allowance after a project’s benefit period ends.

The length of a project’s benefit period will be determined at the time of application and approval based on an assessment of existing development in the same resource in the vicinity of the project. Projects with very little existing activity in the nearby area will receive the longest benefit period.

Can amendments be made to approved projects?

Proponents may amend their projects within certain constraints. The project must continue to meet eligibility criteria, including project size requirements. Alberta Energy may revise program benefits or project eligibility where project amendments are significant. 

A new program application must be submitted in the following circumstances:

  • A project is expanded and the operator wants to increase the number of wells that are eligible for program benefits.
  • A project is decreased in size by more than 20 per cent.

Can projects include freehold lands?

No. Only crown lands can be included in a project for the purposes of this program.