Emerging Resources Program
New Strategic 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.
- 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.
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 wellís 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 projectís 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 projectís 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 projectís 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.
- 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.