Canada: Alberta Announces New Royalty Curves And Initiatives

As reported in prior Energy Law Updates (most recently, the April 2010 edition), in 2009 the Alberta Government launched a competitiveness review of the 'New Royalty Framework' implemented by the Stelmach government only two years earlier. The results of that review, along with the Government of Alberta's policy response, were released in March, 2010 and the corresponding new royalty curves were to be provided prior to June, 2010.

As promised, on May 27, 2010, the Government of Alberta revealed its proposed changes to the base royalty curves for both conventional oil and gas, which are to take effect on January 1, 2011. The government also unveiled further initiatives, as a result of the competiveness review, intended to energize investment and encourage development of Alberta's unconventional and deep resource pools. The most significant of these initiatives are modifications to the Natural Gas Deep Drilling Program and the implementation of the Emerging Resources and Technologies Initiative.

Royalty curves

The changes to the oil and gas royalty curves are in keeping with the announcements previously made in March, 2010.

The maximum and minimum natural gas price royalty rates are now set at 36% and 5% respectively, with the maximum royalty rate being reduced from 50%. The maximum and minimum conventional oil price royalty rates are now set at 40% and 0% respectively, with the maximum royalty rate being reduced from 50%. For both oil and gas the royalty rate is the sum of a price component and a quantity component. In both cases the quantity component of the formula remains the same as under the existing New Royalty Framework. There are changes to the price component of the gas royalty formula to moderate the increase in the rate at prices higher than $5.25/GJ. Similarly, there are changes to the price component of the oil royalty formula to moderate the increase in the rate at prices higher than $535.00/m³. Due to the lack of change to the volume component, higher rate wells will experience only minimal impact in royalty rates as a result of the royalty curve changes.

The new formula will be applied to all Alberta Crown production, including production from existing wells, effective January 1, 2011. An exception is provided for production from wells that choose to remain on certain transitional royalty formulas, which will receive those rates until December 31, 2013.

Natural Gas Deep Drilling Program (NGDDP)

The NGDDP is now a permanent feature of the Alberta royalty framework. The program was initially implemented in 2008 with the intention of encouraging continued deep gas exploration by providing royalty credits according to the depth of the well. In addition to extending the term of the program indefinitely, the modifications to this program include:

  • Reducing the qualifying vertical depth requirement from 2,500m to 2,000m;
  • Off target wells and wells within one spacing unit of another well will receive the deep gas royalty credit;
  • Multilateral wells will now qualify for the program;
  • Removal of the $875,000 credit for wells that exceed 4,000m; and
  • Wells drilled into pools discovered prior to 1985 will now qualify for the program.

These modifications are retroactive to May 1, 2010.

The Emerging Resources and Technologies Initiative

The Emerging Resources and Technologies Initiative is intended to encourage new exploration, development and production from deeper, higher cost natural gas wells; gas resources within coal seams; shale gas; and horizontal oil and gas wells. Recognizing that unconventional plays face higher costs and risks associated with production, additional benefits have been extended to accommodate these plays and speed up the return of risk capital.

Shale Gas New Well Royalty Rate - Wells that produce exclusively from formations defined by the Energy Resource Conservation Board (the ERCB) as shale will qualify for a 5% royalty rate for 36 producing months with no volume limit.

Coalbed Methane New Well Royalty Rate - Wells that produce exclusively from areas defined by the ERCB as coal will qualify for a 5% royalty rate for 36 producing months, with the volume limited to 750-million cubic feet (MMcf) of gas equivalent production.

Horizontal Gas New Well Royalty Rate - New horizontal gas wells (as defined by the ERCB) will be entitled to a new lower upfront royalty rate at the start of production. The maximum royalty rate imposed for the first 18 producing months, or 500 MMcf, is 5%.

Horizontal Oil New Well Royalty Rate - New horizontal oil wells or horizontal non-project oil sands wells (as defined by the ERCB) will be entitled to a lower upfront royalty rate at the start of production. The maximum royalty rate imposed is 5%, with volume and production month limits set according to the depth of the well.

These rates are retroactive and shall apply to all wells that began producing on or after May 1, 2010.

The Government of Alberta has stated that it will not review the Emerging Resource and Technologies Initiative until 2014 and has undertaken that it will provide industry at least 3 years notice at that time if it decides to discontinue the initiative.

Industry reaction

Generally speaking, and not surprisingly, the industry reaction to the announced reform has been positive. David Collyer, president of the Canadian Association of Petroleum Producers has said that the government kept its promise to make the province's regime more competitive. Similarly Gary Leach, speaking on behalf of the Small Explorers and Producers Association of Canada, stated that overall, he was happy with the announcement. We anticipate further announcements from the government over the next few months on some of the other issued identified in the competiveness review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.