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Alberta launches 2 programs aimed at boosting oil and gas exploration

The province revealed two plans Monday aimed at encouraging oil and gas companies to invest in new exploration and enhanced recovery of existing wells.

Royalty rates will reflect extra risk taken by companies doing new exploration and enhanced recovery

The Alberta government is introducing two incentive programs aimed at getting companies to embark on new exploration and to invest in enhanced recovery at existing wells. (Matthew Brown/ Associated Press)

The province revealed two plans Monday aimed at encouraging oil and gas companies to invest in new exploration and enhanced recovery of existing wells.

The Enhanced Hydrocarbon Recovery Program and the Emerging Resources Program are part of the NDP government's newly revised Modernized Royalty Framework, as recommended by the​ royalty review advisory panel early this year.

"I don't have the specific numbers yet, but I've already been told by a couple companies that it will get people back to work sooner than not," said Energy Minister Margaret McCuaig-Boyd.

Energy Minister Margaret McCuaig-Boyd says she has heard from the oilpatch that the new programs will help get laid off workers rehired. (CBC)

"I has to be a fairly big resource, and it has to be for the benefit of Albertans, and it has to obviously bring jobs back."

The two programs will take into account the higher costs associated with enhanced recovery methods as well as the higher costs associated with developing emerging resources when calculating royalty rates for qualified companies.

"These programs serve to recognize the higher risks and greater project costs of drilling in emerging resource plays and implementing secondary recovery schemes," said Tim McMillan, president of the Canadian Association of Petroleum Producers (CAPP).

Enhanced recovery refers to the injection of gas or liquids into wells to stimulate increased production from a site.

The emerging resources program applies to wells drilled in areas with large resource potential that are in the early stages of development.

Companies will have to apply to take part in the programs. They are set to take effect at the beginning of 2017.

Under the Emerging Resources Program, wells will pay a flat royalty rate of five per cent until their combined revenue equals their combined program-specific cost allowances. After that, the wells will be subject to the normal royalty rates under the new royalty framework, the province says.

Similarly, companies whose projects are accepted into the Enhanced Hydrocarbon Recovery Program will pay a flat royalty of five per cent on crude oil, natural gas and natural gas liquids produced from wells in an approved scheme for a limited benefit period.

After that, the wells will be subject to the new royalty framework rates.

"We can get more rigs out there drilling, create jobs and help generate greater long-term returns for Albertans by promoting production in underdeveloped or yet-to-be-developed areas," McCuaig-Boyd said in a release.

Wells operating under existing programs will continue under them until those programs expire, or for up to 10 years.