British Columbia Order in Council — Order under Petroleum and Natural Gas Effective April 1, 2001: B (O.C. 270/2001)

O.C. 270/2001

British Columbia — Orders in Council

4 PROVINCE OF BRITISH COLUMBIA ORDER OF THE LIEUTENANT GOVERNOR IN COUNCIL Order in CoLncil No. I 270 , Approved and Ordered MAR - 8 2001 tfeutenant Governor Executive Council Chambers, Victoria On the recommendation of the undersigned, the Lieutenant Governor, by and with the advice and consent of the Executive Council, orders that, effective April 1, 2001, the Petroleum and Natural Gas Royalty and Freehold Production Tax Regulation, B.C. Reg. 495/92, is amended as set out in the attached Schedule. Ministerro nergy and Ines Presiding Member of the Exec Live Council (This

part is for administritive purposes only and is not part of the Order.) Authority under %hich Order is made: Act and section:- Petroleum and Natural Gas Act, s. 73 (2) Other (specify):- OIC 1854/92 February 12, 2001 Resub 182/2001/33/ca/y

PETROLEUM AND NATURAL GAS ROYALTY AND FREEHOLD PRODUCTION TAX REGULATION I

Section 1 of the Petroleum and Natural Gas Royalty and Freehold Production Tax Regulation, B.C. Reg. 495/92, is amended (

a) by renumbering the

section as

section 1(1), (

b) by adding the following

definitions: "average daily natural gas production volume" means, in relation to a well event in a producing month, the volume of natural gas produced in the producing month from the well event, expressed in m 3, divided by the number of hours during which the well event produced natural gas in the producing month and multiplied by 24; "gas well event" means all completions in a zone for a well with a primary product of natural gas; "low productivity well" means a low productivity well within the meaning of subsection (2); "producer cost of service natural gas volume" means, in relation to a reporting entity in a producing month, the amount determined by the following formula: field sale volume + delivered natural gas — returned gas volume where "field sale volume" means the reporting entity's share of natural gas that, before being processed at a natural gas processing plant, is sold in the field in that producing month; "delivered natural gas" means the reporting entity's share of natural gas delivered, in that producing month, to the following: (

a) to a natural gas processing plant; (

h) directly to market; "returned gas volume" means the reporting entity's share of marketable gas that has, in that producing month, been (

a) processed at a natural gas processing plant, and (

b) returned to the field for use in the production of petroleum and natural gas; "reporting entity" means a reporting entity within the meaning of subsection (3); "repotting entity's share" means, in relation to a producer's reporting entity, the volume of oil, marketable gas or natural gas by-products that is (

a) produced from the reporting entity's wells, and 1 of 12

(

b) attributable to the producer in accordance with the producer's interests in the reporting entity's wells; "reporting entity's weir means, in relation to a producer's reporting entity, any well event or tract if the interest held by the producer in that well event or tract is designated as or is assigned to the reporting entity; "reporting facility" means a facility as defined in B.C. Reg. 362/98, the Drilling and Production Regulation; "weighted average royalty or tax rate" means, in relation to a reporting entity and producing month, the total gross natural gas royalty or tax determined for the reporting entity for the producing month under

section 7 (7) (

a) divided by the sum of (

a) the reporting entity's share of marketable gas multiplied by the reference price for the marketable gas, (

b) the reporting entity's share of natural gas liquids multiplied by the reference price for the natural gas liquids, and (

c) the reporting entity's share of sulphur multiplied by the reference price for the sulphur; "well event" means a gas well event or an oil well event; , (

c) in the

definitions of "concurrent production", "conservation gas", and "heavy oil" by striking out "oil well" wherever it appears and substituting "oil well event", (

d) in the definition of "deemed value", by striking out ", marketable gas", (

e) by repealing the definition of "freehold oil" and substituting the following: "freehold oil" means oil, other than heavy oil, produced from an oil well event or allocated to a tract in a unitized operation if the oil well event or tract is located on freehold mineral lands; , (1) in the definition of "gas cost allowance", by striking out "that is established by order of the administrator under

section 7 (6)" and by striking out "or" at the end of paragraph (a), (

g) by repealing the definition of "liquids price" and substituting the following: "liquids price" means, in relation to a disposition of natural gas liquids in a producing month, the amount determined by the following formula: (consideration — actual costs) sales volume where "consideration" means the consideration received or receivable by the producer for the disposition of the natural gas liquids; "actual costs" means the actual costs, approved by the administrator, that are incurred by the producer for transporting and processing the natural gas liquids from the point of production to the point of sale; "sales volume" means the volume of natural gas liquids involved in the dispo- sition; page 2 of 12

(Is) by repealing the definition of "new oil" and substituting the following: "new oil" means (

a) oil, other than heavy oil or third tier oil, from an oil well event that (

i) draws from an oil pool having on October 31, 1975 no completed well, or (ii) is outside the outline, shown in each plat in

Schedule A, of the surface area of the oil pool named on the plat, (

b) incremental oil other than incremental oil that qualifies as third tier oil under paragraph (

b) of the definition of "third tier oil", (

c) oil, from an oil well event, that received the new oil reference price under the National Energy Program, or (

d) oil from an oil well event that is completed within the outline referred to in paragraph (a) (ii) if the oil well event resumed production on or after January 1, 1981 and had not produced oil for a period of at least 36 months immediately preceding that date, and (ii) was not an injection, pressure maintenance or observation well event during the period referred to in subparagraph (i), whether or not the period was more than 36 months; , (

i) by repealing the definition of "oil well" and substituting the following: "oil well event" means all completions in a zone for a well with a primary product of oil; , (

j) by repealing the definition of "PMP exempt well" and substituting the following: "PMP exempt well event" means a well event that is designated as a PMP exempt well event by order of the administrator under

section 2 (7); , (

k) by repealing the definition of "producer cost of service allowance" and substi- tuting the following: "producer cost of service allowance" means, in relation to a producer's reporting entity and a producing month, the lesser of

a) the weighted average royalty or tax rate determined for the reporting entity for the producing month multiplied by the producer cost of service rate applicable to the producer, in relation to the reporting entity, for the producing month multiplied by the producer cost of service natural gas volume determined for the reporting entity for the producing month, and (b) 95% of the total gross natural gas royalty or tax determined for the reporting entity for the producing month under

section 7 (7) (a); "producer cost of service rate", in relation to a producer's reporting entity, means a rate, expressed as an amount per 1 000 m 3, established by the administrator under

section 2 (8), to cover the producer's cost, in relation to the reporting eniity, of (

a) main field gathering, dehydration and field compression of non-conser- vation gas, (

b) conserving conservation gas, and page 3 of 12

(

c) processing natural gas for use as fuel in paragraphs (

a) and (

b) if the producer undertakes such operations with respect to that producer's own natural gas produced and sold or delivered to a storage facility; , (1) in the definition "producing month" by striking out "well" wherever it occurs and substituting "well event", (

m) by repealing the definition of "reference price" and substituting the following: "reference price" means, (

a) for marketable gas other than gas produced from a PMP exempt well event, the greater of (

i) the producer price, and (ii) the posted minimum price that is, for the calendar month in which the marketable gas becomes available for disposition, applicable to the natural gas processing plant at which the marketable gas was processed; (

b) for marketable gas produced from a PMP exempt well event, the producer price; (

c) for natural gas liquids, (

i) the liquids price, or (ii) if the administrator has, under

section 7 (2), fixed a unit selling price for the royalty or tax share of the natural gas liquids disposed of in a producing month, the deemed value of the natural gas liquids disposed of in the producing month divided by their volume; (

d) for sulphur, (

i) the sulphur price, or (ii) if the administrator has, under

section 7 (2), fixed a unit selling price for the royalty or tax share of the sulphur disposed of in a producing month, the deemed value of the sulphur disposed of in the producing month divided by its volume; , (

n) in paragraph (

a) of the definition of "royalty share" by striking out "oil well" wherever it appears and substituting "oil well event", (0 by repealing paragraphs (

b) and (

c) of the definition of"royalty share" and substi- tuting the following: (

h) in the case of a class of marketable gas produced in a producing month from a reporting entity's wells, the reporting entity's share of that marketable gas multiplied by the royalty percentage rate under

section 6 that is applicable to the class of marketable gas, the producing month and the reporting entity, and (

c) in the case of a class of natural gas by-products produced in a producing month from a reporting entity's wells, the reporting entity's share of those natural gas by-products sold in the producing month multiplied by the royalty percentage rate under

section 6 that is applicable to that class of natural gas by-products; , page 4 of 12

(

p) by repealing the definition of "sales value" and substituting the following: "sales value" means, in relation to a disposition of oil, the greater of (

a) zero, and (

b) the consideration, without deductions, that is received or receivable by a producer for the disposition, or if the administrator has, under

section 7 (2), fixed a unit selling price for the royalty or tax share of the oil disposed of in a producing month, the deemed value of the oil disposed of; , (

q) by repealing the definition of "sulphur price" and substituting the following: "sulphur price" means, in relation to a disposition of sulphur in a producing month, the amount determined by the following formula: (consideration — actual costs) sales volume where "consideration" means the consideration received or receivable by the producer for the disposition of the sulphur; "actual costs" means the actual costs, approved by the administrator, that are incurred by the producer for transporting and processing the sulphur from the point of production to the point of sale; "sales volume" means the volume of sulphur involved in the disposition; (

r) by repealing the definition of "tax share" and substituting the following: "tax share" means, (

a) in the case of a class of freehold oil, the volume of freehold oil of that class that is determined by multiplying the production volume by the tax rate under

section 5 that is applicable to the class of freehold oil, (

b) in the case of a class of freehold marketable gas produced in a producing month from a reporting entity's wells, the reporting entity's share of that freehold marketable gas multiplied by the tax percentage rate under

section 6 that is applicable to the class of freehold marketable gas, the producing month and the reporting entity, and (

c) in the case of a class of freehold natural gas by-products produced in a producing month from a reporting entity's wells, the reporting entity's share of those freehold natural gas by-products sold in the producing month multiplied by the tax percentage rate under

section 6 that is applicable to that class of freehold natural gas by-products; , (

s) in paragraph (

a) of the definition of "third tier oil" by striking out "produced from wells" and substituting "produced from oil well events", and (

t) by adding the following subsections:

(2) A gas well event, or an oil well event that is part of a concurrent production scheme, is a low productivity well in any producing month in which it produces an average daily natural gas production volume of less than 5 000 m 3. page 5 of 12

(3) A producer that has an interest in one or more well events or tracts may designate one of those interests as a reporting entity or may group 2 or more of those interests into a grouping, and each such designation or grouping, if approved by the administrator, constitutes a reporting entity. 2

Section 2 is amended (

a) in subsection (5) by striking out "the sales value in relation to natural gas and for the purpose of

section 7 (1) (b)" and substituting "the producer price in relation to natural gas", (

b) by repealing subsection (7) and substituting the following:

(7) The administrator may, by order, designate as a PMP exempt well event any well e elt that, before the coming into force of this subsection, produced natural gas that had an I-12S content of at least 10%. , and (

c) by repealing subsection (8) and substituting the following:

(8) The administrator may (

a) order that a producer receive a gas cost allowance or a producer cost of service allowance, or both, and (

b) establish, in the order, the method of determining the allowances, including the applicable producer cost of service rate. 3

Section 4 is amended (

a) in subsection (1) (

a) and (

b) by striking out "calendar month" and substituting "producing month", (

b) in subsection (I) (

a) and (

b) by striking out "before the month" and substituting "before the calendar month", (

c) by repealing subsection (2) and substituting the following:

(2) On or before the 25th day of each calendar month, a producer must pay (

a) the net oil royalty, as determined under

section 7 (3) (d), that is payable for the royalty share of oil sold by the producer in the preceding calendar month, and (

b) the net oil tax, as determined under

section 7 (3) (d), that is payable for the tax share on freehold oil sold by the producer in the preceding calendar month. , and (

d) by adding the following subsections:

(2.1) A prciducei to whom a Crown invoice is delivered under

section 9 (1) for one or both of marketable gas made available for sale in, and natural gas by-products sold in, a producing month must, on or before the later of the 25th day of the third calendar month after the producing month and 15 days after the date that the Crown invoice is delivered, pay the invoice amount less the amount paid under subsection (1) in respect of the marketable gas or natural gas by-products. page 6 of 12

(2.2) A producer to whom a Crown invoice is delivered under

section 9 (1) for one or both of freehold marketable gas made available for sale in, and freehold natural gas by-products sold in, a producing month must, on or before the later of the 25th day of the third calendar month after the producing month and 15 days after the date that the Crown invoice is delivered, pay the invoice amount less the amount paid under subsection (1) in respect of the freehold marketable gas or freehold natural gas by-products. 4

Section 5 is amended (

a) by repealing subsection (1) and substituting the following:

(1) In Column 2 of each item in subsection (1.1), "PRODUCTION" means, in relation to an oil well event during a month, the total volume of all oil of every class produced from the oil well event in the month. , and (

b) in subsection (1.1) by striking out "oil well" wherever it appears and substituting "oil well event". 5

Section 6 is amended (

a) in subsection (1) by striking out "The royalty or tax percentage" and substituting "Subject to subsections (1.1) and (1.2), the royalty or tax percentage", (

b) in Items 1 and 1.1 of subsection (

I) by striking out "wells" and substituting "gas well events", and (

c) by adding the following subsections:

(1.1) The royalty percentage rate that is, under subsection (1), applicable to a class of marketable gas produced in a producing month from those of a reporting entity's wells that are, in that producing month, low productivity wells may be reduced by the sum of the low productivity reduction factors determined in relation to those low productivity wells under subsection (1.2) multiplied by the royalty percentage rate determined under Item 1, 1.1, 1.2 or 3 in subsection (1) for the class of marketable gas produced from those low productivity wells.

(1.2) There may be determined, for each of a reporting entity's wells that is a low productivity well, a low productivity reduction factor in accordance with the following formula: P x ((5000 — S)12 5000 ) where P is equal to the volume of natural gas produced in the producing month from the low productivity well divided by the sum of the volumes of natural gas produced in the producing month from all of the reporting entity's wells that are low productivity wells and that produce the same class of marketable gas; S is equal to the average daily natural gas production volume for the low productivity well. page 7 of 12

Section 7 is amended (

a) in subsection (1) (

b) by striking out "the producer price" and substituting "the reference price", (

b) in subsection (2) (

a) by striking out "subsection (1) (

a) or (c)," and substituting "subsection (1) (

a) or (c), and", (

c) by repealing subsection (5) and substituting the following:

(5) The amount of royalty or tax payable to the Crown for natural gas in relation to a reporting entity and producing month is the total gross natural gas royalty or tax determined under subsection (7) (

a) less the sum of the producer cost of service allowance and the royalty or tax exempt value determined under subsection (7) (b). , and (

d) by adding the following subsection:

(7) For the purpose of

section 7 (5), (

a) the total gross natural gas royalty or tax payable in relation to a reporting entity and producing month means the sum of (

i) the royalty share or tax share, as the case may be, of marketable gas made available for sale in the producing month from the reporting entity multiplied by the reference price for that marketable gas, (ii) the royalty share ez tax share, as the case may be, of natural gas liquids sold from the reporting entity in the producing month multiplied by the reference price for the natural gas liquids, and (iii) the royalty share or tax share, as the case may be, of sulphur sold from the reporting entity in the producing month multiplied by the reference price for the sulphur, and (

b) the royalty or tax exempt value in relation to a reporting entity and producing month means the amount determined by the following formula: (P V EP) x (TGNGRT — PCSA) where PVEP means the production volume exempt from payment under

section 6 (3) for the reporting entity and producing month; TPV means the total production volume attributable to the reporting entity's wells in the producing month; TGNGRT means the total gross natural gas royalty or tax determined for the reporting entity and the producing month under paragraph (a); PCSA means the applicable producer cost of service allowance. page 8 of 12

Section 8 is amended (

a) by repealing subsection (1) and substituting the following:

(1) For the purposes of

section 74 (1) of the Act, the following reports must be filed with the administrator in the form and manner required by the minister: (

a) every operator of a reporting facility must, on or before the 25th day of the calendar month following each producing month, file reports indicating the production and disposition in that producing month of oil, condensate, natural gas and water obtained at the reporting facility; (

b) every producer of oil must, on or before the 25th day of the calendar month following each producing month, file a report indicating, for that producing month, (

i) the royalty share or tax share, (ii) the exempt royalty or tax share provided for in

section 5 (5), (iii) the volume of oil sold, and (iv) the sales value of oil sold for each of the producer's reporting entities; (

c) every producer of natural gas must, on or before the last day of the second calendar month following each producing month, tile a report indicating, for that producing month, the following for each of the producer's reporting entities: (

i) the volumes of marketable gas made available for sale; (ii) the volumes and values of natural gas by-products sold; (

d) every producer that, under

section 4, makes payments on account of oil, marketable gas or natural gas by-product royalties and taxes, must, on or before the 5th day following the date of payment, file a report respecting that payment indicating the amounts paid (

i) by reporting entity and producing month for petroleum, marketable gas and natural gas by-product royalty and taxes, (ii) by producing month for estimated marketable gas and natural gas by-product royalty and taxes, and (iii) for penalties and interest; (

e) every operator of a well event must, on or before the 20th day of the calendar month following the calendar month in which operations at the well event began or were suspended, file a report indicating the commencement or suspension of operations; (

f) every operator of a facility to which a well event is connected must, on or before the 20th day of the calendar month after the calendar month in which the well event is connected to the facility, file a report indicating the producers' interest in the well event; (

g) every producer who has acquired an interest in a well event or tract must, on or before the 20th day of the second calendar month after the calendar month in which the closing date of the sales agreement occurs, file a report indicating the producer's interest in the well event or tract; (

h) for the purpose of

section 2 (8), every operator of a producer-owned plant or a producer-owned sales line must, on or before March 15 of the calendar year following the calendar year in which the plant processed gas or the page 9 of 12

pipeline transported gas, file a report indicating the capital and operating costs of the plant or sales line; (

i) every person who processes natural gas produced in British Columbia must, on or before the 25th day of the calendar month following the calendar month in which the natural gas was processed, file for the month in which the natural gas was processed (

i) a report indicating the volume of natural gas, expressed in 1 000 m 3, delivered to a natural gas processing plant and the disposition of the marketable gas by producer and purchaser, and (ii) a report indicating the production volume of natural gas by-products processed at the natural gas processing plant and the volume of natural gas by-products disposed of by producer, destination and purchaser; (

j) every person who operates a pipeline that receives oil or condensate produced in British Columbia must, on or before the 25th day of the calendar month following the calendar month in which the oil or condensate was received, file a report that, for the month in which the oil or condensate was received, indicates (

i) the volume received at each sales meter, and (ii) the volume received from each facility from which the oil or condensate was delivered; (

k) every person who operates a treating plant to recover clean oil or condensate must, on or before the 25th day of the calendar month following the calendar month in which oil, condensate or water is received, file a report that, for the month in which the oil, condensate and water is received, indicates the volumes of oil, condensate or water delivered to the treating plant and the production facility from which the product was delivered. , and (

b) by repealing subsection (3). 8

Section 9 is amended (

a) by repealing subsection (1) and substituting the following:

(1) After receiving reports filed by a producer under

section 8 (1) (

c) for a producing month, the administrator is, on or about the 10th day of the third calendar month following the producing month, to deliver a Crown invoice to that producer showing for the producing month the amount of royalties and taxes that is payable to the Crown in respect of the marketable gas and natural gas by-products to which those reports apply. , (

b) in subsection (2) by striking out "disagrees with the information in it," and substi- tuting "disagrees with the information or calculations in it,", (

c) in subsection (2) (

b) by adding "or tax" after "royalty", and page 10 of 12

(

d) by repealing subsection (4) and substituting the following:

(4) The notice of assessment must contain the determination made by the adminis- trator of the amount of royalty, tax and interest payable and the due date for payment of that amount. 9

Section 11 (1) is repealed and the following substituted:

(1) The administrator may reconsider or vary an invoice or assessment of royalties, taxes or penalties made under

section 9 on the request of a producer who objects in writing to the amount assessed. 10

Section 13 is amended (

a) in subsection (1) by striking out ", overpayments", (

b) by adding the following subsections:

(1.1) The annual rate of interest during a quarterly period for overpayments is the prime lending rate of the principal banker to the Province on the 15th day of the month immediately preceding a quarterly period commencing on January 1, April 1., July 1 and October 1 of each calendar year.

(1.2) It, under subsection (2), interest is to be calculated on an amount, that interest must be calculated in accordance with the following formula: Ax lx 365.25 where A means the amount on which interest is to be calculated; I means the applicable interest rate under subsection (1) or (1.1); D means the number of days from and excluding the 25th day of the calendar month at the end of which A is owing to and including the 25th day of the following calendar month. , and (

c) by repealing subsections (2), (4) and (5) and substituting the following:

(2) Interest on overpayments and on unpaid royalties and taxes is to be calculated as follows: (

a) if, at the end of a calendar month, an amount is owing by a producer for one or both of royalty and taxes, interest is to be calculated on that unpaid amount in accordance with subsection (1.2); (

b) if the amount of an estimate payment made on or before the end of a calendar month under

section 4 (1) is less than 90 percent of the royalty and tax that is invoiced to the producer for that calendar month under

section 9 (1), interest on the difference between the payment and the invoice amount is to be calculated in accordance with subsection (1.2); (

c) if interest is payable under paragraph (

a) or (

b) on an amount (the "initial producer amount") and the whole or any part of the initial producer amount remains unpaid at the end of any calendar month following the calendar month in respect of which interest first became payablr: on the initial page 11 of 12

producer amount, interest is to be calculated on the unpaid portion of the initial producer amount in accordance with subsection (1.2); (

d) if royalties or taxes are overpaid by a producer in a calendar month and the overpayment is not reimbursed or credited on or before the end of that calendar month, interest on that overpayment is to be calculated in accordance with subsection (1.2); (

e) if the amount of an estimate payment made on or before the end of a calendar month under

section 4 (1) is greater than 110 percent of the royalty and tax that is invoiced to the producer for that calendar month under

section 9 (1), interest on the difference between the payment and the invoice amount is to be calculated in accordance with subsection (1.2); (

t) if interest is payable under paragraph (

d) or (

e) on an amount (the "initial amount") and the whole or any part of the initial amount is not paid or credited on or before the end of any calendar month following the calendar month in respect of which interest first became payable on the initial amount, interest is to be calculated on the unpaid portion of the initial amount in accordance with subsection (1.2).

(4) If a producer fails to file a report referred to in

section 8 (1) (a), (b), (c), (d), (e), (f), (

g) or (

h) or (5) or 9 (2) (

a) within the required time, the producer may be assessed a penalty of $20 for each day that the failure to file continues, up to a maximum amount payable under this subsection of $6 000 for each report.

(5) If a producer fails to file a report referred to in

section 8 (1) (i), (

j) or (

k) within the required time, the producer may be assessed a penalty of $100 for each calendar month or part of a calendar month that the failure continues, up to a maximum amount payable under this subsection of $6 000. page 12 of 12

Document details

Collection	British Columbia — Orders in Council
Citation	O.C. 270/2001
Type	order_in_council
Volume / chapter	arc oic 0270 2001
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	526a36ea99b94a088fc7cd4a6a87cb13bf0781bd

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