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Volume 53, No. 23

B.C. Reg. 327/2010

The British Columbia Gazette,

Part II

November 30, 2010

B.C. Reg. 327/2010 , deposited November 19, 2010, pursuant to the PETROLEUM AND NATURAL GAS ACT [Sections 73, 74 and 133]. Order in Council 722/2010, approved and ordered November 18, 2010.

On the recommendation of the undersigned, the Lieutenant Governor, by and with the advice and consent of the Executive Council, orders that the Net Profit Royalty Regulation, B.C. Reg. 98/2008, is amended as set out in the attached Schedule.

— C. HANSEN, Minister of Finance and Deputy Premier ; M. POLAK, Presiding Member of the Executive Council .

Schedule

Section 1 (1) of the Net Profit Royalty Regulation, B.C. Reg. 98/2008, is amended

(

a) by repealing the definition of "net allowed cost" and substituting the following:

"net allowed cost" means an amount, for a producer's interest, for a calendar month that is

(

a) the first calendar month subsequent to the project approval month, determined by the following formula:

A + B + C D

where

A means the amount of allowed historical cost,

B means the amount of allowed operating costs incurred during the month multiplied by a factor of 1.1,

C means the amount of allowed capital costs incurred during the month multiplied by a factor of 1.01, and

D means the amount of gross revenue, or

(

b) the project application month or any calendar month after the project application month, other than the first calendar month after the project approval month, determined by the following formula:

A + B C

where

A means the amount of allowed operating costs incurred during the month multiplied by a factor of 1.1,

B means the amount of allowed capital costs incurred during the month multiplied by a factor of 1.01, and

C means the amount of gross revenue; , and

(

b) by adding the following definition:

"reporting facility" means

(

a) a battery as defined in the Drilling and Production Regulation, or

(

b) if there is no battery to receive the effluent from a net profit royalty well event, the surface equipment associated with that net profit royalty well event that measures the volume of effluent produced; .

Section 6 (2) is amended by striking out " by a producer's interest " and substituting " by a producer ".

Section 7 (1) (

d) is amended by striking out " producing month, " and substituting " production month, ".

Section 8 is amended

(

a) in subsection (2) by striking out " producing month " and substituting " production month " and by striking out " due under

section 6 (2) for the calendar month. " and substituting " due under

section 6 for the production month. ", and

(

b) by repealing subsection (3) and substituting the following:

(3) On or before the later of the 25th day of the calendar month in which invoices are delivered to a producer under

section 16 (1) in respect of a production month and 15 days after the date on which the invoices are delivered, the producer must pay the total of those invoiced amounts less the estimated net profit royalty amounts paid in respect of the production month under subsection (2) of this section.

(3.1) On or before the later of the 25th day of the calendar month in which invoices are delivered to a producer under

section 16 (1.1) in respect of a production month and 15 days after the date on which the invoices are delivered, the producer must pay the total of those invoiced amounts less the amount paid in respect of the production month under subsections (2) and (3) of this section.

Section 9 is amended

(

a) by repealing subsections (1) to (3) and substituting the following:

(1) The reports set out in subsections (2) to (4.3) and (7) to (9) must be filed with the collector in the form and manner required by the director.

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

(3) A producer of oil from a net profit royalty well event must, on or before the last day of the second calendar month following each production month, file a report indicating, for each reporting facility at which the producer had sales of oil produced from a net profit royalty well event in that production month,

(

a) the volume of oil sold by the producer at that reporting facility in that production month,

(

b) the sales value of oil sold by the producer at that reporting facility in that production month, and

(

c) the eligible costs that, under

section 7 (3), May be deducted for that production month.

(3.1) A producer of natural gas from a net profit royalty well event must, on or before the last day of the second calendar month following each production month, file a report indicating, for that production month,

(

a) the producer's share of the volumes of marketable gas produced from each net profit royalty well event in which the producer has an interest,

(

b) the producer's share of the sales volumes and values of natural gas by-products produced from each net profit royalty well event in which the producer has an interest, and

(

c) the producer's share of the volume of natural gas produced from each net profit royalty well event in which the producer has an interest. ,

(

b) in subsection (4) (

a) and (

b) by striking out " producing month " and substituting " production month ",

(

c) by adding the following subsections:

(4.1) The operator of a reporting facility to which a net profit royalty well event is connected must, on or before the 20th day of the calendar month after the calendar month in which the net profit royalty well event is connected to the facility or in which a change in producers' interests in the net profit royalty well event is effective, file a report indicating the producers' interests or the change in producers' interests in the natural gas and oil produced from the net profit royalty well event.

(4.2) The operator of a unitized operation for which there is a unitization agreement under which net profit royalty is determined in relation to a tract according to production volumes allocated to that tract under the agreement must, on or before the 20th day of the second calendar month after the calendar month in which there is a change in producers' interests in the natural gas or oil allocated to a tract, file a report indicating the change in producers' interests in the tract.

(4.3) A person who operates a treating plant to recover clean oil or condensate produced from a net profit royalty well event 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 reporting facility from which the product was delivered. ,

(

d) in subsection (5) by striking out " report filed under subsection (1) " and substituting " report filed by that person under subsection (2), (3), (3.1), (4), (4.1), (4.2), (4.3), (7), (8) or (9) ",

(

e) in subsection (7) by striking out " Every operator " and substituting " The operator " and striking out " at the well event " and substituting " at the net profit royalty well event ", and

(

f) by adding the following subsections:

(8) The operator of a project must, on or before the last day of the second calendar month following the project approval month, file a report indicating the allowed historical cost incurred by each producer in respect of the project.

(9) The operator of a project must, on or before the last day of the second calendar month following each production month, file a report indicating the allowed capital costs and the allowed operating costs incurred by each producer in respect of the project during the production month.

Section 11 is amended

(

a) in subsection (3) by striking out " under subsection (2), " and substituting " under subsection (4), " and

(

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

(4) Interest on overpayments and on unpaid net profit royalties is to be calculated as follows:

(

a) if, at the end of a calendar month, an amount is owing by a producer for net profit royalty, interest is to be calculated on the amount owing in accordance with subsection (3);

(

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

section 8 (2) is less than 90 percent of the net profit royalty that is invoiced to the producer for that calendar month under

section 16 (1), interest on the difference between the payment and the invoice amount is to be calculated in accordance with subsection (3) of this section;

(

c) if interest is payable under paragraph (

a) or (

b) on an amount and the whole or any part of the amount remains unpaid at the end of any calendar month following the calendar month in respect of which interest first became payable on that amount, interest is to be calculated on the unpaid portion of that amount in accordance with subsection (3);

(

d) if net profit royalties 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 (3);

(

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

section 8 (2) is greater than 110 percent of the net profit royalty that is invoiced to the producer for that calendar month under

section 16 (1), interest on the difference between the payment and the invoice amount is to be calculated in accordance with subsection (3) of this section;

(

f) if interest is payable under paragraph (

d) or (

e) on an amount and the whole or any part of the 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 that amount, interest is to be calculated on the unpaid portion of that amount in accordance with subsection (3).

Section 13 is repealed and the following substituted:

Penalties

(1) The penalty under

section 74 (5) of the Act for failure to file, within the required time, a report required under

section 9 (4.1) of this regulation in relation to an interest in oil produced from a net profit royalty well event or a report required under

section 9 (2), (3), (3.1), (4), (4.2) or (7) or

section 16 (2) (

a) of this regulation is $20 for each day that the failure to file continues, or for any lesser number of days that the collector considers appropriate, up to a maximum amount payable under this subsection of $6 000 for each report.

(2) The penalty under

section 74 (5) of the Act for failure to file, within the required time, a report required under

section 9 (4.1) of this regulation in relation to an interest in natural gas produced from a net profit royalty well event or a report required under

section 9 (4.3) or (9) of this regulation is $100 for each calendar month or part of a calendar month that the failure continues, or for any lesser number of months that the collector considers appropriate, up to a maximum amount payable under this subsection of $6 000 for each report.

Section 16 is amended

(

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

(1) After receiving a report filed by a producer under

section 9 (3) or (3.1) for a production month, the collector, on or about the 10th day of the third calendar month following the production month, is to deliver an invoice to the producer showing, for the production month, the amount of net profit royalty that is payable to the government by the producer in respect of the oil or marketable gas and natural gas by-products to which the report applies.

(1.1) After a producer files an amended report under

section 9 (5) to amend a report filed under

section 9 (3) or (3.1), the collector, on or about the 10th day of the second calendar month following the calendar month in which the amended report was filed, is to deliver an amended invoice to the producer showing, for the production month, the amount of net profit royalty that is payable to the government by the producer in respect of the oil or marketable gas and natural gas by-products to which the amended report applies. ,

(

b) in subsection (2) by striking out " a report filed under

section 9 (1) or an amended report filed under

section 9 (5), " and substituting " a report filed under

section 9, " and by striking out " request the producer " in paragraph (

a) and substituting " request the person ", and

(

c) by repealing subsection (3) (

b) and substituting the following:

(

b) in any other case, not more than 72 months after the last day of the production month to which the assessment or reassessment relates.

9 The following

section is added:

Producer liability

17.1

(1) A producer's liability for net profit royalty, interest or a penalty due under the Act and this regulation is not affected by reason of a prior incorrect assessment or the absence of an assessment.

(2) Net profit royalties, interest and penalties are payable whether or not an objection to an assessment is made under

section 18 or a notice of appeal is given under

section 19.

10 Sections 18 (1) and 19 (2) are amended by striking out " under

section 16 " and substituting " under

section 3 (

f) or 16 ".

Section 20 is amended in subsection (3) by striking out " under

section 6 (2) " and substituting " under sections 6 and 8 ".

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