Petroleum and Natural Gas Royalties
The Province collects royalties on oil and gas production. These royalties support British Columbia’s economic prosperity while ensuring that producers receive a fair return on their investments
The Province announced a new oil and gas royalty framework in May 2022 that balances B.C.’s goals for economic development, a fair return on natural resources and environmental protection. This new framework will take effect September 1, 2024.
New Royalty Framework
The new royalty framework is based on a revenue-minus-cost royalty system with price-sensitive royalty rates designed to reflect the value of the resource and achieve a return of 50% of profits after production costs are accounted for. Revenue-minus-cost royalty systems are globally recognized for maximizing economic value.
New wells will pay a flat royalty rate of 5% until the capital spent on drilling and completions is recovered, then they will move to a price-sensitive royalty rate (between 5% and 40%). The specific range of price sensitivity varies by commodity type - natural gas, ethane, propane, butane, condensate and oil.
Transition - new wells drilled after September 1, 2022
Effective September 1, 2022, new wells that begin drilling (spud) on or after that date are not eligible for the deep-well royalty program, the marginal well royalty program, or the ultramarginal royalty program.
Wells drilled on or after September 1, 2022, pay a 5% royalty rate for the equivalent of the first 12 production months (8,760 production hours). At the end of this period, these wells pay royalties based on the current royalty framework until September 1, 2024, when all wells transition to the new framework
Transition - existing wells drilled before September 1, 2022
Existing wells drilled before September 1, 2022, continue to pay royalties based on the current royalty framework until September 2024.
The Ministry is proposing to transition all wells to the new framework in September 2024. They will no longer be eligible for royalty incentive programs.
Deep wells with unused deep well entitlements can continue to apply those deductions to reduce royalty payments until September 1, 2026.
The Ministry intends to create a mechanism beginning in early 2023 to allow producers to repurpose unused deep well entitlements by transferring them to a Healing the Land and Emission Reduction Pool. These pooled deductions are explained in more detail below.
As of September 1, 2026, producers will no longer be allowed to reduce royalties using deep-well deductions or transfer unused deep-well entitlements to the Healing the Land and Emission Reduction Pool.
Learn more about the B.C. oil and natural gas royalty transition.
The Ministry is proposing creation of a Healing the Land and Emission Reduction Pool, which will start in early 2023. Producers would have the option to transfer unused deep well entitlements to their Healing the Land and Emissions Reduction Pool. They would have the option to allocate some, or all, of their deep well entitlements for any individual well. Once allocated to a producer's pool, the deep well credits are no longer available to reduce royalties on the well they were originally allocated to.
The final scope of activities supported through the pool is under development in the fall of 2022 and will be based on discussions within government, with First Nations in northeastern B.C., industry, and other stakeholders.