This information will help you understand the amount of natural gas royalties you are invoiced for and what factors the Ministry of Finance uses to calculate your natural gas royalties.
The royalty framework is changing. During the transition period (September 1, 2022, to August 31, 2024), royalty rates, allowances, deductions and royalty reduction programs are all impacted.
Learn more at gov.bc.ca/royaltytransition.
Natural gas producers receive royalty invoices each month for each Stream ID they own that has volumes available for sale. The amount charged is calculated using the following information:
The Ministry of Finance calculates the amount of royalty or freehold production tax payable on natural gas following these steps:
The formula used to calculate the royalty or tax rate is based on several factors, including:
The base royalty rate that is used to calculate the royalty rate depends on whether the gas is conservation or non-conservation gas.
For non-conservation gas, the base royalty rate is:
For conservation gas, the base royalty rate is:
In addition, your Stream ID production volumes will indicate if your well qualifies as:
These well types qualify for production-related rate reductions for the royalty rate.
Natural gas by-products have a fixed royalty rate. Gas reference prices do not apply to their sales values. There are three marketable natural gas by-products associated with natural gas production:
By-product | Royalty rate |
---|---|
Natural Gas Liquids (NGL) | 20% |
Condensate | 20% |
Sulphur | 16.667% |
The gross royalty or tax is calculated for marketable gas produced from each Stream ID using the following formula:
Reference price x Marketable gas volume x Royalty or tax rate
The gross royalty or tax is calculated for by-products produced from each Stream ID using the following formula:
Sales value x Royalty or tax rate for each by-product
The weighted average royalty for each stream ID is calculated using following formula, using the gross royalties or taxes calculated from step 2 and 3:
(Gross royalty or tax for marketable gas + Gross royalty or tax for by-products) ÷ ((Royalty taxpayer’s marketable gas volume x Reference price) + Sales value of all by-products))
First, the gross royalty or tax is calculated using the weighted average royalty or tax rate and reported gas production volume as follows:
Weighted average royalty or tax rate x Raw gas volume
The net royalty or tax is then calculated by subtracting any deductions, including producer cost of service allowance and deep well deductions from the total gross royalty or tax.
For more information and sample calculations:
There are certain circumstances where natural gas producers may qualify for:
For new gas wells spudded during the royalty transition period (September 1, 2022 to August 31, 2024), a flat 5 percent royalty rate applies for the initial production period (8,760 production hours). Once the initial production period concludes, that well falls under the pre-transition royalty system until August 31, 2024.
Existing wells spudded prior to September 1, 2022, are not impacted and continue under the pre-transition royalty framework until August 31, 2024.
When the new royalty framework is implemented on September 1, 2024, all wells start using new price-sensitive royalty rates. The new rates depend on commodity price and range from 5 percent to 40 percent.
Find out who to contact for your questions about oil and natural gas in B.C.