Natural gas royalties

Natural gas producers receive royalty invoices each month for each well event or tract in a Production Entity (PE) they have an interest in that has volumes available for sale. The amount owing is determined using information reported in Petrinex by producers, purchasers and facility operators.

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. 

Calculating royalties

Royalties are calculated monthly. Once royalty rates are established, the royalty amount payable is calculated based on:

  • Ownership interest in raw, marketable gas and by-product volumes available for sale
  • The natural gas monthly reference price

The gross royalty payable is reduced by a Producer Cost of Service (PCOS) allowance and any applicable exemptions or credits. However, if the net royalty amount would be zero in a production month, a minimum royalty amount (PDF) may be payable. 

For more information on calculating your royalties, refer to sections 5.0 and 7.0 of the Oil and Gas Royalty Handbook (PDF).

Royalty rates

Royalty rates are calculated differently for natural gas and natural gas by-products.

Natural gas

Natural gas royalty rates are determined every month for each well event or tract in a Production Entity (PE). The royalty rate can be up to 27% of the value of the natural gas and is based on:

For new gas wells spudded during the royalty transition period (September 1, 2022, to August 31, 2024), a flat 5% 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. 

Starting in December 2022, invoices for new gas wells spudded on or after September 1, 2022 that have begun producing will reflect the flat 5% royalty rate.

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% to 40%. 

Natural gas by-products

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%

Reduce your royalties

There are certain circumstances where natural gas producers may qualify for:

Allowances

The following allowances are available to cover the costs associated with processing the Crown’s royalty share of natural gas:

Exemptions

Natural gas production may be exempt from the payment of royalties in the following situations:

Credits and deductions

The following credits and deductions are available to qualifying wells:

Lower royalty rates

Lower royalty rates may be available if you qualify for one of these programs: