Producer Cost of Service (PCOS) Natural Gas Allowance
The Producer Cost of Service (PCOS) allowance offsets the cost of moving the Crown’s share of natural gas from the wellhead to the inlet of the processing plant. It does not include capital and operating costs for producer-owned plants, which are covered by the Gas Cost Allowance.
The amount of the PCOS allowance depends on the volume and type of natural gas. For royalty purposes, the two types of natural gas are:
Conservation gas produced from the well event or Production Entity (PE) automatically receives a fixed PCOS rate of $16.00 per 103m3 of raw gas.
The information from your BC-22 application is used to calculate annual PCOS rates for each reporting facility. Rates per 103m3 of raw gas are based on estimated costs for qualifying equipment at the reporting facility that are:
- in the field (not past the plant inlet)
- used to carry non-conservation gas
- owned and operated by a royalty payor
- gathering lines
- field processing units
Once the annual PCOS rate is determined for each reporting facility, the PCOS allowance is deducted from your total gross royalty payable each month for each well event or PE. The allowance is calculated by multiplying the PCOS rate by:
- The volume of raw gas produced from the well event or Production Entity (PE), and
- The weighted average royalty rate (%) for the well event or PE
For more information on the PCOS allowance, see section 5.5 of the Oil and Gas Royalty Handbook (PDF)(pg.53).
To apply for the PCOS allowance, the facility operator must submit a BC-22, Application for Producer Cost of Service Allowance by the end of the month following the month in which the reporting facility starts operating.
Note: Every April, each facility operator will receive an annual inventory list showing all equipment that will be used to calculate the PCOS rate for their facilities in the next reporting year.