B.C. oil and natural gas royalty transition impact on existing wells and new oil wells
Last updated on April 5, 2024As a result of government’s Natural Gas Royalty Review project, royalty rates on existing oil and gas wells are changing. How allowances and deductions apply are also changing.
The transition period has begun. Make sure you know how this affects you.
For the following types of wells, the current royalty system applies until August 31, 2024:
- Existing oil and gas wells spudded before September 1, 2022
- New oil wells spudded on or after September 1, 2022
On September 1, 2024, all wells move to the new royalty system.
For existing gas wells that are using the deep well deductions, the deep well deductions continue to be available for those existing wells until August 31, 2026.
Producers who have existing deep well deductions will have the option of transferring their deep well deductions into a healing the land and emissions reduction pool. Deductions in a healing the land and emissions reduction pool are not well-specific and can be used by other wells that the producer has.
Any deep well deductions that have not been used or transferred into a healing the land and emissions reduction pool by September 1, 2026 will expire, unless the remaining deductions in the pool are used to offset emissions reduction expenditures.
For the low productivity, marginal and ultra-marginal royalty programs, on September 1, 2024, existing gas wells stop getting these reductions and start using the new price-sensitive royalty rates. The new rates depend on commodity price and range from 5 to 40 percent.
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Find answers to questions about how the new royalty system affects existing wells and new oil wells:
What is the royalty rate for existing wells and new oil wells after September 1, 2022?
Existing wells, and new oil wells spudded on or after September 1, 2022, continue to pay the royalty rate structure in effect prior to September 1, 2022 until the end of the transition period, and then switch to the new royalty system on September 1, 2024.
What happens to existing cost allowances for existing wells and new oil wells after September 1, 2022?
The producer cost of service allowance, gas cost allowance and transportation cost deductions remain during the transition period for existing wells (until August 31, 2024).
New oil wells spudded on or after September 1, 2022 may also apply for the existing cost allowances.
When the new royalty system is implemented, a gathering and processing allowance replaces all existing cost allowances. The new gathering and processing allowance is still under development.
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What happens to royalty deductions that were eligible for existing gas wells prior to September 1, 2022?
During the transition period (September 1, 2022 to August 31, 2024), existing gas wells can continue to participate in the low productivity, marginal and ultra-marginal royalty programs.
Effective September 1, 2024, existing wells transition to the new price-sensitive royalty rates and no longer receive any royalty rate reductions.
For the deep well royalty deduction, existing gas wells can continue to reduce royalties using deep well deductions for which they qualified prior to September 1, 2022, until September 1, 2026.
Producers will have the option to transfer existing deep well deductions to a healing the land and emissions reduction pool. Any deep well deductions that have not been used or transferred into a healing the land and emissions reduction pool by September 1, 2026 will expire, unless the remaining deductions in the pool are used to offset emissions reduction expenditures.
More information about the healing the land and emissions reduction pool and how to set one up will be available in the coming months.
Impact on new gas wells
Important dates
Contact information
Contact us if you have questions about the transition to the new royalty system.
1-800-667-1182