B.C. oil and natural gas royalty transition impact on new wells

As a result of government’s Royalty Review project, allowances and deductions are changing. During the transition period from September 1, 2022, to December 31, 2026, newly spud oil and gas wells have transitional provisions.

For the transition period, new wells are defined as:

• Gas wells spud on or after September 1, 2022
• Dry gas wells spud on or after September 1, 2024
• Oil wells spud on or after September 1, 2024

A dry gas well is a well that produces less than 0.05618 cubic metres of petroleum (condensate and pentanes plus) per 1,000 cubic metres of natural gas (Condensate-Gas-Ratio, based on raw wellhead volumes).

On January 1, 2027, the new royalty framework will take effect.

On this page

• Transitional provisions for new wells
• Royalty rates
• PCOS and GCA allowance
• Reduction and deductions programs

Transitional provisions for new wells

For new wells, transitional provisions are available for the initial production and subsequent production period. After the new wells have completed these production periods, the wells return to the pre-transition system until December 31, 2026.

The duration of the productions period varies by well type and spud date.

Duration of the production period for transitional provisions by well type and spud date

Well type and spud date	Duration of production period
Gas wells spud on or after September 1, 2022	8,760 production hours (around 12 production months)
Dry gas wells spud on or after September 1, 2024	12,407 production hours (around 17 production months)
Oil wells spud on or after September 1, 2024	4,380 production hours (around 6 production months)

Dry gas wells spud on or after September 1, 2024

For gas wells spud on or after September 1, 2024, a flat 5 percent royalty rate applies for 8,760 production hours (around 12 production months). At the end of that period, the well will be evaluated for whether it qualifies as a dry gas well:

• If it’s a dry gas well, it will be granted an additional 5 production months (3,647 production hours) at a flat 5 percent royalty rate
• If it’s not a dry gas well, the well returns to the pre-transition royalty system until December 31, 2026

Royalty rates

Our system automatically applies a flat 5 percent royalty rate to new wells during the production period for transitional provisions. At the end of the production period, the well returns to the pre-transition royalty system until December 31, 2026.

After the transition period on January 1, 2027, new price-sensitive royalty rates apply. The proposed new rates depend on commodity price and range from 5 to 40 percent.

Find the royalty rates on your invoice

The transitional royalty rate will be reflected in your royalty invoice.

Starting from December 2022, if you spud a new gas well on or after September 1, 2022, that has begun producing, the OGR Gas Invoice Details and OGR Oil Invoice Details CSV files that you normally get through Petrinex will reflect the flat 5% royalty rate introduced during the royalty transition period.

PCOS and GCA allowances

From 2027 onwards, after the transition period, a new gathering and processing allowance replaces the producer cost of service allowance (PCOS) and the gas cost allowance (GCA). The new allowance is still under development.

Producer cost of service allowance (PCOS)

For the transitional provision production period (8,760 production hours), new wells do not receive a PCOS allowance. While you can apply for the PCOS following the normal process, you will not receive the PCOS allowance until the transition provision production periods have ended. New wells will then receive the PCOS until December 31, 2026.

Gas cost allowance (GCA)

Producers can continue to apply through Petrinex and receive a gas cost allowance for new wells until December 31, 2026.

Reduction and deduction programs

Effective September 1, 2022, new gas wells spud on or after September 1, 2022, no longer qualify for:

• The low productivity, marginal or ultra-marginal royalty programs, nor
• The deep well deductions