Credits and deductions

When you produce oil or natural gas in B.C. you may qualify for a credit or deduction. Credits and deductions are applied to your royalty invoice and reduce the amount of royalty you pay.

• Natural gas deep well deduction
• Natural gas deep well re-entry deduction
• Infrastructure credits (e.g. road credits)

Natural gas deep well deduction

To offset the higher drilling and completion costs associated with deep wells, qualifying wells (PDF, 280KB) may receive a deduction on their monthly royalty invoice if they are actively producing.

Note: Deep well deductions are only available to wells spudded prior to September 1, 2022. Deep well deductions are not available for new gas wells. 

Information provided by the well operator on the directional survey and completion reports filed with the Oil and Gas Commission (OGC) is used to calculate the deduction. Find out more about how the credit is calculated (PDF, 280KB).

Each producer's share of the deduction is based on their ownership interest in the deep well events as reported.

If the well event also qualifies for the deep discovery well exemption, the deduction won’t be applied while the natural gas is exempt from royalties. However, your deduction amount will be reduced by the cumulative amount of the exemption you received.

The deduction is applied to the gross royalty payable less producer cost of service for all deep well events within the same well. However, the minimum royalty program limits the amount of deep well deduction a producer may deduct from the gross royalty payable less producer cost of service.

The deduction balance will continue to be reduced by the amount of deep well deduction reduced from the gross royalty payable less producer cost of service until the full amount of the deduction has been used.

Natural gas deep well re-entry deduction

When a previously drilled well is drilled deeper to maximize the development of known resources, qualifying wells (PDF, 280KB) may receive a deduction on their monthly royalty invoice if they are actively producing.

Note: Deep well deductions are only available to wells spudded prior to September 1, 2022. Deep well deductions are not available for new gas wells. 

Information provided by the well operator on the directional survey and completion reports filed with the Oil and Gas Commission (OGC) is used to calculate the deduction. Find out more about how the deduction is calculated (PDF, 280KB).

Each producer's share of the deduction is based on their ownership interest in the deep well events as reported.

If the well event also qualifies for the deep discovery well exemption, the deduction won’t be applied while the natural gas is exempt from royalties. However, your deduction amount will be reduced by the cumulative amount of the exemption you received.

The deduction is applied to the gross royalty payable less producer cost of service for all deep well events within the same well. However, the minimum royalty program limits the amount of deep well re-entry deduction a producer may deduct from the gross royalty payable less producer cost of service.

The deduction balance will continue to be reduced by the amount of deep well re-entry deduction reduced from the gross royalty payable less producer cost of service until the full amount of the deduction has been used.

Only one deduction type (deep well or deep re-entry well) can be used to reduce royalties on a well event. If a deep re-entry well event is in the same zone as a deep well event, the deep re-entry credit will displace any unused balance of the deep well deduction.

For more information on deep well deductions, see section 5.9 in the Oil and Gas Royalty Handbook (PDF, 1.4MB).

Infrastructure credits

To offset the cost of exploration and production in under-developed areas of B.C., qualifying companies can receive a credit for up to 50% of the cost to construct roads or pipelines.

Each year, applications for the Infrastructure Royalty Credit Program are requested. The amount you are approved for will be applied against the royalties you owe on your Crown invoice.

Summer drilling credit program

Effective April 1, 2013, the Summer Drilling Program is discontinued; however, credits previously granted to qualifying wells aren't affected by the end of the program.

These credits can only be used to reduce the amount of royalties or taxes owed by a producer who had an interest in the well at the time it was completed. They are non-refundable credits that can't be converted to a cash payment or transferred to another producer.

Note: All approved credits and deductions may be subject to audit.