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UPDATE: February 2021
This handbook is still being updated. Thank you for your patience.
Due to ongoing operational changes, employee organization charts have been
removed from this handbook.
For current reporting and invoicing information visit our website (gov.bc.ca/
oilandnaturalgastaxes). Petrinex reporting information is also available on the
Petrinex website (www.petrinex.ca).
MINISTRY OF FINANCE
OIL AND GAS
OIL AND GAS
ROYALTY
ROYALTY
HANDBOOK
HANDBOOK
July 2014
Ministry of Finance
Mineral, Oil and Gas Revenue Branch Oil and Gas Royalty Handbook
1.0 LEGISLATIVE AND HANDBOOK OBJECTIVES
1.1 Introduction
Legislative provisions with respect to petroleum and natural gas royalties and freehold
production tax in British Columbia are in several acts and regulations. Acts express the
general policy and intent of the Legislative Assembly. Regulations provide the detailed
administrative procedures and practices to be followed.
HANDBOOK OBJECTIVES
The objectives of this Handbook are to assist producers and operators in meeting their
royalty and tax reporting and payment obligations by:
• explaining the relevant provisions of Acts and Regulations that apply to oil and
gas activities in British Columbia
• providing the ministry’s interpretation where meaning is not clear, and
• illustrating and explaining the prescribed reporting forms.
As well as assisting producers and operators, this Handbook is designed to support the
royalty management system used in the Mineral, Oil and Gas Revenue Branch of the
Ministry of Finance.
If this Handbook is found to be inconsistent with the legislation or prescribed forms in
any respect, the Handbook should be considered to be in error.
PETROLEUM AND NATURAL GAS ACT
Parts 10 and 11 of the Petroleum and Natural Gas Act contain the primary legislative
provisions for royalties and freehold production taxes on oil and gas.
Section 73(1) provides that the Crown in the Right of the Province shall receive a royalty
on oil and gas production from Crown land permitted, licensed or leased under that Act.
Section 73(2) gives the Lieutenant Governor in Council authority to prescribe by
regulation the amount of royalty, who must pay it, when it must be paid, penalties for late
or non-payment, and any other considerations.
Section 73(3) allows the Lieutenant Governor in Council to delegate powers to, and
confer discretionary powers on, an employee of the Ministry of Energy, Mines and
Natural Gas appointed Royalty Administrator and an employee of the Ministry of Finance
appointed Royalty Collector.
Section 74 requires every person who is required to pay royalty to pay it and to file and
complete reports in the form and manner required by the Director of Titles on or before
the date prescribed in the Regulation. Section 74 also requires payment of interest if
royalty is not paid when it is due and provides for refunds of overpayments of royalty
with interest. An important objective of this handbook is to explain how to complete the
forms required by the Director.
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Ministry of Finance
Mineral, Oil and Gas Revenue Branch Oil and Gas Royalty Handbook
PETROLEUM AND NATURAL GAS ACT cont’d
Sections 75, 76 and 77 provide for various powers of enforcement and requirements for
creation and retention of adequate records relating to royalty calculations.
Section 78 allows the Minister of Energy, Mines and Natural Gas to make an agreement
establishing the amount of royalty on petroleum and natural gas produced from a
unitized operation or as the result of a conservation plan, scheme or project, including
injection or pressurization schemes.
Section 80(1) requires every owner of freehold land to pay a production tax calculated as
a percentage of the value of the petroleum and natural gas produced and disposed of
from freehold land.
Section 80(2) allows the Lieutenant Governor in Council to make regulations prescribing
the percentage freehold production tax rate, but limits the percentage to less than 30%.
Section 81 applies the administrative and enforcement provisions of sections 73 to 77
respecting royalties in the same manner and to the same extent to the freehold
production tax.
PETROLEUM AND NATURAL GAS ROYALTY AND FREEHOLD PRODUCTION TAX REGULATION
The matters that section 73 of the Petroleum and Natural Gas Act leaves to the
Lieutenant Governor in Council for all oil and gas production except from net profit
royalty projects are prescribed in the Petroleum and Natural Gas Royalty and Freehold
Production Tax Regulation (B.C. Reg. 495/92). Provisions with respect to the freehold
production tax have also been included in this Regulation.
The calculation of royalty and freehold production tax payable for different classes of
petroleum and natural gas and most of the practices and procedures to be followed are
set out in this Regulation. A primary objective of this handbook is to explain its
provisions.
This regulation is usually referred to as the Royalty Regulation in this Handbook.
NET PROFIT ROYALTY REGULATION
The matters that section 73 of the Petroleum and Natural Gas Act leaves to the
Lieutenant Governor in Council that are related to oil and gas production from net profit
royalty projects are prescribed in the Net Profit Royalty Regulation (B.C. Reg. 98/2008).
This regulation outlines the calculation of the net profit royalty for approved net profit
royalty projects. An important provision of the regulation is the power given to the
administrator to approve projects and the power given to the administrator and collector
to set royalty provisions, practices and procedures as they relate to net profit royalty
administration. These provisions apply to production from net profit royalty projects on
both freehold and Crown land. This Handbook provides more details and examples of
these royalty provisions, practices and procedures.
This regulation is usually referred to as the NPR Regulation in this Handbook.
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Ministry of Finance
Mineral, Oil and Gas Revenue Branch Oil and Gas Royalty Handbook
DRILLING AND PRODUCTION REGULATION
The Petroleum and Natural Gas Act contains many provisions with respect to exploration
for and production of British Columbia’s oil and natural gas resources. Many of the
detailed practices and procedures with respect to drilling, operating and reporting oil and
gas wells are set out in the Drilling and Production Regulation (B.C. Reg. 362/98).
The Drilling and Production Regulation is relevant for royalty purposes because some
terms that are used in the Royalty and Freehold Production Tax Regulation are defined
in the Drilling and Production Regulation. The Drilling and Production Regulation also
requires certain reports that are used for royalty and tax purposes.
OBTAINING REFERENCE MATERIALS
This Handbook is produced and maintained by the Ministry of Finance. It is available
along with Information Letters and Bulletins on the Government of British Columbia
website at www.gov.bc.ca/sbr. This website allows users to subscribe to receive
notification if particular Information Letters or Bulletins are updated. If the subscription
service is used, subscribers are notified of change by way of the email address they
provide at the time of subscription.
Any questions regarding this Handbook may be made to:
Mineral, Oil and Gas Revenue Branch
Ministry of Finance
P.O. Box 9328 Stn Prov Gov’t
Victoria, British Columbia V8W 9N3
Phone: 250 952-0192
Fax: 250 952-0191
Toll Free: 1-800-667-1182
Acts and Regulations are available on the Government of British Columbia website at
www.gov.bc.ca under Statutes and Regulations.
Copies of Acts and Regulations with unconsolidated amendments may be purchased by
contacting:
Crown Publications Bookstore
563 Superior Street
Victoria, British Columbia V8V 1T7
Phone: 250 387-6409 or 1-800-663-6105
Fax: 250 387-1120
Website: www.crownpub.bc.ca
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