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Indian Oil and Gas Regulations (SOR/2019-196)

Regulations are current to 2024-11-26 and last amended on 2019-08-01. Previous Versions

SCHEDULE 5(Subsection 79(1))Royalties

Interpretation

  • Marginal note:Definition of marketable gas

    1 In this Schedule, marketable gas means gas, consisting mainly of methane, that meets industry or utility specifications for use as a domestic, commercial or industrial fuel or as an industrial raw material.

Actual Selling Price

  • Marginal note:Highest value

    • 2 (1) For the purposes of this Schedule, if the Minister determines that the actual selling price of oil or gas is less than the fair value of that oil or gas at the time and place of production, the actual selling price is deemed to be that fair value. In that case, the Minister must send the contract holder notice of the royalties payable and, within 30 days after the day on which the notice is received, the holder must pay the royalties payable in accordance with that notice.

    • Marginal note:Factors to consider

      (2) In determining the fair value of oil or gas, the Minister, in consultation with the council, must take into account the following factors:

      • (a) any applicable reference price;

      • (b) in the case of gas, transportation cost, volume of fuel gas and heat value;

      • (c) in the case of oil, transportation cost, quality adjustment for sulphur content and density;

      • (d) whether the parties to the transaction are related parties within the meaning of subsection 82(4) of these Regulations;

      • (e) the Bank of Canada’s daily exchange rate for converting U.S. dollars to Canadian dollars; and

      • (f) the factor of 6.2898 to convert barrels of oil to cubic metres of oil.

Oil Royalty

  • Marginal note:Calculation of royalty — oil

    • 3 (1) The royalty on oil that is recovered from, or attributed to, lands in a contract area consists of the basic royalty determined in accordance with subsection (2) or (3) and the supplementary royalty determined in accordance with subsection (5). All amounts are to be calculated at the time and place of production.

    • Marginal note:Basic royalty — first five years

      (2) During the five-year period beginning on the day on which production of oil from the contract area begins, the basic royalty for each month of that period is equal to the actual selling price multiplied by the monthly royalty determined in accordance with column 2 of the table to this subsection, based on the monthly production, referred to in column 1, of oil that is recovered from, or attributed to, each well.

      TABLE

      ItemColumn 1Column 2
      Monthly Production (m3)Monthly Royalty (m3)
      180 or less10% of the number of cubic metres
      2More than 80 but not more than 1608 m3 plus 20% of the number of cubic metres in excess of 80
      3More than 16024 m3 plus 26% of the number of cubic metres in excess of 160

    • Marginal note:Basic royalty — subsequent years

      (3) Beginning immediately after the period referred to in subsection (2), the basic royalty for each subsequent month is equal to the actual selling price multiplied by the monthly royalty determined in accordance with column 2 of the table to this subsection, based on the monthly production, referred to in column 1, of oil that is recovered from, or attributed to, each well.

      TABLE

      ItemColumn 1Column 2
      Monthly Production (m3)Monthly Royalty (m3)
      180 or less10% of the number of cubic metres
      2More than 80 but not more than 1608 m3 plus 20% of the number of cubic metres in excess of 80
      3More than 160 but not more than 79524 m3 plus 26% of the number of cubic metres in excess of 160
      4More than 795189 m3 plus 40% of the number of cubic metres in excess of 795

    • Marginal note:Notice to council

      (4) The Minister must send the council notice of the date on which the production referred to in subsection (2) begins.

    • Marginal note:Supplementary royalty

      (5) The supplementary royalty is

      • (a) in respect of oil to which subsection (2) applies, the amount determined by the formula

        (T – B)0.50(P – R)

        where

        T
        is the amount of oil, in cubic metres, that is recovered from, or attributed to, each well in the contract area during the month,
        B
        is the monthly royalty, in cubic metres, determined in accordance with the table to subsection (2),
        P
        is the actual selling price of the oil per cubic metre, and
        R
        is the reference price, equal to

        • (i) in the case of oil recovered from a source set out in column 2 of the table to this subsection, the price set out in column 3, and

        • (ii) in any other case, $25 per cubic metre; and

      • (b) in respect of oil to which subsection (3) applies, the amount determined by the formula

        (T – B)[0.75(P – R – $12.58) + $6.29]

        where

        T
        is the amount of oil, in cubic metres, that is recovered from, or attributed to, each well in the contract area during the month,
        B
        is the monthly royalty, in cubic metres, determined in accordance with the table to subsection (3),
        P
        is the actual selling price of the oil per cubic metre, and
        R
        is the reference price, equal to

        • (i) in the case of oil recovered from a source set out in column 2 of the table to this subsection, the price set out in column 3, and

        • (ii) in any other case, $25 per cubic metre.

      TABLE

      ItemColumn 1Column 2Column 3
      First Nation LandsSource Producing Before January 1, 1974Reference Price ($/m3)
      1Pigeon Lake 138ACardium24.04
      Leduc25.37
      2Sawridge 150GGilwood Sand25.13
      3Enoch Cree Nation 135Lower Cretaceous24.64
      Acheson Leduc24.45
      Yekau Lake Leduc25.01
      4Sturgeon Lake 154Leduc21.51
      5Utikoomak Lake 155Gilwood Sand Unit No. 125.00
      West Nipisi Unit No. 124.58
      6White Bear 7010-2-10-2 W2 well22.40
      8-9-10-2 W2 well22.63
      7Siksika 1466-25-20-21 W4 well18.19
      8Ermineskin 1386-11-45-25 W4 well19.18

Gas Royalty

  • Marginal note:Calculation of royalty — gas

    • 4 (1) When gas that is recovered from, or attributed to, lands in a contract area is sold, the royalty payable is the gross royalty value of the gas, determined in accordance with subsection (2), less the portion of the cost of gathering, dehydrating, compressing and processing the gas that is equal to its gross royalty value divided by its total value.

    • Marginal note:Gross royalty

      (2) The gross royalty value of gas that is recovered from, or attributed to, lands in the contract area is the basic gross royalty value of 25% of the quantity of that gas multiplied by the actual selling price plus the supplementary gross royalty value determined in accordance with subsection (3). All amounts are to be calculated at the time and place of production.

    • Marginal note:Supplementary gross royalty

      (3) The supplementary gross royalty value of gas, individually determined for each gas component produced, is equal to the sum of the products obtained by multiplying 75% of the quantity of each gas component by

      • (a) in the case of marketable gas,

        • (i) if the actual selling price exceeds $10.65/1000 m3 but does not exceed $24.85/1000 m3, 30% of the difference between the actual selling price per 1000 m3 and $10.65/1000 m3, or

        • (ii) if the actual selling price exceeds $24.85/1000 m3, $4.26/1000 m3 plus 55% of the portion of the actual selling price in excess of $24.85/1000 m3;

      • (b) in the case of pentanes plus, if the actual selling price exceeds $27.68/m3, 50% of the portion of the actual selling price in excess of $27.68/m3;

      • (c) in the case of sulphur, if the actual selling price exceeds $39.37/t, 50% of the portion of the actual selling price in excess of $39.37/t;

      • (d) in the case of other components from a source that produces marketable gas, an amount equal to the product obtained by multiplying the actual selling price of each of those components by the percentage by which the overall royalty rate for marketable gas, taking both basic and supplementary gross royalty values into account, exceeds 25%; and

      • (e) in the case of other components from a source that does not produce marketable gas, the lesser of one third of the actual selling price of that component and the amount determined under any special agreement entered into under subsection 4(2) of the Act.

    • Marginal note:Measurement of volumes

      (4) For the purposes of this section, volumes referred to are volumes measured at standard conditions of 101.325 kPa and 15°C.

    • Marginal note:Notice to council

      (5) The Minister must send the council notice of any costs that are deducted under subsection (1) for gathering, dehydrating, compressing and processing.

Royalty on Oil or Gas Consumed

  • Marginal note:No royalty payable

    • 5 (1) Despite sections 2 to 4, the royalty payable on oil or gas recovered from, or attributed to, lands in a contract area is nil if the oil or gas is consumed in drilling for, producing or processing oil or gas that is recovered from, or attributed to, those lands.

    • Marginal note:Royalty payable

      (2) However, subsection (1) does not apply to oil or gas that is consumed in the production or processing of crude bitumen.

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