ALBERTA DEPARTMENT of ENERGY. Resource Revenue Operations Edmonton Gas Royalty Calculation Unit November 4, 2009

Transcription

1 ALBERTA DEPARTMENT of ENERGY Resource Revenue Operations Edmonton Gas Royalty Calculation Unit November 4, 2009

2 Background - Crown Rights The Crown owns the mineral rights underlying Crown lands. Companies purchase mineral rights by bids and enter into agreements with the Crown to produce the natural gas. Once a royalty client has a lease, the client obtains approval from the Alberta Energy and Utilities Board (AEUB) to drill a well.

3 Background - Royalty Clients A Royalty Client is a person or company with whom the Department (DOE) communicates with about Royalty transactions. In the Petroleum Registry of Alberta (PRA), the Department approves and assigns each royalty client, called the Business Associate (BA), a standard four-character BA ID. The BA has to obtain a BA User Security Administrator (USA) ID and password from the DOE that will allow the USA, or a designate, to conduct business in the Registry.

4 Background - Facilities Facilities include Well Events (W1), Batteries (BT), Gathering Systems (GS), Gas Plants (GP) Injection Facilities (IF) and Meter Stations (MS). Each facility is assigned a unique facility code, which is requested by the facility operator and is generated on-line, in the Registry.

5 Background - Statistics General Statistics as of December 2008 Number of Royalty Clients Invoiced 2,051 Number of Active Wells (gas & oil) 200,004 Number of Active Gas Plants 668 Number of Active Batteries 25,254 Number of Active Gathering Systems 2,927

6 Background - Policy & Procedures Governing Regulations and Procedures - Mines and Minerals Act - Natural Gas Royalty Regulations, 2002 and Alberta Natural Gas Royalty Principles and Procedures, (referred to as the Guidelines). The DOE issues monthly Information Bulletins and Information Letters to provide notification of prices, royalty factors, changes in legislation, policy or procedures, and general information that may benefit royalty clients.

7 Product and Volume Reporting Stream Allocation Factors (SAF) & Owner Allocation Factors (OAF) Facility operators report volumetric SAF and OAF submissions to the Registry. Volumetric submissions report the volumetric activities (receipts & activities) at a facility. SAF submissions are used to report the facility volumes and energy values down to the stream level. OAF submissions are used to report the stream volumes and energy to an owner level.

8 Reporting Controls and Balancing Activity The Department of Energy monitors volumetric variances between facilities and works with the operator to ensure that all variances are corrected. Variances that are not corrected are subject to Provisional Assessments.

9 Provisional Assessment When an operator does not fully account for all the quantities for which he is responsible in a month, the department will: Deem the operator to be a royalty client with respect to the quantities that are not accounted for. Calculate a provisional royalty for these discrepancies and charge that provisional royalty on the operator s invoice. Provisional Assessments are charged at the highest royalty rates and no cost deductions are allowed.

10 Determination of Crown Royalty Volumes Royalty Rates Crown royalty is assessed on Natural Gas, Ethane, Propane, Butanes, Pentanes-Plus and Sulphur. Royalty rates for natural gas are sensitive to price and production and adjusted for acid gas content and depth of the well. Rates range from 5% to 50%. Royalty rates for products, propane and butane are fixed at 30% and pentanes at 40% Sulphur rate is fixed at %

11 Valuation of Crown Royalty Volumes Raw and Residue Gas Valuation Residue Gas (processed gas includes ISCs) is valued at the Facility Average Price (FAP), as determined by the DOE. Propane, Butanes and Pentanes-Plus are valued based on a reference price determined by the department. Sulphur is valued at a Royalty Client s Sulphur Corporate Average Price (S-CAP), if annual production is greater than 30,000 tonnes. If under the 30,000 minimum, Sulphur is valued at the average price of all S-CAP filers.

12 Cost Recognition Cost Allowances Since a royalty client produces and processes the Crown s share of natural gas and gas products, the Crown shares in the costs by providing cost allowances. Cost allowances are deducted from money owing, on Crown royalty charges, for natural gas and gas products. Cost allowances may never exceed the money owing to the Crown in a given production year. Unclaimed cost allowances may not be carried forward to a subsequent production year.

13 Collecting Royalty Invoice The DOE issues a monthly invoice to notify clients of all activity that occurred in the billing period. Invoices are issued on or before the last day of the second month following the month of production. Payment is due by the last day of the third month. (Deposit) The invoice includes all charges, and adjustments that were processed in the current billing period.

14 EUB Apply Crown Interest & Royalty Rates Crown Royalty Volumes Gas Valuation Gross Royalty $ Registry DOE MRIS Apply Royalty Triggers Royalty Liable Volumes Volumetric Reconciliation Cost Deductions Royalty Waiver Programs Net Royalty $ Industry Provisional Assessment Monthly Invoice $

15 Gas Royalty Calculation Questions