Acts and Regulations

2014-28 - Oil and Natural Gas Act

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NEW BRUNSWICK
REGULATION 2014-28
under the
Oil and Natural Gas Act
(O.C. 2014-76)
Filed March 28, 2014
1Subsection 2(1) of New Brunswick Regulation 2001-66 under the Oil and Natural Gas Act is amended
(a) in the definition “section” by striking out the period at the end of the definition and substituting a semicolon;
(b) by adding the following definitions in alphabetical order:
“weighted average selling price” , in relation to a particular period of time, means the total gross revenue from sales of natural gas in the period divided by the total number of units of natural gas sold in the period;(prix de vente moyen pondéré)
“unit” means a gigajoule.(unité)
2Section 22 of the Regulation is repealed and the following is substituted:
Royalties
22(1)The royalty to be calculated, levied and collected by the Crown on oil won, worked, recovered or obtained under a licence to search or lease shall be that percentage of the oil so produced from each well during each calendar month, as specified in Schedule C, free and clear of any deductions calculated on the actual selling price or fair market value at the time and place of production, whichever is the greater.
22(2)The royalty payable on natural gas shall consist of
(a) a basic royalty component, and
(b) an economic rent royalty component.
22(3)The royalty on natural gas may be paid in kind with the approval of the Lieutenant-Governor in Council.
22(4)The approval referred to in subsection (3) may be general or specific in nature.
22(5)The basic royalty component shall be calculated and paid monthly.
22(6)The basic royalty component shall be the greater of
(a) 4% of the product of the wellhead price for natural gas produced in the month, as calculated under subsection (7), and the units of natural gas produced in that month, cumulated for all of a licensee’s or lessee’s wells that produce natural gas, and
(b) 2% of a licensee’s or lessee’s monthly gross revenue from sales of natural gas from all of its wells, as calculated under subsection (8).
22(7)Subject to subsection 22.1(1), the wellhead price shall be determined by the following formula:
WP = SP – TC – GPA
7where
7SP is the weighted average selling price per unit for the month, in Canadian dollars, received by a licensee or lessee for its natural gas in the market place;
7TC is the transportation costs from the processing facility to market for the month, consisting of the per unit transport fee charged by a third party; and
7GPAis the gas processing allowance per unit sold for the month, as determined by the following formula:
GPA = (DOC + OHD + DP + RC)/U
where
DOCis the direct operating costs for the month of a licensee or lessee that are used directly in the gathering, processing and transportation of its New Brunswick natural gas subject to a royalty;
OHDis an overhead allowance calculated as follows:
OHD = 10% × DOC
DP is straight line depreciation over 20 years of the licensee’s or lessee’s capital assets for the month that are used directly in New Brunswick in the gathering, processing and transportation of its New Brunswick natural gas;
RC is a 15% annual return on the average monthly undepreciated balance of capital assets in New Brunswick related to the gathering, processing and transportation of the licensee’s or lessee’s natural gas produced in New Brunswick; and
U is the number of units of natural gas sold for the month from all of the licensee’s or lessee’s New Brunswick wells.
22(8)The monthly gross revenue of a licensee or lessee shall be determined by the following formula:
MGR = SP × U
8where
8SP is the price referred to in the description of “SP” in subsection (7);
8U is the number of units referred to in the description of “U” in subsection (7).
22(9)Subject to subsection 22.1(2), the economic rent royalty component shall be estimated on a calendar year basis.
22(10)The economic rent royalty component shall be determined by the following formula:
ER = 25% × [CGR - (E + CF)]
10where
10CGR is a licensee’s or lessee’s cumulative gross revenue from all of its natural gas operations in New Brunswick;
10E is an amount equal to the sum of all of a licensee’s or lessee’s capital expenditures and all operating costs that are associated with its natural gas operations in New Brunswick, including the amount of the basic royalty component determined under subsection (6), but not including interest expenses, depreciation expenses or corporate income taxes; and
10CF is an amount equal to the sum of any capital expenditures, operating costs and interest referred to in subsection (11) and any capital expenditures and operating costs referred to in subsection 22.1(3).
22(11)Any expenditures and costs that could not be deducted under subsection (10) may be carried forward and an annual interest rate equal to the daily average Government of Canada Benchmark Bond Yield: Long-Term Rate for the calendar year shall be applied to those expenditures and costs.
22(12)The royalty on all by-products obtained from oil or natural gas by processing or separation, including but not limited to sulphur, helium, natural gas liquids and condensate, shall be 10% of the actual selling price or fair market value at the time and place of production, whichever is the greater, less the licensee’s or lessee’s proportionate share of gathering, processing and transportation charges.
22(13)Subject to subsection 22.1(5), a licensee or lessee shall pay the economic rent royalty component in accordance with the following:
(a) not later than 25 days after the end of each month of the calendar year in respect of which the royalty is payable, an amount equal each time to 1/12 of the royalty estimated by the licensee or lessee to be payable for the calendar year in respect of which the royalty is payable; and
(b) within six months after the end of the calendar year, the balance of any royalty payable as calculated by the licensee or lessee in an annual return which shall be on a form acceptable to the Minister.
22(14)A licensee or lessee shall account for every sale of oil, natural gas or by-products on a form acceptable to the Minister.
22(15)The licensee or lessee shall remit the form referred to in subsection (14) and the royalty payment, if due, to the Minister by the twenty-fifth day of the month following the calendar month of the sale.
22(16)No royalty is payable for oil or natural gas that is
(a) consumed by a lessee or licensee in direct connection with development work under a lease or licence to search,
(b) returned to a formation, or
(c) flared.
3The Regulation is amended by adding after section 22 the following:
Transitional provisions
22.1(1)For the purposes of the description of “DP” referred to in subsection 22(7), if as of April 1, 2014, a licensee or lessee has undepreciated capital assets that are used in the gathering, processing and transportation of natural gas, the licensee or lessee may depreciate the capital assets on a straight line basis for the remaining number of years that will result in full depreciation over 20 years.
22.1(2)The economic rent royalty component shall be estimated for the period from April 1, 2014, to December 31, 2014, both dates inclusive.
22.1(3)Capital expenditures and operating costs associated with New Brunswick natural gas operations incurred by a licensee or lessee after December 31, 2002, and before April 1, 2014, may be deducted from all of the licensee’s or lessee’s cumulative gross revenue earned from all of its natural gas operations in New Brunswick after December 31, 2002, and before April 1, 2014, and any excess expenditure may be carried forward under CF in subsection 22(10).
22.1(4)The carry forward of excess expenditures shall only be calculated and applied once.
22.1(5)For the period from April 1, 2014, to December 31, 2014, both dates inclusive, a licensee or lessee shall pay the economic rent royalty component in accordance with the following:
(a) not later than 25 days after the end of each month of the period in respect of which the royalty is payable, an amount equal each time to 1/9 of the royalty estimated by the licensee or lessee to be payable for the period in respect of which the royalty is payable; and
(b) within six months after December 31, 2014, the balance of any royalty payable as calculated by the licensee or lessee in an annual return which shall be on a form acceptable to the Minister.
4This Regulation comes into force on April 1, 2014.