Infrastructure Royalty Credit Program – 2013
Frequently Asked Questions
Application Submission
1. Are submissions required to be completed in the format provided (Section D of the Request for Applications (RFA) document) for an application to be considered?
Yes, all the information must be submitted as detailed in Section D of the RFA document to ensure the application proceeds to the evaluation process.
2. Will the information provided in the RFA be held confidential from the public?
The Ministry realizes that companies are submitting confidential information in their applications and the confidentially of these applications is a priority.
The public has the right to request records held by public bodies under the Freedom of Information and Protection of Privacy (FOIPP) Act. However, Section 21 (Disclosure Harmful to Business Interests of a Third Party) is a mandatory exemption to the public's right to access information. It protects information which, if disclosed, would harm a third party's business interests. Section 21 follows:
21(1) The head of a public body must refuse to disclose to an applicant information:
(a) that would reveal
(i) trade secrets of a third party, or
(ii) commercial, financial, labour relations, scientific or technical
information of or about a third party
(b) that is supplied, implicitly or explicitly, in confidence, and
(c) the disclosure of which could reasonably be expected to
(i) harm significantly the competitive position or interfere
significantly with the negotiating position of the third party, ...
(ii) result in undue financial loss or gain to any person or organization ...
Link to FOIPP Act: http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/96165_00
3. Would the cost of drilling a water disposal well be allowed under the application?
These costsare not considered part of an eligible infrastructure royalty credit allocation. Only costs associatedwiththe constructionor upgrade of a road or pipeline are considered eligible coststo be used todetermine the royalty credit allocation ofthe project.
4. In a partnership application, who will decide which company gets what percent of royalty credits?
If two or more companies apply jointly, the companies will submit a letter with their application providing each company’s contact information and approval of the percent of royalty credit to be shared. This information will be reflected in the agreement that successful companies will sign with the Crown if their project is approved. The Province will have no involvement in how the companies negotiate their share of the royalty credits.
5. Is it possible to apply for projects that were started or completed before the RFA closed?
No, the objective of the Infrastructure Royalty Credit Program is to generate incremental oil and gas activity in British Columbia and thus, incremental royalties to the Province – i.e. generate infrastructure and activity that would not have happened at all or would have been delayed without the credit.
6. If a project is being built 2/3 in BC and 1/3 built in Alberta, would the project costs cover only the costs located in BC?
Yes, as quoted in Petroleum and Natural Gas Royalty and Freehold Production Tax Regulation, Section 4(9.1) “..., to construct or upgrade road and pipelines in British Columbia in support of resource exploration or development in British Columbia.”
7. A section of the RFA Template asks for the company’s hurdle rate which is information our company regards as confidential. Is there a consequence to not providing an internal hurdle rate?
The Ministrydoes require that all companiesprovide this information. The Ministry is very aware of the confidential/sensitive nature of some of the required information. As such, all applications are locked in a secure area and are available only to our small evaluation team.
It's also important to note that, though the public has the right to request records held by public bodies under the Freedom of Information and Protection of Privacy Act (FIPPA),an"Exception"contained inthe FIPPAprotects confidential sensitive business information (Section 21 - Disclosure Harmful to Business Interests of a Third Party – Please refer to Question 2).
8. When submitting a partnership application, is it acceptable to the Ministry to submiteach company’s individual hurdle ratesunder separate cover (attached tothe joint application) so as not to sharesensitive information among the applicants?
Yes, we realize the sensitive information among applicants and will accept the individual hurdles rates under separate cover attached to the joint application.
9. Does the amount of the royalty credit request affect the ranking process?
Yes, it does affect the ranking process directly. The amount of royalty credit requested is used in calculating some of the ranking and selection factors included in the Request for Application (Please see Page 11, Section 4, Ranking and Selection of the 2013 Request for Applications).
10. Does Royalty Policy Branch have a preference for awarding royalty credits to smaller capital projects over large capital projects?
No, there is not a preference for awarding smaller projects over larger projects. The ranking criteria of the project are based on incremental value to the Crown which reflects the cost/benefit ratio plus the other ranking criteria (leverage, acceleration).
11. We have been in discussion with another company with a possibility of a partnership/joint efforts. However, we still don’t have a commercial arrangement, but this could be reached soon. If awarded a royalty credit project, and a partnership agreement is arranged afterward, is there an issue with amending the approval to add a partner?
In the event the project is awarded a royalty credit the Ministry will allow for changes such as adjustments to the royalty credit allocations due to partnership agreements. Please note that no change to the maximum royalty credit amount awarded the project will be allowed.
12. Can we apply for less than 50% of the royalty credit based of the eligible costs?
Yes, the royalty credit amount can be up to 50 percent of the eligible construction cost of the project. If a lower percentage makes your project economics work, it could be a good strategy to apply for a lower percentage of royalty credit.
13. What is required or defined as the “Legal Name of Applicant?
Please use the company name that you operate in British Columbia. This is also the name that will be used to determine that you have a client code as an oil and gas royalty payer with the British Columbia Ministry of Finance.
Pipeline Project
14. Can and how do pipeline companies participate in the Infrastructure Royalty Credit Program?
Pipeline companies can only apply jointly with a producer or producers, and only for pipeline projects. As Pipeline companies cannot receive royalty credits as they don’t pay royalties they must apply jointly with a producer or producers.
15. Can a Pipeline Company sign and take responsibility for performance of the Agreement?
Yes, for projects that compete under the Request for Applications (RFA) and are approved, pipeline companies must later sign an Agreement with the Crown and the Producers they applied with for the approved project. Pipeline companies can also take responsibility for performance of an Agreement, assuming the pipeline company is willing and able to report all costs associated with construction of the project, production from drilling associated with the project on behalf of all producers involved in the project, and all other reporting requirements as specified in the Agreement.
Sample Agreements are available with all of the RFA materials at:
http://www.empr.gov.bc.ca/OG/oilandgas/royalties/infdevcredit/Pages/default.aspx
16. Are compressor stations or dehydration facilities eligible costs for a pipeline project?
Yes, the definition of “eligible pipeline project” includes “all properties used, with or incidental to their operation” (see Section B, page 5 of the Request for Applications). Eligible facilities are already contemplated – i.e. compressor stations, dehydrators, and other property incidental to the pipeline project can be included in the application. Please note that these are only eligible when associated with the building of a new pipeline.
17. Is there a diameter limit for pipeline projects?
No, there is no diameter limit. Nevertheless, pipeline applications have to be consistent with the definition of pipeline included in Section B of the RFA document.
18. Do water or other types of liquid pipeline projects qualify as an eligible project?
Yes, a water or other type of liquid pipeline does qualify as an eligible infrastructure project if used for the production of natural gas or oil. Please read the eligible pipeline definitions in the Infrastructure RFA document. Note that an eligible application requires a revenue generated component to proceed through the evaluation process.
Road Projects
19. Can bridge construction be put forward as part of a road application?
Yes, bridge construction can be part of a road application as per the Petroleum and Natural Gas Royalty and Freehold Production Tax Regulation Section (7) Subsection (9) applies to a producer if:
“(b) ) If a producer advises the administrator that the producer intends to undertake a project to construct or upgrade pipelines, bridges, roads, rails or trails in support of resource exploration or development, “. Please read the eligible road definitions in the Infrastructure RFA document.
Drilling, Production, and Royalty Estimates Table
20. Instead of loading in each and every well for the application, could we roll up the wells each year rather than individually? Our forecast is based on type curves which average out individual well performance so the same data would appear for each well.
No, to be in compliance with the Request for Applications submission, one of the requirements is to input the Drilling, Production and Royalty Estimates Table with well information as instructed in the table. The determination of the timing of the drilling and production of wells associated with the project is a significant part of the Ministry’s evaluation and selection process.
21. Should we consider inflation also?
Yes, you should calculate your costs as you would usually do for a regular project.
22. Should we include in the table our entire future well development program for the project area?
The Ministry would suggest providing up to a 5 year drilling period. The Drilling, Production and Royalty Estimates Table asks for “Chance of Success” and “Chance of Occurrence” for each well. A five year drilling period would provide the least amount of risk for chance of occurrence.
Providing your entire well development program could also affect any future RFA infrastructure proposals in the area if all wells were included with another project.
23. What does “net royalty” mean?
Net royalty is based on gross royalty less all royalty credits (deep, infrastructure, and marginal). This is calculated in the “Annual Production and Royalty” worksheet of the Drilling, Production and Royalty Estimates Table.
24. In the ‘Annual Production and Royalty’ worksheet, are the production inputs risked or unrisked?
The inputs in the "Annual Production and Royalty" worksheet should be risked. The information provided in that table should be extracted from the "Information & Production Input" worksheet, where you should include all unrisked well production figures by month (starting in column AA), then risk them by the two risk factors (chance of success and chance of occurrence) included in columns Y and Z of the sametab.
Mapping
25. Do I need to submit only the centerlines for the road and the pipeline, or do you need the actual shape file of each?
The centerline is adequate but if you have the right of waylocation it would beappreciated to receive this information. We need this information to determine where the project is located and the general scope of the project.
26. Are we required to submit the associated features, such as borrow pits, or is the Ministry only interested in the main features?
Yes, you are required to submit the associated features. These features include any pipelines or roadsand other main features which would intersect or connect to the proposed project. If the proposed project includes bridge locations these are required. Additional features such as borrow pits are not required.
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