Overview of British Columbia’s Infrastructure Royalty Credit Program.

Overview ofBritish Columbia’s

Infrastructure Royalty Credit Program

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TOPICS

1. BC's Oil and Gas Resources, Competitiveness and Royalty Programs

2.BC's Infrastructure Royalty Credit Program

• Objectives

• Requirements

• Results

• Current Instalment

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• Natural Gas = 90% - 95% of royalties

• Activity focused in Northeast BC – Western Canada Sedimentary Basin

• Conventional Resources

- 91 Tcf GIP estimate

• Shift to unconventional resources

- Tight Gas = >300 Tcf GIP estimate*

- Shale Gas = >500 Tcf GIP estimate*

British Columbia is abundant with oil and gas resources

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• Natural Gas StrategyOutlines BC’s vision for becoming a global leader in secure and sustainable natural gas investment, development and export.www.gov.bc.ca/ener/popt/down/natural_gas_strategy.pdf

• Liquefied Natural Gas StrategyDetails BC’s commitment to LNG exports, and outlines the principles that will guide the delivery of this new industry.www.gov.bc.ca/ener/popt/down/liquefied_natural_gas_strategy.pdf

• BC monitors its competitive position every two years.

• BC is responsive to market changes.

British Columbia’s Strategy for Oil and Gas Development

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British Columbia has a competitive royalty

framework, with royalties targeted to resource British Columbia Targeted Royalty Programs

Deep Royalty Programs• Deep

• Deep Discovery• Deep Re-entry

Conditions:

• Vertical Well Depth > 2500m

• Before Sep 1, 2009 Horizontal Well Depth

> 2300m• After Sep 1, 2009

Horizontal Well Depth > 1900m

Marginal Royalty Program

Conditions:

• 12 month average Rate < 80 mcf/d/100m

• Monthly Production below 880 mcf/d

Ultra-Marginal Royalty Program

Condition:

• 12 month average Rate < 40 mcf/d/100m

CoalbedMethane

Condition:

• Production < 600

mcf/d

Infrastructure Royalty Credit

Program

Condition:

• By Request forApplications

Net Profit Royalty Program

Conditions:

• By Request for Applications

Programs provide reduced royalty rates Programs provide credits

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• These programs can be combined in many cases, thus providing enough margin to move certain projects to economic territory.

• Example - a well that…

– is associated with a road project (an infrastructure credit);

– is deep; and

– is marginal…

• …can receive all the associated benefits for those programs.

British Columbia Targeted Royalty Programs

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TOPICS

1. BC's Oil and Gas Resources, Competitiveness and Royalty Programs

2.BC's Infrastructure Royalty Credit Program

• Objectives

• Requirements

• Results

• Current Instalment

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Program awards royalty credits to oil and gas companies who invest in new oil and gas roads and pipeline projects in BC.

Designed to enable investment in oil and gas infrastructure and improve year round access to oil and gas resources in northeast BC.

Facilitates new capital investment, job growth in northern communities, and new incremental revenue to the Crown, which would not otherwise occur.

Identified in the 2012 BC Natural Gas Strategy as an important means to demonstrate BC’s commitment to investment competitiveness by enhancing industry capital planning and investment in emerging or under-explored areas.

Program Objectives

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Road and pipeline projects are received and evaluated through a competitive Request for Applications (RFA) process.

Approved projects are selected according to their potential to generate future royalties and ability to open up new areas to oil and gas exploration.

Companies are required to fund the entire cost of an approved infrastructure project (and complete it) before they can apply for a deduction to the royalties they would otherwise pay to the province.

This deduction can be as much as 50% of the total road and/or pipeline project cost of constructing the approved project.

Approved projects must be completed within 3 years from the date which the Agreement was signed.

Program Requirements

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Since 2004, eleven program instalments have resulted in over 200 all-season roads and/or new pipeline projects in BC.

Leveraged $1.9 billion in industry capital investments in oil and gas infrastructure, and over $5 billion in well drilling and completion investment.

Generated new job and business opportunities in northeast BC.

One of the successes of the Program is measured by the net incremental oil and gas royalty revenues generated to the Province that are directly associated with the projects approved under the Program.

Return on investment from each instalment grows over time as the wells drilled continue to produce and new wells are developed because the new road or pipeline infrastructure is in place.

Program Results

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Given the success of the Program, the Province approved a new $120 million allocation in infrastructure royalty credits for the 2014 Program.

The $120 million allocation is the maximum amount of infrastructure royalty credits available.

The RFA for the 2014 Program began on February 25, 2014 and will close on April 16, 2014.

All of the RFA documents and templates for the 2014Program as well as a new RFA tutorial may be found at:

www.empr.gov.bc.ca/OG/oilandgas/royalties/infdevcredit/Pages/default.aspx

Current Instalment of the Program

For more information, please visit our website at:

www.em.gov.bc.ca/OG/oilandgas/royalties/infdevcredit/Pages/default.aspx