IMG January 2015 Newsletter

Some Subtleties of BC Production Reporting

Wayne Olson, P.Eng. Sr. Hydrocarbon Allocation Engineer Expert Allocation Services Inc.

In BC the regulatory environment has been developed by a small group of people who were responsible at the Oil and Gas Commission for determining the regulatory reporting requirements. Initially, these requirements were predicated upon the specific needs of BC rather than the collaboration of BC with any other jurisdiction. Many of the requirements stem from the unique BC Government laws and regulations that dictate the need for a specific reporting requirement such as the Provincial Fuel Tax and the Carbon Tax.

In these cases the specific amounts of gas that is consumed in each engine is taxed based upon the reporting of this fuel gas volume. As such if an operator has not been tracking the fuel gas volumes for their engines – all engines including those for pump jacks, Gen Sets and the like – then they are going to end up in contravention of the BC requirements for self-assessment and self-reporting. This can be quite a costly omission on the operator’s part. If they are unaware of these requirements, they will not have factored these costs into their third party processing fee calculations. Add to that situation the fact that the amounts are now due and payable by the Province especially post audit, there could also be penalties and interest amounts accruing to the government. This can have a doubling effect on the mid-streamers situation since they are unlikely to be able to recalculate and back charge for these lost revenues that they would otherwise have collected through their correct fee calculations.

Although the BC and Alberta requirements are very similar, the specifics of what gets reported on each type of production report are driven by these differences in the laws and regulatory needs. As such just understanding Directive 17 from Alberta is not adequate since an operator may end in non-compliance with the BC requirements. In some cases the penalties and interest that could be incurred are not referenced in the OGC documentation and therein lies the risk that an operator is exposed to.

Given that these requirements arise from non-OGC based requirements and regulations, some may say this is strictly speaking not a production accounting (PA) or measurement issue, however, I would suggest otherwise, since this information is readily available during the field data capture and measurement processes. It should also be noted that the estimation of determination of these “volume based” data are readily available at the time that the PA is competing their monthly activities. As such the best place to capture the required data and measurements is during the production accounting and measurement cycles each month. This is the most effective and efficient way to support a corporate commitment to be in compliance with all a jurisdictions regulatory requirements where the company is operating. Also, one should note that the data is at the very least similar to the PA data collected for the purposes of calculating and booking revenues and royalties so it is quite consistent with that environment.

Another area where BC differs in an even more subtle manner is the reporting of fuel and flare volumes particularly at a gas plant. In BC the general “rule” is that any gas volumes that are burned at the flare stack are considered flared volumes are not to be reported as fuel gas volumes. Here Alberta is less particular in this differentiation and is accepting of the reporting of volumes in either manner but most reporting in Alberta is as a fuel gas volume. A further subtle difference is that any gas volumes flared from upstream of the inlet separators are considered battery flared volumes and must be reported on the S-2 Report not on the BC-19 Report for the facilities involved. This arises from the fact that BC does not recognize a Gas Gathering System (GGS) as a type of facility that is legitimate in the BC reporting regime. Having said that, the BC regulator (the OGC) have accepted many PA systems that utilize the GGS facility type since most of these systems have been built to address the Alberta paradigm in this regard.

Another area that should be noted is that when the facility has a flare meter just upstream of the flare stack, any purge and tank blanket gas volumes supplied from the fuel gas system must be backed out of the fuel gas measurement volume for the facility or the flare volume depending upon the final destination of those gas volumes. As well, in some cases these flared volumes are sourced from upstream of the inlet metering and as such these volumes are considered battery flare not plant flare. These volumes need to be backed out of the plant flare and reported on the BC S-2 report and not the BC-19 report. Generally these volumes are small and as such in Alberta they are not considered for adjustment for the regulatory reports. This is not the case in BC, however, and they therefore do need to be accounted for and properly reported per the jurisdictions requirements.

In summary, the BC regulatory environment is somewhat unique in that many of the reporting requirements have been established based upon their own needs but by and large the two regimes (Alberta and BC) are very similar. However, this can mislead an operator or mid-streamer into a regulator mess that can cost many hours of extra work and possibly even lost revenue recoveries that they would otherwise have been entitled to. And don’t forget the corporate credibility and reputation factors that can arise from this as well with the provincial regulatory bodies.