Natural Gas Liquids and ISC Questions and Answers

The following questions were asked by Industry at Town Hall training sessions on Natural Gas Liquids (NGLs) and In-Stream Components (ISCs), held by the Department of Energy, for the stakeholders. Approximately 250 individuals attended the presentations held in Calgary from June to September 2002. These sessions were used to encourage questions and have advisors explain how the NGL changes would impact royalty reporting.

These questions from industry are provided for your information:

  • the questions are related mostly to the changes in volumetric reporting
  • to the revisions in the calculation of the Crown Royalty share resulting from the recognition of ISCs within the gas stream
  • to the revised prices and royalty rates
  • to the modifications in data retrieval in Registry and their impact on royalty reporting by industry clients

Raw Gas Allocation (RGA) Information submissions

When does a client submit an RGA? Is the seller exempt from submitting an RGA if he or she is selling raw gas and not residue gas?
When a company sells raw gas at the wellhead, and does not operate a disposition facility, does it still need to file an RGA?
If the same company sells gas downstream of a shallow cut plant, and the gas goes to a deep cut plant, this gas is considered processed gas. Is an RGA required? If this company does not operate any facilities, does it file volumetric ISC submissions?
If a company processes its gas at both the shallow cut plant and the deep cut plant and sells its gas at the Alberta border, is an RGA required and does the ISC have to be reported?
Why are sellers of raw gas, rather than purchasers, required to submit an RGA in the Registry?
Do downstream operators and purchasers have a liability if upstream sellers don't submit an RGA?
How often are RGAs submitted? (Static vs. Dynamic)
What supporting details does Audit require to support the ISC factors on the RGA?

In-Stream Components (ISC) Information submissions

How often are clients expected to submit ISC volumetrics?
Carbon Dioxide (CO2-1C) and the forward products such as inerts are not required for ISC balancing/reporting. However, some of their products (components) have heat value. Why are they not reported?
If gas were sent from a NOVA pipeline to an injection facility (IF), would ISC filing be necessary, and if so, who would be responsible for this submission? What would happen if there were no other receipts at the IF?
Who is responsible for filing the ISCs, when gas is delivered to a fractionation facility?
Is ISC balancing done only at Meter Stations?
Can Gas volume and energy be submitted separately from the corresponding ISC volume and energy?
How is the ISC heat calculated? How were the heat value ranges determined? Will a submission be rejected if the heat is not within the range on the table?
How is the ISC breakdown reported for non-reporting pipelines? What is the source of the ISC breakdown coming from a non-reporting facility such as the Pipeline Alliance? Would such situations be subject to audit?

Client Impact

Are ISC imbalances shown immediately, upon entry in the Registry?
When there are ISC imbalances, why don't we reject submissions, rather than apply defaults? Will the owners be notified of the defaults and if so, when?
How often does the CSO have to perform a composition analysis? Are there any stipulations and how often do they change?
Do pipeline receipts provide the necessary ISC component breakdown? Is there a compliance mechanism to ensure this is provided? How does the producing facility operator source the ISC composition for non-reporting pipelines?
Can a service provider upload ISC dispositions to the Registry?
All IF activity influences the valuation of the FAP and the net Gas Transportation Adjustment. Could producers' FARR% be affected by another party delivering to an IF? Could transportation allowances be diluted by others delivering to a larger sale?
What is an Included Pipeline?
What is the meter station factor? When did we begin to use it?
Why implement this policy when products are already extracted as much as they can be extracted? This is a concern for those who are delivering out of the province for extraction. Is the Crown is penalizing a large group for a small group's problem?

Rates and Prices

How are the reference prices calculated?
Why is the ISC price different from the extracted product?
Will the ISC reference price be consistent with the extracted product reference price? If their prices are different, how will the ISC R% be the same as the extracted product R %?
Why is raw gas used as lease fuel valued at 100% of the Gas Reference Price, when subsequently processed raw gas is valued at 80% of the reference price?
When is the Gas select price available?
How is the minimum of 15% established for Propane and Butane royalty rates?
Why does the '40' in the Royalty formula remain constant for gas when the formulas for other products change as per maximum and minimum?

Client Information

How will clients know the Heat Value Range?
Will the Department publish the ISC royalty rates and prices?
Will the Department publish the FARR% and FAP information?
Will the Crown Invoice and Crown Royalty Detail (CRD) change and will the supporting reports be available on the Registry in the same way as the Invoice/CRD is?
Will the ISC Balancing Discrepancy Notification be available in the Registry?
Who is the contact for Registry formats?
Will the Department consider calculating facility average royalty rates and prices at a client/facility level?
How will inventories be dealt with in the Registry? Will the negative inventories be accepted or not?