PETROLEUM RULES REVAMPED FOR CANADIAN INDUSTRY

Rules have changed for the Canadian petroleum industry.

The federal Government unveiled a new royalty structure for frontier areas, including the Beaufort Sea and Mackenzie Delta.

And British Columbia made substantial changes to its oil and gas regulations affecting about 300 companies operating there. Revamped rules, effective immediately, include more than 400 changes.

FEDERAL ROYALTY

Under Ottawa's new frontier royalty system, companies will pay 1% of gross revenues initially plus another 1% every 18 months until revenues exceed project costs. Royalties will then rise to 30% of net revenues or 5% of gross, whichever is greater.

The regulations will allow explorers to claim a 1% allowance for capital costs, a 10% allowance for operating costs, and a 25% investment royalty credit.

The Canadian Petroleum Association (CPA) said the new royalty schedule in the Canada Petroleum Resources Act will allow companies to recover costs of expensive, long term projects before royalties rise to the top rate. The regulations went into effect last Dec. 12.

A permanent royalty level of 10% of gross revenues plus a progressive rate of 40% was in effect under the defunct National Energy Program. An interim royalty level of 1% was then established in 1985 after the NEP was scrapped.

The only significant project currently affected by frontier royalty levels is production from Panarctic Oils Ltd.'s Bent Horn oil field in the Arctic Islands. Small volumes of Bent Horn crude are produced on a seasonal basis.

BRITISH COLUMBIA

Major changes in British Columbia include:

Increased size of target areas for natural gas wells that will give companies more flexibility in choice of drilling locations.
Mandatory emergency planning zones and evacuation procedures for sour gas wells.
Clarification of reporting requirements for test hole drilling.
A ban on on-site burning of petroleum during reclamation to reduce emissions.

British Columbia Energy Minister Anne Edwards said the changes are intended to make operations safer for workers and to give industry more operational flexibility. She said the revised regulations will reduce environmental effects, improve resource conservation, and allow industry to use new technology.

CPA said it welcomed changes in drilling regulations that will make them similar to Alberta rules. It had no comment on changes to environmental and safety rules.