Volume model to calculate petroleum royalty

Royalty is calculated by applying a prescribed rate to the volume of liable petroleum produced during a return period.

Different rates apply to the 4 classes of petroleum:

• domestic gas
• supply gas
• project gas
• liquid petroleum.

Petroleum is produced when it is released or recovered to ground level from a natural underground reservoir. Your petroleum royalty liability is based on the volume of liable petroleum produced in a return period.

The volume model is used for calculating petroleum royalty. Under this model, you need to determine:

• the total liable volume of petroleum produced during the period
• the classification (e.g. domestic gas, supply gas, project gas or liquid petroleum)
• the royalty rate that applies to each class of petroleum.

These position papers will help you to determine your royalty liability under the volume model:

• Classification of petroleum
• Measurement of petroleum
• Determination of petroleum royalty rates.

Swap arrangements

Swap arrangements may be relevant for determining the classification of gas and average sales price for petroleum.

See the Commissioner of State Revenue’s determinations on swap arrangements.

Benchmark election

When calculating your petroleum royalty rates under the volume model, you may elect in your return form to use the benchmark price for a particular petroleum type as the average sales price on an ongoing basis. To end a benchmark election, you must complete an application to end benchmark election (Form R2.10). The Commissioner will consider the reasons why you want to end the election.

Also consider…

• Find out about petroleum and gas tenures.
• Read about penalties and interest.
• See the transitional arrangements for petroleum royalty.
• Learn about lodging royalty returns.
• Read the petroleum guide for QRO Online.