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Non-refundable credits on amended periods

Last updated on June 26, 2024

Non-refundable credits are incentives for producers of oil and natural gas to encourage operational activity and investment in infrastructure, clean infrastructure, and clean growth infrastructure. If your company has received a credit under an Oil and Natural Gas Royalty Program, it may be applied to offset royalties due.

Non-refundable credits and payments are applied to royalties using these rules:

  1. An on-time payment or non-refundable credit is applied before a late payment or non-refundable credit
  2. If both are on-time, the payment is applied before the non-refundable credit
  3. If both are late, they are applied in the order they become available

Amendments to a period will result in payments and non-refundable credits for that period being re-evaluated and applied based on the above rules starting with the oldest period being amended.

Increased royalty due

If a prior period is amended and your royalty due increases, non-refundable credits that were in effect at the original due date of the royalty, and are still available at the time of your amendment, will automatically be applied against the additional royalty amount. As a result, if the non-refundable credits are sufficient to cover the increase in royalty, no payment is required.

Example

Assume you amend your January 2018 production gas period on March 2, 2019, and you have non-refundable credits to offset the additional amount due (the non-refundable credit was granted to you on or before April 25, 2018):

  • The non-refundable credits available in March 2019 are automatically applied against your additional royalty due.  Any credits previously applied against months after January 2018 are not changed or impacted.
  • If you do not have enough credits to cover the full amount of additional royalty due, interest is charged on the outstanding amounts from April 25, 2018 (payment due date). However, if an additional infrastructure credit was granted after April 25, 2018 and is still available by March 2019, the credit is used to offset your outstanding balance, and interest is charged from the payment due date to the date when the credit was granted.

Decreased royalty due

If a prior period is amended and your royalty due decreases, and non-refundable credits were applied to offset the entire royalty, your non-refundable credit balance will increase based on the amount of credit used to reduce the royalty for that period.

If a prior period is amended and your royalty due decreases, and non-refundable credits were applied to reduce some but not all of the royalty, your non-refundable credit balance increases by the amount of credit that had been previously applied. The remaining overpayment will offset the oldest debt within the oldest period first. If there is no debt, your account remains in a credit position until new debt is due.

Example

Assume you amend your January 2018 production period for gas, on March 2, 2019. The royalty was due on April 25, 2018 (April 10, 2018 invoice):

  • If you reduced your royalty to zero using your non-refundable credit, your credits are returned to your non-refundable credit account and become available to offset royalty debt.
  • If your January 2018 royalties were partially reduced from the use of your non-refundable credits, your credits are returned to your non-refundable credit account first. If the decrease in royalty resulting from the amendment exceeds the non-refundable credit used for that period, the overpaid amount is credited to your account and applied to your oldest debt, as described above.

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