Bitumen Valuation Methodology (Ministerial) Regulation

Link to law: http://www.qp.alberta.ca/1266.cfm?page=2008_232.cfm&leg_type=Regs&isbncln=9780779778553&display=html
Published: 2009

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AR 232/2008 BITUMEN VALUATION METHODOLOGY (MINISTERIAL) REGULATION (Consolidated up to 341/2009)
ALBERTA REGULATION 232/2008
Mines and Minerals Act
BITUMEN VALUATION METHODOLOGY (MINISTERIAL) REGULATION
Table of Contents
                1       Interpretation
                2       Hardisty Bitumen Price
                3       BVM Blend volume                 4       BVM Dilbit Value
                5       Transportation Allowance
                6       Expiry
                7       Coming into force
Interpretation
1(1)  In this Regulation,
                                 (a)    “dilbit” means a blend of heavy crude oil or cleaned crude bitumen mixed with diluent in order to meet pipeline viscosity and density specifications, where the density of the diluent included in the blend is less than 800 kg/m3;
                                 (b)    “dilbit fraction”, in respect of a month, means the ratio of the volume of dilbit received during the month at the Hardisty WCS blending facility over the aggregate of all volumes of dilbit and synbit received during the month at the facility;
                                 (c)    “diluent” has the meaning given to it in the Oil Sands Royalty Regulation, 2009 but
                                           (i)    in relation to dilbit, the diluent will usually be condensate, and
                                          (ii)    in relation to synbit, the diluent will usually be synthetic crude oil;
                                 (d)    “Floor Price”, in respect of a month, means the greater of
                                           (i)    $10 per m3, and
                                          (ii)    the simple average of the weekly Mexico Maya Spot Prices FOB for the month, expressed in Canadian dollars per m3, minus $250 per m3;
                                 (e)    “four‑month rolling average dilbit fraction”, in respect of a month, means the simple average of the dilbit fractions for the month and the 3 immediately preceding months;
                                  (f)    “four‑month rolling average synbit premium”, in respect of a month, means the simple average of the synbit premiums for the month and the 3 immediately preceding months;
                                 (g)    “Hardisty WCS blending facility” means the terminal and related facilities located at Hardisty, Alberta and managed by Husky Energy Inc. at which WCS is produced;
                                 (h)    “NQ”, in respect of a Project for a month or Period, means
                                           (i)    in the case of blended bitumen described in section 32(6)(a)(i) of the Oil Sands Royalty Regulation, 2009, the volume of cleaned crude bitumen contained in the volume of blended bitumen determined by deducting from the production quantity of the Project for the month or Period, respectively, of such blended bitumen, the third party disposition quantity of the Project for the month or Period, respectively, of such blended bitumen, or
                                          (ii)    in the case of cleaned crude bitumen described in section 32(b)(a)(ii) of the Oil Sands Royalty Regulation, 2009, the volume of the cleaned crude bitumen determined by deducting from the production quantity of the Project for the month or Period, respectively, of such cleaned crude bitumen, the third party disposition quantity of the Project for the month or Period, respectively, of such cleaned crude bitumen;
                                  (i)    “Project CCB”, in respect of a Project for a month, means cleaned crude bitumen obtained pursuant to the Project and delivered at a royalty calculation point for the cleaned crude bitumen during the month, whether as part of blended bitumen or otherwise;
                                  (j)    “synbit” means a blend of heavy crude oil or cleaned crude bitumen mixed with diluent in order to meet pipeline viscosity and density specifications, where the density of the diluent included in the blend is 800 kg/m3 or more;
                                 (k)    “synbit premium”, in respect of a month, means the equalization premium paid for the month for crude bitumen based synbit over crude bitumen based dilbit received during the month at the Hardisty WCS blending facility;
                                  (l)    “WCS” means the blended crude oil called “Western Canadian Select” comprised mostly of cleaned crude bitumen and diluent;
                                (m)    “WCS index”, in respect of a month, means the amount calculated as the WCS index for the month pursuant to subsection (3) or the amount otherwise specified under subsection (4).
(2)  Sections 1, 2, 3, 6, 32, 48 and 50 of the Oil Sands Royalty Regulation, 2009 and Division 2 of Part 2 of the Oil Sands Allowed Costs (Ministerial) Regulation apply in respect of this Regulation unless otherwise specified in this Regulation or otherwise required by the context or by necessary implication.
(3)  Subject to subsection (4) and unless the Minister specifies otherwise in any particular case,
                                 (a)    the density of Project CCB reported to the Minister by the operator of the Project shall be as measured by the operator of the Project in accordance with section 6 of the Oil Sands Royalty Regulation, 2009,
                                 (b)    the following amounts referred to in this Regulation shall be as reported for each month to the Minister by Canadian Natural Resources Limited as the representative for the WCS founders which include, in addition to Canadian Natural Resources Limited, Talisman Energy Inc., Petro‑Canada and EnCana Corporation:
                                           (i)    the four-month rolling average dilbit fraction;
                                          (ii)    the four-month rolling average synbit premium;
                                         (iii)    the WCS density as defined in section 3(4),
                                 (c)    the WCS index for each month shall be the weighted average, based on trading volumes, of the “WCS‑WTI” index published by Natural Gas Exchange Inc. for that month, and the “WCS” index published by Net Energy Inc. for that month, as calculated by the Minister,
                                 (d)    the following shall be as determined for each month by the Equalization Steering Committee and as published on the website of the Canadian Association of Petroleum Producers:
                                           (i)    the Condensate Allowance Price;
                                          (ii)    the Condensate (CRW) Density,
                                     and
                                 (e)    the weekly Mexico Maya Spot Price FOB shall be as published by the Energy Information Administration of the U.S. Government.
(4)  If any item referred to in subsection (3) reported to the Minister or published ceases to be so reported or published, or if the Minister is of the opinion that any such item has ceased to be appropriate in relation to how it is used in this Regulation, the Minister may specify an alternative to the item, and the alternative shall be used in lieu of that item for the purposes of this Regulation.
(5)  The simple average of the weekly Mexico Maya Spot Prices FOB for a month referred to in subsection (3)(e), the synbit premium for a month and the BVM Dilbit Value for a month referred to in section 4(1) shall be converted from U.S. dollars per barrel to Canadian dollars per m3, using
                                 (a)    a conversion factor of 6.29234 barrels per m3, and
                                 (b)    the simple average of the daily actual USD/CAD (noon) exchange rates for the month published by the Bank of Canada, rounded to 5 decimal places.
AR 232/2008 s1;341/2009
Hardisty Bitumen Price
2   The Hardisty Bitumen Price for a Project for a month for the purposes of section 32(6)(a) of the Oil Sands Royalty Regulation, 2009 is the greater of
                                 (a)    the Floor Price, and
                                 (b)    the price determined for the month in accordance with the following formula:
HBP = [QBVM Blend x BVM Dilbit Value] - [QBVM Diluent x CRWP]
where
HBP                              is the Hardisty Bitumen Price for the Project for the month;
QBVM Blend              is the BVM Blend volume for the Project for the month determined under section 3;
BVM Dilbit Value       is the BVM Dilbit Value for the month determined under section 4;
QBVM Diluent           is the BVM Diluent volume for the Project for the month determined under section 3(2);
CRWP                          is the amount determined as the Condensate Allowance Price for the month.
BVM Blend volume
3(1)  The BVM Blend volume for a Project for a month for the purposes of section 2 is the volume of blended bitumen produced by blending one cubic metre of Project CCB obtained during the month with the BVM Diluent volume for the Project for the month determined in accordance with subsection (2).
(2)  The BVM Diluent volume for the purposes of subsection (1) is the volume of condensate having a density equal to the Condensate (CRW) Density for the month that must be blended with one cubic metre of Project CCB in order for the density of the resulting blended bitumen to be equal to the BVM Dilbit density determined for the month in accordance with subsection (4).
(3)  The BVM Blend volume referred to in subsection (1) shall be calculated in accordance with chapter 12.3 of the Manual of Petroleum Measurement Standards published by the American Petroleum Institute.
(4)  The BVM Dilbit density for a month is the amount determined in accordance with the following formula:
BVMDD = WCS density ‑ DDA
where
BVMDD                      is the BVM Dilbit density for the month;
WCS density              is the monthly volume weighted average density of all WCS delivered to pipelines during the month from the Hardisty WCS blending facility;
DDA                            is the dilbit density adjustment determined for the month in accordance with subsection (5).
(5)  The dilbit density adjustment for a month is the amount determined in accordance with the following formula:
DDA = 12 kg/m3 x [1 - FMDF]
where
DDA                       is the dilbit density adjustment for the month;
FMDF                    is the four‑month rolling average dilbit fraction for the month.
BVM Dilbit Value
4(1)  The BVM Dilbit Value for a month for the purposes of section 2 is the difference between
                                 (a)    the WCS Settlement Price for the month determined under subsection (2), and
                                 (b)    the BVM Dilbit Value adjustment for the month determined under subsection (3)
converted to Canadian dollars per m3.
(2)  The WCS Settlement Price for a month is the sum of
                                 (a)    the simple average of the WTI prices for the trading days of the month where
                                           (i)    the WTI price for a trading day is the closing price for the day of the prompt month contract of Light Sweet Crude Oil (CL1) as traded in NYMEX, and
                                          (ii)    a trading day is a day during which a prompt month contract referred to in subclause (i) is traded in NYMEX,
                                     and
                                 (b)    the WCS index for the month.
(3)  The BVM Dilbit Value adjustment for a month is the product of
                                 (a)    the four‑month rolling average synbit premium for the month, and
                                 (b)    the difference between
                                           (i)    1, and
                                          (ii)    the four‑month rolling average dilbit fraction for the month.
Transportation Allowance
5(1)  In this section,
                                 (a)    “aggregate transportation rate”, in respect of a removal pipeline of a Project, means, for a month,
                                           (i)    the transportation rate for the month determined under subsection (3), (5) or (6), as the case may be,  for the removal pipeline, where the removal pipeline is a single pipeline, or
                                          (ii)    the sum of the transportation rates for the month determined under subsection (3), (5) or (6), as the case may be, for each pipeline that comprises a part of the removal pipeline, where the removal pipeline is comprised of a series of 2 or more connected pipelines;
                                 (b)    “diluent pipeline”, in respect of a Project for a month, means a pipeline, if any, that is capable of transporting  diluent to a place on or near the Project lands during the month from another point on or near the route of the removal pipeline of the Project for the month, but does not include such a pipeline for a month during which a pipeline described in subsection (5)
                                           (i)    is the removal pipeline of the Project for the month, or
                                          (ii)    is a part of the removal pipeline of the Project for the month and is capable of taking delivery of crude bitumen at a place on or near the Project lands;
                                 (c)    “end”, in respect of a pipeline that is the whole or a part of a removal pipeline of a Project, means the point on the pipeline closest to Hardisty, Alberta or Edmonton, Alberta, as the case may be;
                                 (d)    “removal pipeline”, in respect of a Project, means each pipeline, or each series of 2 or more connected pipelines, that is capable of transporting cleaned crude bitumen, or oil sands products obtained from cleaned crude bitumen, from a place on or near the Project lands to a point at or near Hardisty, Alberta or Edmonton, Alberta, regardless of
                                           (i)    whether the cleaned crude bitumen to be transported would be transported as part of blended bitumen or otherwise, and
                                          (ii)    whether the oil sands products so obtained and to be transported are obtained at one or more processing plants located on or near the route of the pipeline or series of pipelines, as the case may be, between the royalty calculation point of the Project for cleaned crude bitumen and the point at or near Hardisty, Alberta or Edmonton, Alberta;
                                 (e)    “removal pipeline of the Project for the month” means the removal pipeline of the Project that has for a month the lowest aggregate transportation rate relative to any other removal pipeline of the Project;
                                  (f)    “tariff”, in respect of a pipeline that is a removal pipeline or diluent pipeline in respect of a Project, means
                                           (i)    the tariff setting out the charges for transportation service on the pipeline, where the transportation service would, if obtained by the lessee or operator of the Project, be obtained pursuant to an arm’s length transaction, or
                                          (ii)    the amount determined under Division 2 of Part 2 of the Oil Sands Allowed Costs (Ministerial) Regulation as the cost of transportation service on the pipeline, in any other case.
(2)  The transportation allowance for a Project for a month for cleaned crude bitumen referred to in section 32(6)(a)(i) and (ii) of the Oil Sands Royalty Regulation, 2009 is the sum of
                                 (a)    the aggregate transportation rate for the month for the removal pipeline of the Project for the month, and
                                 (b)    the transportation rate determined under subsection (8) or (9) for the month for the diluent pipeline, if any, for the Project for the month.
(3)   Subject to subsection (4), the transportation rate for a month of a pipeline that comprises the whole or a part of a removal pipeline of a Project and that transports dilbit or synbit is the amount determined in accordance with the following formula:
BRC + (.754 x GRC)             CCBQ
where
                                      BRC     is the amount that would be charged under the tariff for the pipeline to transport during the month the volume of dilbit determined by multiplying the BVM Blend volume for the Project for the month determined under section 3 by the NQ for the Project for the month;
                                       GRC    is the amount that would be charged under the tariff for the pipeline to transport during the month the volume of dilbit equal to the volume of diluent that would be contained in the volume of dilbit referred to in the definition of BRC;
                                    CCBQ    is the NQ for the Project for the month.
(4)  In determining the transportation rate for a month for a pipeline under subsection (3),
                                 (a)    the transportation service capacity contracted for on the pipeline to transport the volumes of dilbit referred to in the definitions of BRC and GRC in subsection (3) shall be considered to be equal to the aggregate of those volumes, and
                                 (b)    GRC for the month is zero if the pipeline referred to in subsection (3) is the whole or a part of the removal pipeline of the Project for the month and there is a diluent pipeline for the Project for the month that is capable of transporting diluent during that month from a place at or near the end of the pipeline referred to in subsection (3) to a place on or near the Project lands.
(5)  The transportation rate for a month of a pipeline that comprises the whole or a part of a removal pipeline of a Project and that transports cleaned crude bitumen rather than dilbit or synbit is the amount determined by dividing
                                 (a)    the amount that would be charged under the tariff for the pipeline to transport during the month the NQ for the Project for the month,
by
                                 (b)    the NQ for the Project for the month.
(6)  Subject to subsection (7), the transportation rate for a month of a pipeline that comprises the whole or a part of a removal pipeline of a Project and that transports synthetic crude oil is the amount determined in accordance with the following formula:
TRC + (.92 x DRC)
            CCBQ
where
                                     TRC      is the amount that would be charged under the tariff for the pipeline to transport a volume of synthetic crude oil having a density of not less than 800 kg/m3 and not more than 875 kg/m3 and equal to the volume of dilbit determined by multiplying the BVM Blend volume for the Project for the month determined under section 3 by the NQ for the Project for the month;
                                     DRC     is the amount that would be charged under the tariff for the pipeline to transport a volume of synthetic crude oil meeting the density requirements specified in the definition of TRC and equal to the volume of diluent that would be contained in the volume of dilbit referred to in the definition of TRC;
                                    CCBQ    is the NQ for the Project for the month.
(7)  In determining the transportation rate for a month for a pipeline under subsection (6),
                                 (a)    the transportation service capacity contracted for on the pipeline to transport the volumes of synthetic crude oil referred to in the definitions of TRC and DRC in subsection (6) shall be considered to be equal to the aggregate of those volumes,
                                 (b)    the components of the tariff for the pipeline that vary according to the density of the synthetic crude oil transported on the pipeline shall be multiplied by a factor of 1.22, and
                                 (c)    DRC for the month is zero if the pipeline referred to in subsection (6) is the whole or a part of the removal pipeline of the Project for the month and there is a diluent pipeline for the Project for the month that is capable of transporting diluent during that month from a place at or near the end of the pipeline referred to in subsection (6) to a place on or near the Project lands.
(8)  Subject to subsection (9), the transportation rate for a month of the diluent pipeline for a Project for the month is the amount determined by dividing
                                 (a)    the amount, if any, that would be charged under the tariff for the diluent pipeline to transport to the Project during the month the volume of diluent determined by multiplying the NQ of the Project for the month by the BVM Diluent volume for the Project for the month determined under section 3(2),
by
                                 (b)    the NQ for the Project for the month.
(9)  The transportation rate for a month of the diluent pipeline for the Project for the month is zero if the cost of transporting the volume of diluent referred to in subsection (8) on the pipeline during the month is included in the transportation rate determined under subsection (3) for a pipeline that is the whole or a part of the removal pipeline of the Project for the month.
Expiry
6   For the purpose of ensuring that this Regulation is reviewed for ongoing relevancy and necessity, with the option that it may be repassed in its present or an amended form following a review, this Regulation expires on November 30, 2018.
Coming into force
7   This Regulation comes into force on January 1, 2009.