Information letter: Independent audits relating to oil trucking costs

Net royalty

Many of IOGC's oil subsurface contracts state that the net royalty payable on oil is equal to the gross royalty on oil less the eligible trucking costs for oil.

Trucking cost clause definitions

In these subsurface contracts, trucking costs are defined as either:

• as a written pre-agreed flat rate for trucking costs, or
• the actual trucking costs incurred on a monthly basis for trucking clean oil only, from the Point of Measurement (the production tankage) to the nearest available pipeline.

Independent audit requirements of actual trucking costs

• The subsurface contract holder is required to pay for, complete, and submit an independent audit of the actual trucking costs to the First Nation Chief and Council and IOGC for subsurface contracts with a trucking cost clause.
• This audit is required to be completed by an independent auditor
• This independent audit is to be completed every 2 years, or as indicated in the subsurface contract.
• Completed independent audit reports must:
  • be submitted within appropriate timelines
  • contain complete and acceptable data
  • meet Canadian Auditing Standards
• Failure to comply with IOGC timelines, completeness, acceptability, and standards may result in compliance and enforcement actions including but not limited to disallowing all trucking deductions for the independent audit period.

Background

• This information letter replaces the May 2017 Information Letter and all previous trucking cost-related information letters.
• This version contains updated simplified wording and an updated contact link from the May 2017 version.

Additional information

• Contact us