Royalties Order Regulations (P.E.I. Reg. EC537/85)

1. (1) Subject to section 4, the lessee shall pay to the Minister, for each Royalty on oil month that the land covered by the lease is producing oil, a royalty consisting of a percentage of the oil obtained from each well as specified in Schedule A. (2) Any sale of oil from a lease area shall include the royalty share Manner of payment belonging to the Minister, and, by the twenty-fifth day of the month following each quarterly period of each year that the lease is in effect, the lessee shall pay the Minister an amount equal to the royalty share sold in the name of the Minister. (EC537/85)

2. (1) Subject to section 4, the royalty on natural gas shall be ten Royalty on gas percentum of the selling price or fair market value at the time and place of production, and, by the twenty-fifth day of the month following each quarterly period of each year that the lease is in force, the lessee shall account to, and pay to, the Minister the royalty on natural gas accumulated during that period. (2) Where the Chief Officer, in his sole discretion, determines that Market value there is effectively no Prince Edward Island fair market value price for natural gas, the Alberta border price shall prevail. (EC537/85; 575/85)

3. The royalty on sulphur obtained by processing natural gas shall be ten Royalty on sulphur percentum of the selling price or fair market value at the time and place of production, less the lessor’s proportionate share of production, processing and transportation charges, and, by the twenty-fifth day of the month following each quarterly period of each year that the lease is in force, the lessee shall account to and pay to the Minister the royalty on these products accumulated during that period. (EC537/85)

4. No royalty is payable for oil or natural gas that is Exceptions (a) consumed by the lessee in direct connection with development work on the lease area; (b) returned to a formation; or (c) flared. (EC537/85) 1 2 Cap. O-5 Oil and Natural Gas Act Updated 2002 Royalties Order Nominal royalty 5. Notwithstanding sections 1 and 2, the Minister may, with the approval of the Lieutenant Governor in Council, enter into agreements providing for payment by the lessee of a nominal royalty fee on the leasehold and for the term specified in the agreement. (EC122/97) 2 Updated 2002 Oil and Natural Gas Act Cap. O-5 3 Royalities Order SCHEDULE A Monthly Production Rate of Royalty for in m3 the Month in m3 0 - 49m³ 5% 50 - 79m³ 5% of 50m³ + 7½% of remainder 80 - 109m³ 6% of 80m³ + 9½% of remainder 110 - 139m³ 7% of 110m³ + 11½% of remainder 140 - 179m³ 8% of 140m³ + 13 % of remainder 180 - 219m³ 9% of 180m³ + 15 % of remainder 220 - 289m³ 10% of 220m³ + 114 % of remainder 290 - 719m³ 11% of 290m³ + 13½% of remainder 720 and over 12% (EC537/85) 3