Information Letter - Independent Audits Relating to Oil Trucking Costs

May 2017

A. Introduction

The purpose of this Information Letter is to describe Indian Oil and Gas Canada’s (IOGC) Policy relating to oil and gas mineral leases that contain a clause requiring an independent audit of actual oil trucking costs. This Information Letter replaces the August 2008 Information Letter and all previous Information Letters.

B. Background

Many of the mineral lease agreements signed by Indian Oil and Gas Canada (the lessor), oil and gas companies (the lessees) and various Indian bands, have stated that the net royalty payable on oil is equal to the gross royalty on oil less the Trucking Costs for Oil. These trucking costs are then defined as either "...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.

Pursuant to some of these leases, the lessee is required to pay for an independent audit of the actual trucking costs. This audit is to be carried out by an independent auditor and this audit is to be paid for by the lessee. This independent audit is to be carried out every two years, or as indicated in the lease. Copies of all completed and successfully reviewed independent audit reports are to be sent to the lessor and Band Council free of charge.

Completed independent audit reports must be submitted within the appropriate timelines and they must contain complete and acceptable data and the report must meet Canadian Auditing Standards. Failure to comply with timelines, completeness, acceptability, and standards may result in compliance actions including but not limited to disallowing all trucking deductions for the independent audit period.

For further information on the Independent Audits of Trucking Oil Policy, please contact IOGC:

Indian Oil and Gas Canada / Pétrole et gaz des Indiens du Canada
100 – 9911 boul. Chiila Blvd.
Tsuu T’ina AB T2W 6H6
Phone / Téléphone: (403) 292-5625
Fax / Télécopieur: (403) 292-5618

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