The Financial Analysis and Royalty Administration (FARA) division within the Department of Industry, Tourism and Investment (ITI) administers the oil and gas royalty regime for onshore petroleum production in the Northwest Territories (NWT).
The Petroleum Resources Act and Petroleum Lands Royalty Regulations govern the setting and collecting of royalties in respect of petroleum produced from public lands and prescribes the royalty rates, the calculation, reporting and associated interest or penalties.
The royalty regime is a generic profit-sensitive regime that is robust and competitive and provides industry with full cost recovery. As a profit-sensitive regime it takes a higher share from the most profitable developments and a lower share from less profitable developments. It is robust, as it adjusts automatically to changes in the price or quality of the resources. It is competitive with other jurisdictions, and with other investment options, providing an attractive return that encourages northern investment.
A combination of "resource rent" royalty (royalty as a share of net revenue after payout) and a minimum ad valorem royalty (royalty as a share of the value of the resource) allows risks and profits to be shared.