Excise Tax Act

Marginal note:Definitions

• 162 (1) The definitions in this subsection apply in this section.

  estimated reserves

  estimated reserves of minerals means the estimated quantities of minerals that geological and engineering data demonstrate, with reasonable certainty, to be recoverable under existing economic and operating conditions. (réserves estimées)

  farm-out agreement

  farm-out agreement means an agreement referred to in subsection (4). (accord d’amodiation)

  natural resource right

  natural resource right means

  • (a) a right to explore for or exploit a mineral deposit;

  • (b) a right of entry or user relating to a right referred to in paragraph (a); or

  • (c) a right to an amount computed by reference to the production (including profit) from, or to the value of production from, a mineral deposit. (droit relatif à des ressources)

  specified mining or well-site equipment

  specified mining or well-site equipment, in relation to the exploration or development of unproven property under a farm-out agreement, means

  • (a) equipment, installations and structures for use at a mine site in the production of minerals from the mine and not in the milling, smelting, refining or other processing of the minerals after production; and

  • (b) equipment, installations and structures for use at a well site in the production of minerals from the well, including a heater, dehydrator or other well-site facility for the initial treatment of substances produced from the well to prepare such production for transportation but excluding

    • (i) any equipment, installation, structure or facility that serves or is intended to serve a well that has not been drilled in the course of the exploration or development under that agreement, and

    • (ii) any equipment, installation, structure or facility for use in the refining of oil or the processing of natural gas including the separation therefrom of liquid hydrocarbons, sulphur or other joint products or by-products. (matériel déterminé)

  unproven property

  unproven property means real property for which estimated reserves of minerals have not been attributed. (bien non prouvé)

• Marginal note:Natural resources

  (2) For the purposes of this Part, the supply of

  • (a) a right to explore for or exploit a mineral deposit, a peat bog or deposit of peat or a forestry, water or fishery resource,

  • (b) a right of entry or user relating to a right referred to in paragraph (a),

  • (c) a right to an amount computed by reference to the production (including profit) from, or to the value of production from, any such deposit, bog or resource, or

  • (d) a right to enter or use land to generate, or evaluate the feasibility of generating, electricity from the sun or wind,

  shall be deemed not to be a supply and any consideration paid or due, or any fee or royalty charged or reserved, in respect of the right shall be deemed not to be consideration for the right.

• Marginal note:Exception

  (3) Subsection (2) does not apply to a supply of a right to take or remove forestry products, products that grow in water, fishery products, minerals or peat, a right of entry or user relating thereto or a right referred to in paragraph (2)(d), if the supply is made to

  • (a) a consumer; or

  • (b) a person who is not a registrant and who acquires the right in the course of a business of the person of making supplies of the products, minerals, peat or electricity to consumers.

• Marginal note:Exploration and development of mineral deposits

  (4) For the purposes of this Part, if, under an agreement in writing between a person (in this subsection referred to as the “farmor”) and another person (in this subsection referred to as the “farmee”), the farmor transfers to the farmee particular natural resource rights, or portions of them, relating to unproven property in consideration or part consideration for the farmee undertaking the exploration of the property for mineral deposits, providing information (or the right to it) gathered from the exploration and, subject to any conditions that may be provided in the agreement, developing the property for the production of minerals,

  • (a) the value, as consideration, of any property or service given by the farmor to the farmee under the agreement is deemed to be nil to the extent that the property or service is given as consideration for any of the following (each of which is referred to in this subsection as the “farmee’s contribution”):

    • (i) the undertaking of that exploration or development,

    • (ii) the provision of that information (or the right to it), and

    • (iii) any transfer under the agreement by the farmee to the farmor of any interest in specified mining or well-site equipment that is used by the farmee exclusively in that exploration or development;

  • (b) the value of the farmee’s contribution as consideration for any property or service given by the farmor to the farmee under the agreement is deemed to be nil; and

  • (c) if part of the consideration given by the farmor for the farmee’s contribution is a service or property (each of which is referred to in this paragraph as the “farmor’s additional contribution”) that is not a natural resource right relating to unproven property,

    • (i) the farmee is deemed to have made, at the place at which the unproven property is situated, a taxable supply of a service to the farmor separate from any supply by the farmee under the agreement and that service is deemed to be consideration for the farmor’s additional contribution,

    • (ii) the value of that service and the value of the farmor’s additional contribution as consideration for the supply of that service are each deemed to be equal to the fair market value of the farmor’s additional contribution determined at the time (in this paragraph referred to as the “time of transfer”) that

      • (A) if the farmor’s additional contribution is a service, performance of the service commences, and

      • (B) in any other case, ownership of the farmor’s additional contribution is transferred to the farmee,

    • (iii) all of the consideration for the farmor’s additional contribution and the consideration for the service deemed to have been supplied by the farmee are deemed to become due at the time of transfer, and

    • (iv) if, in addition to the farmee’s contribution, the farmee supplies to the farmor other property or services (other than the service deemed under subparagraph (i) to have been supplied) for which part of the consideration is the farmor’s additional contribution, the value of the consideration for the supply of the other property or services is deemed to be equal to the amount, if any, by which the value of that consideration, determined without reference to this subparagraph, exceeds the fair market value of the farmor’s additional contribution.