Frontier Lands Petroleum Royalty Regulations

2 (1) In these Regulations,

abandonment and restoration

abandonment and restoration means activities, in respect of wells, production infrastructure and geological, geophysical and geochemical operations that were allowed capital costs of the project, relating to

• (a) the abandonment of a well,

• (b) the destruction, scrapping, removal, disassembling and decommissioning of production infrastructure,

• (c) the renewing, repairing, cleaning-up, remediation or other management of soil, water or sediment to the extent that the damage is consistent in scope and magnitude with any damage to the environment that would reasonably be expected where activities are conducted using good production practices so that the functions and qualities of the soil or water are comparable to those of its original, unaltered state, and

• (d) the monitoring of the effectiveness of the activities referred to in paragraphs (a) to (c); (abandon et restauration)

abandonment and restoration royalty trust

abandonment and restoration royalty trust means a trust certified under section 7; (fiducie de redevances pour l’abandon et la restauration)

Act

Act means the Canada Petroleum Resources Act; (Loi)

adjusted cumulative cost base

adjusted cumulative cost base[Repealed, SOR/2008-96, s. 3]

adjusted gross revenues

adjusted gross revenues[Repealed, SOR/2008-96, s. 3]

allocated

allocated[Repealed, SOR/2008-96, s. 3]

allowed capital costs

allowed capital costs of an interest holder of a production licence in relation to a project in respect of any month means, if there is only one interest holder, the allowed capital costs of the project or, if there is more than one interest holder, the allowed capital costs of the project attributed to that interest holder, that are

• (a) described in and calculated in accordance with Schedule I, and

• (b) incurred in that month; (coûts en capital déductibles)

allowed operating costs

allowed operating costs of an interest holder of a production licence in relation to a project in respect of any month means, if there is only one interest holder, the allowed operating costs of the project or, if there is more than one interest holder, the allowed operating costs of the project attributed to that interest holder, that are

• (a) described in and calculated in accordance with Schedule I, and

• (b) incurred in that month; (frais d’exploitation déductibles)

attributed

attributed means allocated in accordance with an applicable allocation agreement or reasonably allocated if no allocation agreement exists; (attribué)

capital cost adjustment

capital cost adjustment of an interest holder of a production licence in relation to a project means

• (a) in respect of a month preceding the month in which the project commencement date falls, an amount equal to five per cent of the allowed capital costs of the interest holder in relation to the project in respect of that month, and

• (b) in respect of the month in which the project commencement date falls and any month after that month, an amount equal to one per cent of the interest holder’s allowed capital costs in relation to the project in respect of that month, other than any amounts considered under subsection (2) to be an interest holder’s allowed capital cost in relation to the project in respect of the following month; (rajustement du coût en capital)

contribution deferral balance

contribution deferral balance of an interest holder of a production licence in relation to a project in respect of any month means the amount, if any, by which the aggregate, for that month and all preceding months, of all contributions used to defer an amount of royalty under section 6 exceeds the withdrawal of those contributions under section 6.1; (solde des apports servant au report de redevances)

cumulative adjusted gross revenues

cumulative adjusted gross revenues[Repealed, SOR/2008-96, s. 3]

cumulative capital cost adjustments

cumulative capital cost adjustments of an interest holder of a production licence in relation to a project in respect of any month means the aggregate of the capital cost adjustments of the interest holder for that month and the preceding months; (montant cumulatif des rajustements des coûts en capital)

cumulative cost base

cumulative cost base[Repealed, SOR/2008-96, s. 3]

cumulative costs

cumulative costs of an interest holder of a production licence in relation to a project in respect of any month means, subject to any adjustments arising from section 8, the aggregate of

• (a) the interest holder’s allowed capital costs in relation to the project for that month and the preceding months,

• (b) the interest holder’s allowed operating costs in relation to the project for that month and the preceding months,

• (c) the royalty payable by the interest holder in that month and the preceding months in respect of petroleum produced from the project lands,

• (d) the cumulative capital cost adjustments in respect of the costs referred to in paragraph (a),

• (e) the cumulative operating cost adjustments in respect of the costs referred to in paragraph (b), and

• (f) the interest holder’s cumulative return allowance in relation to the project in respect of that month; (montant cumulatif des coûts)

cumulative gross revenues

cumulative gross revenues of an interest holder of a production licence in relation to a project in respect of any month means the aggregate of the gross revenues of the interest holder in respect of that month and the preceding months; (montant cumulatif des revenus bruts)

cumulative operating cost adjustments

cumulative operating cost adjustments of an interest holder of a production licence in relation to a project in respect of any month means the aggregate of the operating cost adjustments of the interest holder for that month and the preceding months; (montant cumulatif des rajustements des frais d’exploitation)

cumulative return allowance

cumulative return allowance of an interest holder of a production licence in relation to a project in respect of any month means the aggregate of the return allowances for the months preceding that month; (montant cumulatif de l’allocation de rendement)

delineation well

delineation well means a well that is so located in relation to another well penetrating an accumulation of petroleum that there is a reasonable expectation that another portion of the accumulation will be penetrated by the first-mentioned well and that the drilling of the first-mentioned well is necessary in order to determine the commercial value of the accumulation; (puits de délimitation)

development plan

development plan means a development plan or an amended development plan approved pursuant to the Canada Oil and Gas Operations Act; (plan de mise en valeur)

development well

development well means a well that is so located in relation to another well penetrating an accumulation of petroleum that it is considered to be a well or part of a well drilled for the purpose of production or observation or for the injection or disposal of fluid into or from the accumulation; (puits d’exploitation)

discovery well

discovery well means the well drilled on a geological feature that indicates that a significant discovery has been made; (puits de découverte)

exploratory well

exploratory well means a well drilled on a geological feature on which a significant discovery has not been made; (puits d’exploration)

facility

facility means a gas plant or a transportation facility; (installation)

gas plant

gas plant means a facility for processing transportable petroleum by any process, including absorption, adsorption and refrigeration, designed to recover residue gas or gas plant products; (usine de traitement du gaz)

gross revenues

gross revenues of an interest holder of a production licence from petroleum produced from project lands means the gross revenues of the interest holder as determined in accordance with Schedule II; (revenus bruts)

Her Majesty

Her Majesty means Her Majesty in right of Canada; (Sa Majesté)

inflation index

inflation index means the monthly Consumer Price Index as published by Statistics Canada under the authority of the Statistics Act; (indice d’inflation)

investment royalty credit

investment royalty credit of an interest holder means twenty-five per cent of that portion of the qualified frontier exploration expenses claimed by the interest holder as Canadian exploration expenses under the Income Tax Act, as amended from time to time, and certified by the Minister pursuant to subsection 10(3); (crédit de redevance à l’investissement)

investment royalty credit balance

investment royalty credit balance of an interest holder in respect of a month means the amount, if any, by which the aggregate of all of that interest holder’s investment royalty credits exceeds the aggregate of all amounts deducted under subsection 3(3) in respect of the months preceding that month; (solde du crédit de redevance à l’investissement)

long-term government bond rate

long-term government bond rate in respect of any month means the average percentage yield, during the calendar year immediately preceding the calendar year in which that month falls, of securities issued by the Government of Canada maturing in over ten years, as published by the Bank of Canada in the Bank of Canada Review; (taux des obligations à long terme du gouvernement)

marketable condition

marketable condition[Repealed, SOR/2008-96, s. 3]

month of payout

month of payout of an interest holder of a production licence in relation to a project means the first month in respect of which the interest holder’s cumulative gross revenues in relation to the project are equal to or greater than the interest holder’s cumulative costs in relation to the project; (mois de recouvrement de l’investissement initial)

net revenues

net revenues of an interest holder of a production licence in relation to a project in respect of a month means the amount by which the interest holder’s gross revenues in that month exceed the aggregate of the interest holder’s

• (a) allowed capital costs in relation to the project in respect of that month,

• (b) allowed operating costs in relation to the project in respect of that month,

• (c) capital cost adjustment in relation to the project in respect of that month, and

• (d) operating cost adjustment in relation to the project in respect of that month; (revenus nets)

non-qualifying expense

non-qualifying expense means an expense

• (a) that is a Canadian exploration and development overhead expense within the meaning of section 1206 of the Income Tax Regulations, as amended from time to time, or

• (b) in respect of which a reimbursement, compensation or other payment is made, including any amount of assistance or benefit from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan, deduction from royalty or tax, investment allowance or any other form of assistance or benefit; (frais non admissibles)

operating cost adjustment

operating cost adjustment of an interest holder of a production licence in relation to a project in respect of any month means an amount equal to ten per cent of the allowed operating costs of the interest holder in relation to the project in respect of that month; (rajustement des frais d’exploitation)

point of production

point of production means the point at which transportable petroleum leaves production infrastructure; (point de production)

production facility

production facility[Repealed, SOR/2008-96, s. 3]

production infrastructure

production infrastructure means any equipment and buildings that are used for the production or treatment of petroleum from the reservoir and includes

• (a) equipment for natural pressure reduction, mechanical separation, heating, cooling, dehydration and compression, and

• (b) batteries, gathering lines, storage areas, tanks, landing areas, heliports and personnel accommodations; (infrastructure de production)

production month

production month means a calendar month in which petroleum is produced from project lands on one or more days in that month; (mois de production)

project

project means a project described in a development plan; (projet)

project commencement date

project commencement date means the date on which a project development plan is approved; (date de démarrage du projet)

project lands

project lands means the frontier lands, described in the production licence or licences issued for the purpose of producing petroleum from those lands in accordance with a project; (terres domaniales du projet)

qualified frontier exploration expenses

qualified frontier exploration expenses means the aggregate of all expenses that are incurred in the drilling or completing of an exploratory well, an exploratory probe or a delineation well that is located on frontier lands in respect of which the Act applies, or in preparing the site in respect of such a well or in the building of a temporary access road to the site, and that

• (a) are incurred on or before August 31, 2008,

• (b) do not exceed $5 million in respect of any one well,

• (c) are not non-qualifying expenses, and

• (d) are reasonable in the circumstances; (frais d’exploration admissibles sur des terres domaniales)

return allowance

return allowance of an interest holder of a production licence in relation to a project in respect of any month means the return allowance for that month calculated in accordance with section 9; (allocation de rendement)

transportable petroleum

transportable petroleum means petroleum that is sufficiently free from impurities and is otherwise in such a condition that it will be accepted for transportation by a transportation facility. (hydrocarbures transportables)

transportation facility

transportation facility means a pipeline, tanker or other transportation equipment used to deliver petroleum from project lands, or, in the case described in paragraph 1(1)(m) of Schedule I, from production infrastructure, to the point at which the petroleum is delivered to the first purchaser of the petroleum; (réseau de transport)

(2) Where, in determining the net revenues of an interest holder in relation to a project in respect of the month of payout or any month thereafter, the aggregate of the costs and adjustments, referred to in paragraphs (a) to (d) of the definition “net revenues”, of the interest holder in relation to the project in respect of that month exceeds the gross revenues of the interest holder in relation to the project in respect of that month, the excess shall, for the purposes of these Regulations, be considered to be an allowed capital cost of the interest holder in relation to the project in respect of the following month.

(3) Subject to subsection (4), for the purposes of these Regulations, the provisions of the Income Tax Act, as amended from time to time, apply, with such modifications as the circumstances require, in respect of the determination of whether or not a person is dealing at arm’s length with another person.

(4) For the purpose of the determination referred to in subsection (3),

• (a) a partnership or trust shall be considered to be a corporation; and

• (b) where a trust is determined to be related to a person, the trustee of the trust shall be considered to be related to that person.

(5) Where a percentage is required to be determined by these Regulations, the percentage shall be calculated to eight decimal points and rounded off to seven decimal points.