Frontier Lands Petroleum Royalty Regulations (SOR/92-26)

1 [Repealed, SOR/2008-96, s. 2]

Interpretation

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  adjusted cumulative cost base[Repealed, SOR/2008-96, s. 3]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  adjusted gross revenues[Repealed, SOR/2008-96, s. 3]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  allocated[Repealed, SOR/2008-96, s. 3]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

Prescribed Royalty

• 3 (1) The prescribed royalty reserved to Her Majesty under subsection 55(1) of the Act from each interest holder is

  • (a) in respect of petroleum produced from project lands in a month preceding the month of payout

    • (i) beginning with the first production month and ending with the eighteenth production month, one per cent of the gross revenues of the interest holder from that petroleum,

    • (ii) beginning with the nineteenth production month and ending with the thirty-sixth production month, two per cent of the gross revenues of the interest holder from that petroleum,

    • (iii) beginning with the thirty-seventh production month and ending with the fifty-fourth production month, three per cent of the gross revenues of the interest holder from that petroleum,

    • (iv) beginning with the fifty-fifth production month and ending with the seventy-second production month, four per cent of the gross revenues of the interest holder from that petroleum, and

    • (v) beginning with the seventy-third production month and ending with the last production month preceding the month of payout, five per cent of the gross revenues of the interest holder from that petroleum, or

  • (b) in respect of petroleum produced from project lands in the month of payout or any month thereafter, the greater of

    • (i) thirty per cent of the net revenues of the interest holder from that petroleum, and

    • (ii) five per cent of the gross revenues of the interest holder from that petroleum.

  • (c) [Repealed, SOR/2008-96, s. 4]

• (2) Subject to subsection (3), the royalty payable for a month is equal to the amount obtained from the following formula:

  A + B - C

  where

  A

  is the prescribed royalty reserved for the month as calculated under subsection (1);

  B

  is the deferred royalty that is payable in the month in accordance with subsection 6.1(2); and

  C

  is the amount of royalty deferred in the month in accordance with section 6.

• (3) The royalty payable is further reduced by a credit equal to the lesser of the amount calculated under subsection (2) and the investment royalty credit balance.

• (4) Royalties are payable on petroleum that is transported from the project lands by a transportation facility or, subject to section 4, consumed, lost or wasted.

Exemption

• 4 (1) Subject to subsection (2), no royalties are payable in respect of petroleum, produced from project lands, that is

  • (a) consumed on project lands in drilling or testing or in any production infrastructure for the purposes of the project;

  • (b) injected into a formation for conservation purposes;

  • (c) consumed in the operation of a facility, to the extent that

    • (i) it is for processing or transporting petroleum produced from the project, and

    • (ii) the cost of the consumed petroleum is not included in a gas processing allowance or a transportation allowance; or

  • (d) flared.

• (2) Subsection (1) does not apply to any petroleum that is wasted within the meaning of subsection 18(2) of the Canada Oil and Gas Operations Act.

Payment of Prescribed Royalty

• 5 (1) The royalty payable, in respect of a month, is payable in the following two installments:

  • (a) the first installment is due on the last day of the following month and is equal to the royalty payable under section 3 for the previous month; and

  • (b) the second installment is due on the last day of the second following month and is equal to the difference between the amount payable under section 3 for the month and the first installment.

• (2) If the amount calculated under paragraph (1)(b) is negative,

  • (a) no second installment is due for that month; and

  • (b) the amount, as a positive value, is included in the first installment for the following month.

Deferral of Royalty

• 6 (1) Subject to subsection (2), an interest holder of a production licence in relation to a project may choose to defer an amount of royalty payable for a production month, as determined under subparagraph 3(1)(b)(i), that is equal to 30% of part or all of a contribution that it makes into an abandonment and restoration royalty trust in relation to the project.

• (2) The amount of royalty payable deferred in a month shall not reduce the royalty payable with respect to such month below the amount determined under subparagraph 3(1)(b)(ii).

• (3) A contribution may be applied, in whole or in part, to defer the amount of royalty payable in the month in which the contribution is made or to the amount of royalty payable in a following month or months.

• (4) For the purposes of subsection (1), all realized income earned by the trust shall be considered to be a contribution.

• 6.1 (1) If an interest holder makes a withdrawal from an abandonment and restoration royalty trust that is greater than the amount by which the trust balance exceeds the contribution deferral balance, the contribution deferral balance for that month is reduced by an amount equal to the result obtained from the following formula:

  A - B + C

  where

  A

  is the amount of the withdrawal;

  B

  is the trust balance prior to the withdrawal; and

  C

  is the contribution deferral balance prior to the withdrawal.

• (2) The amount of deferred royalty payable for that month is equal to 30% of the amount, if any, by which the amount calculated in subsection (1) exceeds the abandonment and restoration expenses which

  • (a) are allowed capital costs;

  • (b) are applied against the withdrawal in that month;

  • (c) have not been used to calculate net revenues or applied against a withdrawal in the previous month; and

  • (d) include the capital cost adjustment on those expenses.

• (3) All realized losses incurred by the trust shall be considered to be a withdrawal.

• (4) Any amounts remaining in a trust when the certification of that trust expires under subsection 7(3) shall be treated as a withdrawal.

• (5) If an interest holder (in this section referred to as the predecessor) sells an interest or a share of an interest in relation to a project to another person (in this section referred to as the successor), the predecessor may transfer a portion of its contribution deferral balance for that project to the successor, in respect of the same project, equal to the lesser of

  • (a) the predecessor’s contribution deferral balance for that project multiplied by the percentage interest sold in the project to the successor; and

  • (b) the amount transferred by the predecessor from its abandonment and restoration royalty trust for that project to the successor’s abandonment and restoration royalty trust for that same project.

• (6) The amount determined in subsection (5) will not be considered to be a withdrawal of the predecessor and the contribution deferral balance shall be considered as if it had been made by the successor.

Certification of an Abandonment and Restoration Royalty Trust

• 7 (1) An interest holder in relation to a project may apply to the Minister, in the prescribed form, for the certification of an abandonment and restoration royalty trust for that interest holder’s interest in the project.

• (2) The Minister shall certify the abandonment and restoration royalty trust if

  • (a) the trust indenture includes the mandatory clauses set out in the prescribed form;

  • (b) the trust is managed by a trustee that is dealing at arm’s length with the interest holder and that is a corporation resident in Canada that is licensed or otherwise authorized under the laws of Canada or of a province to carry on in Canada the business of offering to the public its services as trustee;

  • (c) the trust is restricted to holding property described in any of paragraphs (a), (b) and (f) of the definition qualified investment in section 204 of the Income Tax Act;

  • (d) the trust is established for the sole purpose of holding funds to be used by the interest holder for abandonment and restoration for the project; and

  • (e) the trust indenture includes a mandatory clause providing that the ownership of the trust cannot be transferred to another person.

• (3) An abandonment and restoration royalty trust certification expires on the earlier of the date on which

  • (a) the interest holder terminates the trust;

  • (b) the interest holder sells its entire interest in the project;

  • (c) the interest holder becomes insolvent or commits an act of bankruptcy; or

  • (d) all abandonment and restoration is completed.

• 8 (1) If a person (in this section referred to as the successor) acquires, by purchase or otherwise, from an interest holder (in this section referred to as the predecessor) a share in an interest in relation to a project that has not reached the month of payout, the successor’s cumulative costs in relation to that share in respect of the month of acquisition are, subject to subsection (3), an amount equal to the product of

  • (a) the aggregate of

    • (i) the amount, if any, by which the predecessor’s cumulative costs in relation to that project in respect of the month immediately preceding the month of acquisition exceed the predecessor’s cumulative gross revenues in relation to that project in respect of the month immediately preceding the month of the acquisition, and

    • (ii) the predecessor’s return allowance in relation to that project in respect of the month immediately preceding the month of acquisition, and

  • (b) the ratio that the share of the interest acquired by the successor bears to the share of the interest held by the predecessor immediately before the disposition.

• (2) The predecessor’s cumulative costs in a share in an interest in relation to a project in respect of the month of acquisition shall be reduced by the same amount determined for the successor in accordance with subsection (1).

• (3) If the amount calculated under subsection (1) or (5) exceeds the cost of the acquisition, the successor’s cumulative costs or allowed capital costs, as the case may be, in a share in an interest in relation to that project in respect of that month are the cost of the acquisition.

• (4) If the successor is currently an interest holder of a production licence in relation to a project and either the predecessor or successor has not reached the month of payout for their interest in the project, the cumulative costs, cumulative gross revenues and royalties payable for the acquired interests held by the successor in the project shall continue to be determined separately until all interests held by the successor in relation to the project have reached the month of payout.

• (5) If a share of an interest in relation to a project is acquired in a month after the month of payout, and the predecessor has allowed capital costs in that month by virtue of subsection 2(2), a portion of those allowed capital costs shall be allocated to the successor in proportion to the share of the interest being acquired, and the predecessor’s allowed capital costs in that month shall be commensurately reduced.

• (6) If a project is comprised of more than one production licence, and the successor’s interest in relation to a project does not include the interests or a share in the interests in all production licences held by the predecessor in relation to the project, the amounts to be allocated to the successor and predecessor, in accordance with subsections (1) to (3) and (5) shall be allocated on a reasonable basis.

Return Allowance

• 9 (1) A return allowance of an interest holder of a production licence in relation to a project shall be calculated for the month in which the project commencement date falls and for every month after that date, up to but not including the month of payout, if

  • (a) the interest owner or the representative of the interest owner has notified the Minister of the month in which the interest owner proposes to commence production for the purpose of sale; and

  • (b) that month is consistent with the development plan.

• (2) [Repealed, SOR/2008-96, s. 7]

• (3) Subject to subsections (4) and (5), the return allowance of an interest holder in relation to a project in respect of any month for which a calculation is required by subsection (1) shall be equal to the product of

  • (a) (1.1 + X)^1/12 - 1, where X equals the long term government bond rate

  and

  • (b) the amount by which the interest holder’s cumulative costs in relation to the project in respect of that month exceed the interest holder’s cumulative gross revenues in relation to the project in respect of that month.

• (4) Subject to subsection (5), where production of petroleum from project lands for the purpose of sale does not begin on or before the proposed month referred to in subsection (1), the return allowance of an interest holder for each month in the period beginning with the month immediately following the proposed month and ending with the month immediately preceding the month in which such production begins shall be equal to the product of

  • (a) the result obtained by subtracting 1 from the ratio that the inflation index for the month bears to the inflation index for the immediately preceding month, and

  • (b) the amount by which the interest holder’s cumulative costs in relation to the project in respect of that month exceed the interest holder’s cumulative gross revenues in relation to the project in respect of that month.

• (5) For the purpose of calculating the return allowance of an interest holder for a month, each allowed capital cost of the interest holder shall be adjusted as follows:

  • (a) where the cost was incurred before the project commencement date, it shall be multiplied by the ratio that the inflation index for the month in which the project commencement date falls bears to the inflation index for the month in which the allowed capital cost was incurred; and

  • (b) where the cost is a qualified frontier exploration expense, it shall be reduced by the amount of any credit that has been deducted under subsection 3(3) to determine the royalty payable in a preceding month if that credit includes an investment royalty credit that is calculated on the basis of that expense.

• (6) For the purpose of paragraph (5)(b), if the credit deducted under subsection 3(3) is less than the amount of the investment royalty credit balance in respect of the month in which the royalty is payable, the credit shall be considered to be calculated on the basis of expenses in the order in which they were incurred.

Certification of Qualified Frontier Exploration Expenses

• 10 (1) An interest holder may make an application to the Minister, in the prescribed form, for the certification of qualified frontier exploration expenses.

• (2) The interest holder shall file the application with the Minister not later than one year after the year in which the expenses are incurred.

• (3) If the application is filed within the required time period, the Minister shall, if the Minister determines that the expenses are qualified frontier exploration expenses, certify those expenses as qualified frontier exploration expenses.

Reports and Returns

• 11 (1) Each interest holder of a production licence in relation to a project shall file with the Minister, in the prescribed form,

  • (a) a pre-project commencement cost statement for that interest in the month of the project commencement in respect of allowed capital costs and allowed operating costs for that interest incurred prior to the month of the project commencement; and

  • (b) a royalty return for that interest for the month of the project commencement and for every month after that whether a royalty is payable for that month or not.

• (2) The interest holder shall file the pre-project commencement cost statement and the royalty return not later than the last day of the second month after the months referred to in paragraphs (1)(a) and (b).

• 12 (1) Each interest holder of a production licence in relation to a project shall file with the Minister a payout statement, in the prescribed form, in respect of the project for each six month period, beginning with the period that starts with the month in which the project commencement date falls and ending with the period that includes the month of payout.

• (2) The payout statement shall be filed not later than the last day of the second month after the six-month period to which it relates.

• 13 (1) If the interest owner of a production licence in relation to a project consists of only one interest holder, the holder shall file with the Minister and, if the interest owner of a production licence in relation to a project consists of two or more interest holders, the representative of the interest owner shall file with the Minister, in the prescribed form,

  • (a) a proposed production commencement date statement; and

  • (b) a production and cost statement for the month in which the project commencement date falls and for every month after that month in respect of the volumes or quantities of petroleum from the project that are produced, consumed or transported from project lands in the month, the project costs for the month and the portion of any petroleum or costs that is attributed to the respective interest holders for the month.

• (2) The statement referred to in paragraph (1)(a) shall be filed not later than the 15th day of the month after the month in which the project commencement date falls, and the statement referred to in paragraph (1)(b) shall be filed not later than the 15th day of the second month after the month to which it relates.

14 Each interest holder of a production licence, when paying a royalty, penalty or interest, shall identify, in the prescribed form, the interest holder and the project in respect of which the payment is made.

• 14.1 (1) Within 60 days after the change in ownership of a share in an interest in relation to a project, the successor and predecessor referred to in section 8 shall file a report with the Registrar that

  • (a) sets out the changes in ownership of interests in relation to a project;

  • (b) sets out the amount of cumulative costs for the successor and predecessor in respect of the month of acquisition; and

  • (c) includes a summary of the terms and conditions of the sales agreement or arrangement.

• (2) If the information in the summary referred to in paragraph (1)(c) is insufficient, the Minister may require that a copy of the agreement or arrangement be filed with the Registrar.

15 Each interest holder of a production licence shall retain the information required to be kept under subsection 59(1) of the Act, in respect of royalty returns and statements referred to in subsections 11(1), 12(1) and 13(1), at the interest holder’s place of business in Canada, for a period of six years after the day on which the respective royalty returns and statements are filed.

Interest, Penalties and Refunds

• 16 (1) For the purposes of section 56 of the Act, the prescribed rate of interest for any period is the rate prescribed by Part XLIII of the Income Tax Regulations, as amended from time to time, in respect of that period.

• (2) The interest payable by an interest holder under section 56 of the Act on arrears of royalties, interest or penalties shall be calculated from the day on which the royalties, interest or penalties payable was due to the day on which payment is received by the Minister, and shall be compounded monthly.

• (3) If, in the Minister’s opinion, the arrears have occurred through no fault of the interest holder, the interest payable by the interest holder on those arrears shall be calculated from the end of the month after the month in which the arrears were discovered.

• 17 (1) The prescribed penalty to be paid by an interest holder for failing to file a statement or royalty return referred to in sections 11 to 13 or for filing a statement or royalty return that is substantially incomplete or contains information of inadequate quality to properly calculate the royalty payable is $1,000 for each month or part of a month from the day on which the statement or royalty return is due to the day on which the statement or royalty return is filed.

• (2) The prescribed penalty to be paid for failing to file a report in accordance with section 14.1 is $1,000 for each month or part of a month from the day on which the report is due to the day on which the report is filed with the Registrar.

• (3) Payment of penalties that are prescribed under this section is due on the last day of the month after the month in which they are imposed.

• 18 (1) For the purposes of section 66 of the Act, the circumstances in which the Minister shall refund any overpayment made on account of royalties, interest or penalties are

  • (a) where, on an assessment, the Minister determines that an overpayment has been made;

  • (b) where royalties, interest or penalties are remitted in error; or

  • (c) where such a refund is required to be made by order of a court.

• (2) The Minister shall not refund any overpayment on the amounts specified in subsection 5(2) except for the last production month.

• 19 (1) For the purposes of section 66 of the Act, the prescribed rate of interest for any period is the rate referred to in subsection 16(1).

• (2) The interest payable by the Minister under section 66 of the Act on an overpayment made by an interest holder on account of royalties, interest or penalties shall be calculated from the end of the second month after the month in which the overpayment was made and shall be compounded monthly.

20 If interest or penalties are payable by the interest holder, any payments received shall be applied first to penalties payable, second to interest payable and third to royalties payable.

• 21 (1) Interest is payable on deferred royalties that are payable under subsection 6.1(2) and is calculated from the date that the deferral is made.

• (2) For the purpose of calculating the interest, withdrawals from an abandonment and restoration royalty trust are applied to deferred royalties in the order in which they are deferred.