Frontier Lands Petroleum Royalty Regulations

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.