Frontier Lands Petroleum Royalty Regulations

7 (1) Subject to subsection (2), where an interest holder is in any month entitled to receive an amount under a policy of insurance for loss or damage to property, or an amount from the licensing or from the sale, lease or other disposition of any tangible or intangible asset, and the cost of that property or that asset is an allowed capital cost or an allowed operating cost of the project in respect of which the adjusted cumulative cost base is being determined, for the purpose of that determination, in calculating the cumulative cost base of the interest holder

• (a) the allowed capital costs of the interest holder in respect of that month shall be reduced by the amount of that entitlement, where the cost of the property or asset to which the entitlement relates is an allowed capital cost of the project;

• (b) the allowed operating costs of the interest holder in respect of that month shall be reduced by the amount of that entitlement, where the cost of the property or asset to which the entitlement relates is an allowed operating cost of the project but not an allowed capital cost thereof; and

• (c) the capital cost adjustment and operating cost adjustment of the interest holder in respect of that month shall be based on the reduced costs determined under paragraph (a) or (b), as the case may be, in respect of that month.

(2) Where the amount by which the allowed capital costs or the allowed operating costs are reduced under paragraph (1)(a) or (b), as the case may be, exceeds the amount of those costs, the difference shall, for the purpose of determining the adjusted cumulative cost base under subsection (1), be considered to be the allowed capital costs or allowed operating costs of the interest holder, as the case may be, expressed as a negative value.