Contents
Whereas, pursuant to subsection 154(1) of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, a copy of the proposed Crown Share Adjustment Payments Regulations, substantially in the annexed form, was published in the Canada Gazette, Part I on February 11, 2012 and interested persons were given an opportunity to make representations to the Minister of Natural Resources with respect to the proposed Regulations;noteAnd whereas, pursuant to section 6 of that Act, the Provincial Minister has been consulted by the Minister of Natural Resources with respect to the proposed regulations and has approved the making of those regulations;Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Natural Resources, pursuant to sections 153 and 248 of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, hereby makes the annexed Crown Share Adjustment Payments Regulations.notenote
Interpretation
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(1)The following definitions apply in these Regulations.
conversion date means the day that is 30 days after the day on which the Board’s fundamental decision to approve the development plan is implemented. (date de conversion)
gross revenues in relation to a project, includes oil, natural gas and NGL production revenues as determined using the prices of those resources at the project boundary, insurance proceeds, asset sale proceeds and revenues derived from the provision of a service for another project in relation to the production of oil, natural gas and NGL in the offshore area. (recettes brutes)
income tax payable means the corporate income tax payable for a year under the Income Tax Act, Chapter 217 of the Revised Statutes of Nova Scotia, 1989, on the Provincial Crown share of the project. (impôt sur le revenu à payer)
NGL means natural gas liquids — including propane, butane, ethane and condensates — derived from the production of natural gas. (LGN)
project boundary means the point at which the product leaves the infrastructure as set out in the development plan for the project. (limite du projet)
(2)The calculations set out in sections 4 and 6 shall be made in respect of each of the oil, natural gas and NGL components of a project, if the project consists of at least 2 of those components.
Forecasts
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Any forecast referred to in these Regulations, other than one provided in the development plan under section 7, shall be the average of the forecasts made closest to the date of conversion by three independent organizations designated jointly in writing by the Federal Minister and the Provincial Minister.
Annual Average Cost of Borrowing
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(1)For the purposes of the definition average annual cost to the Province of borrowing money in subsection 246(1) of the Act, the average annual rate of interest is equal to
(a)the weighted average of the effective yield on all outstanding debt instruments, including promissory notes, issued by the Province during the 12-month period immediately preceding the date of calculation of the rate of return referred to in subsection 247(2) of the Act adjusted for the effect of any debt swap arrangements in effect during that period; or
(b)if the Province has issued no debt instruments in that period, the average of long-term Government of Canada benchmark bond yields for that period.
(2)The Provincial Minister shall provide to the Federal Minister a list, certified by an independent auditor, of the debt instruments that includes their dates of issuance, their dates of maturity and their effective yields.
Crown Share Adjustment Payment
Profit Realized
Information Required to Determine Profit Realized
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(1)The operator of a project shall, over the life of a project beginning on the day on which the development plan is submitted under subsection 143(2) of the Act, provide the following information to the Federal Minister no later than June 30th of each year for the preceding year:
(a)the project operating costs;
(b)the project capital costs categorized in accordance with their tax treatment; and
(c)at the request of the Federal Minister, any other information necessary to determine the profit in relation to a project or to verify the accuracy and completeness of the information provided under this section.
(2)An interest holder, as defined in section 49 of the Act, shall, over the life of a project beginning on the day on which the development plan is submitted under subsection 143(2) of the Act, provide the following information to the Federal Minister no later than June 30 of each year for the preceding year:
(a)the project gross revenues;
(c)at the request of the Federal Minister, any other information necessary to determine the profit in relation to a project or to verify the accuracy and completeness of the information provided under this section.
(3)If information provided for any year is inaccurate or incomplete, the Federal Minister shall, as soon as feasible, request accurate and complete information.
Rate of Return of the Project
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(1)For the purposes of subsection 247(2) of the Act, the rate of return in respect of the project that would have been obtained on behalf of Her Majesty in right of the Province is equal to the interest rate that would make the net present value of the provincial cash flow, calculated over the life of the project beginning on the conversion date, equal to zero.
(2)The provincial cash flow for a year is equal to the amount determined by the following formula:
(3)The calculation made under subsection (2) shall be based on the mean production scenario provided in the development plan.
(4)If the Federal Minister determines that the rate of return in respect of a project meets the requirements of subsection 247(2) of the Act, no further determination shall be made under that subsection due to an amendment to the development plan unless the amendment is in respect of a new pool or field.
Information Required in Development plan
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For the purposes of paragraph 143(3)(b) of the Act, Part II of the development plan shall include,
(a)for a mean production scenario,
(i)a forecast of the annual project operating and capital costs over the life of the project in constant dollars and categorized in accordance with their income tax treatment,
(ii)the pre-development costs in constant dollars,
(iii)the forecast volume of annual production of NGL and crude oil over the life of the project in cubic metres, and
(iv)the forecast volume of annual production of natural gas over the life of the project in gigajoules;
(b)the forecast annual difference over the life of the project in constant US dollars per cubic metre between
(i)the crude oil price at the project boundary and the West Texas Intermediate (WTI) crude oil price at Cushing, and
(ii)the NGL price at the project boundary and the WTI crude oil price at Cushing;
(c)the forecast annual difference over the life of the project in constant US dollars per gigajoule between the natural gas price at the project boundary and the natural gas price at Henry Hub; and
(d)the forecast of any other annual gross revenues over the life of the project in respect of the project in constant dollars.
Project Gross Revenues — Rate of Return
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(1)For the purposes of subsection 6(2), the project gross revenue for a year is equal to the sum of
(a)the forecast volume of the crude oil production in the year multiplied by the forecast crude oil price in that year;
(b)the forecast volume of natural gas production in the year multiplied by the forecast natural gas price in that year;
(d)the forecast of any other gross revenues in respect of the project in the year multiplied by the forecast Canadian GDP deflator for the year.
(2)The forecast crude oil, natural gas or NGL price for a year is equal to the amount determined by the following formula:
Provincial Capital Loan Repayment
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(1)The provincial capital loan repayment is equal to the amount determined by the following formula:
(2)The provincial capital loan repayments shall be considered during the period beginning in the year in which the cash flow first becomes positive and ending in the year in which the sum of the repayments considered is equal to the cumulative cash flow, plus interest, from the conversion date until the year prior to the year in which cash flow first becomes positive. Any years of negative cash flow after this period shall not be considered for the purposes of determining Crown share adjustment payments.
(3)The interest referred to in subsection (2) shall be calculated annually using either
(a)the weighted average of the effective yield on all outstanding debt instruments, including promissory notes, issued by the Province during the year adjusted for the effect of any debt swap arrangements in effect during that year; or
(b)if the Province has issued no debt instruments in that year, the average of long-term Government of Canada benchmark bond yields for that year.
(4)In this section “cash flow” means the amount determined by the following formula:
Acquisition Payments
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(1)The acquisition payment for a year is equal to one half of the net revenue for the year.
(2)The net revenue is equal to the amount determined by the following formula:
(3)The acquisition payments shall be considered during the period beginning in the year in which the cumulative net revenue since the conversion date becomes positive and ending the year in which the sum of the acquisition payments considered is equal to the sum of the incentives — adjusted in accordance with the following formula — that were paid in respect of the project under the Petroleum Incentive Program Act, chapter 107 of the Statutes of Canada, 1980–81–82–83, from the conversion date, plus simple interest:
(4)Simple interest shall be calculated annually based on the annual average of long-term Government of Canada benchmark bond yields.
Fiscal Incentives and other Benefits
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(1)For the purposes of paragraph 247(3)(b) of the Act, a copy of any proposed fiscal incentive or other benefit shall be provided to the Provincial Minister for approval.
(2)The Provincial Minister has 60 days from the date of reception of the copy of the proposed fiscal incentive or other benefit to approve it. However, the deadline may, on request, be extended by up to 30 days if circumstances beyond the control of the Provincial Minister justify the extension. If there is no response within the deadline, the Provincial Minister shall be considered to have given his or her approval.
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If the aggregate amount of fiscal incentives and other benefits for a project for a fiscal year is greater than the Crown share adjustment payment for the project for the year, the difference shall be included in the aggregate amount of fiscal incentives and other benefits for the following fiscal year.
Delay of Crown Share Adjustment Payment
Recovery of Overpayment
Payment of Underpayment
Coming into Force
Federal laws of Canada reproduced under the Reproduction of Federal Law Order (SI/97-5); not the official version. Source: Justice Laws Website.