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

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.