Frontier Lands Petroleum Royalty Regulations

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(2) [Repealed, SOR/2008-96, s. 7]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.