Frontier Lands: 31 regions within Yukon, Northwest Territories, Sable Island and offshore. In the North, this includes all areas except for the following: Norman Wells field, the Pointed Mountain field and the Kotaneelee field (where other agreements are in force) and areas subject to the Inuvialuit Final Agreement. Other regions include Hudson Bay, the West Coast offshore and areas in the East Coast offshore not under an Accord regime.
The Frontier Lands Petroleum Royalty Regulations provide for limiting the royalty burden during early production and on marginal projects, but to ensure an equitable sharing of revenues between government and industry after the initial investment has been recovered. A royalty is defined as any payment required by government in respect of production of resources by reason of government's title to the resource.
A 1/5/30 percent royalty regime is prescribed in the Regulations. This means that prior to "payout", the basic royalty commences at a rate of 1 percent of gross revenues, rising to 5 percent in increments of 1 percent every 18 production months. Following "payout" of the initial investment, the royalty is the greater of 30 percent of net revenues and 5 percent of gross revenues. Payout is deemed to have occurred when cumulative gross revenues first equal the sum of total eligible capital costs, operating costs, overhead allowances, royalties paid and the cumulative return allowance. Payout will be calculated on a working interest basis and, where many participants are involved in a project, several payout points will be likely for a single project.
DISCLAIMER
Information contained in this section is of a general nature only and is not intended to constitute advice for any specific fact situation. For particular questions, the users are invited to contact their lawyer. For additional information, see contact(s) listed below.
New Brunswick Contact(s):
See National Contact.