Bitumen Royalty-in-kind Regulation

(no amdt) ALBERTA REGULATION 276/2025 Mines and Minerals Act Petroleum Marketing Act BITUMEN ROYALTY‑IN‑KIND REGULATION Table of Contents 1 Definitions Part 1 Bitumen‑in‑kind Directions 2 Interpretation 3 Bitumen‑in‑kind direction 4 Obligations of lessee or delivery agent 5 Notice to Minister 6 Delivery point 7 Forecast Crown quantity 8 Directed Crown quantity 9 Delivery under bitumen‑in‑kind direction 10 Suspension and cancellation of direction 11 Royalty reporting 12 Quality and equalization reporting 13 Origin reporting 14 Reconciliation of deliveries 15 Failure to provide information Part 2 Goods‑and‑services Direction 16 Direction to provide goods and services 17 Content of goods‑and‑services direction 18 Suspension or cancellation of direction Part 3 Consideration and Handling Allowance 19 Definition 20 Just and reasonable consideration 21 Application for handling allowance 22 Eligibility for handling allowance 23 Amount of handling allowance 24 Amount of consideration 25 Review of decision 26 Appeal of handling allowance Part 4 Product Exchange 27 Proposal to exchange directed Crown quantity 28 Acceptance of proposal 29 Reporting by lessee 30 Reconciliation Part 5 General 31 Notice to provide information 32 Records 33 Indemnity 34 Readjustment Definitions 1 (1) In this Regulation, (a) “affiliate” means a person who is affiliated with another person in accordance with section 2 of the Oil Sands Royalty Regulation, 2009 (AR 223/2008); (b) “bitumen‑in‑kind direction” means a direction under section 3(1) for the supply of royalty bitumen in kind from a Project; (c) “Crown volume” means the directed Crown quantity and any oil sands product obtained from the directed Crown quantity or acquired by the Commission as agent of the Crown; (d) “delivery agent” means, in relation to the directed Crown quantity, a person who is, at a point between the royalty calculation point and the delivery point, the owner of the lessee’s share of the oil sands product recovered from the development area of a Project; (e) “delivery point” means the place to which royalty bitumen is required to be delivered under section 6; (f) “directed Crown quantity” means the quantity of royalty bitumen recovered from a Project that the Commission has directed be delivered in a month under a bitumen‑in‑kind direction, expressed in accordance with section 8(1); (g) “forecast Crown quantity” means the quantity of royalty bitumen forecast to be recovered from a Project under section 7, expressed in accordance with section 8(1); (h) “goods‑and‑services direction” means a direction issued by the Commission under section 16 of the Petroleum Marketing Act and in accordance with this Regulation; (i) “handling allowance” means an allowance applied for under section 21 by a person bound by a handling goods‑and‑services direction; (j) “handling goods and services” means goods or services referred to in section 22(3); (k) “handling goods‑and‑services direction” means a goods‑and‑services direction for handling goods and services directed by the Commission under section 3(2); (l) “lead delivery agent” means a delivery agent designated under section 3(3)(c); (m) “reported royalty quantity”, in relation to a month and a Project, means the quantity of royalty bitumen reported by the operator under section 11(1) to be owing to the Crown; (n) “royalty bitumen” means the Crown’s royalty share of an oil sands product recovered under an agreement for a Project. (2) In this Regulation, “blended bitumen”, “cleaned crude bitumen”, “cost of diluent”, “crude bitumen”, “diluent”, “lessee”, “oil sands product”, “operator”, “person”, “Project”, “royalty calculation point” and “unit price” have the same meanings as in the Oil Sands Royalty Regulation, 2009 (AR 223/2008). Part 1 Bitumen‑in‑kind Directions Interpretation 2 For the purposes of a bitumen‑in‑kind direction, (a) oil sands product delivered to a delivery point on the account of the Commission is deemed to consist of royalty bitumen until proven otherwise, (b) when a bitumen‑in‑kind direction is in effect in respect of a Project and an oil sands product recovered from that Project is delivered to a delivery point, the product containing royalty bitumen is deemed to be delivered first, and (c) when a bitumen‑in‑kind direction is in effect in respect of a Project and the royalty bitumen from that Project is crude bitumen or cleaned crude bitumen contained in a blend with diluent that was added or deemed to be added before or at the royalty calculation point, the bitumen‑in‑kind direction is deemed to include a direction to supply the quantity of diluent blended with the directed Crown quantity of royalty bitumen at the royalty calculation point. Bitumen‑in‑kind direction 3 (1) The Commission may make a bitumen‑in‑kind direction in accordance with this section to direct a lessee of a Project that is the subject of an order under section 31(3) of the Oil Sands Royalty Regulation, 2009 (AR 223/2008) to deliver royalty bitumen in respect of the Project to the Commission. (2) A direction under subsection (1) must specify (a) that the direction is made under this Regulation, (b) the period to which the direction applies, which may be expressed as a number of months or as continuing until termination by the Commission, (c) the delivery point, (d) the handling goods and services to be provided by the lessee, and (e) any other information necessary to enable the lessee to comply with the direction. (3) A direction under subsection (1) may (a) identify delivery agents for the purposes of the direction, (b) in respect of that portion of the directed Crown quantity commingled with a delivery agent’s share of the lessee’s production, direct the delivery agents identified under clause (a) to provide handling goods and services on behalf of the lessee, and (c) designate a lead delivery agent to act on behalf of the lessee and one or more delivery agents identified under clause (a) for the purposes of a handling allowance. (4) The Commission must deliver a bitumen‑in‑kind direction to the lessee between the following dates: (a) 60 days after the issuance of an order under section 31(3) of the Oil Sands Royalty Regulation, 2009 (AR 223/2008); (b) 70 days before the start of the first month to which the direction applies. Obligations of lessee or delivery agent 4 (1) A lessee or delivery agent referred to in section 3 must (a) manage the directed Crown quantity with the care of a prudent operator, (b) take reasonable steps to prevent unauthorized use of the directed Crown quantity, (c) account to the Crown for any profit, gain or other benefit derived from the directed Crown quantity or the blending of the directed Crown quantity while in the person’s possession or control, (d) coordinate the provision of handling goods and services required to deliver the directed Crown quantity to the Commission at the delivery point, and (e) if costs and charges are incurred in respect of handling goods and services referred to in clause (d), apply to the Commission for a handling allowance in accordance with section 21 as payment for the goods and services provided. (2) A lessee or delivery agent referred to in section 3 shall act as an agent of the Crown in respect of the directed Crown quantity and the provision of handling goods and services unless the Commission directs otherwise. (3) No person has any of the rights, privileges, prerogatives or immunities of the Crown by reason only of acting as an agent of the Crown in respect of a bitumen‑in‑kind direction. (4) Section 86(1) of the Mines and Minerals Act applies to any directed Crown quantity. Notice to Minister 5 (1) The Commission must provide notice to the Minister of (a) the issuance of a bitumen‑in‑kind direction, and (b) the quantity of royalty bitumen delivered from a Project in a month to the Commission in accordance with a bitumen‑in‑kind direction. (2) A notice provided under subsection (1)(a) must also include a copy of the direction. Delivery point 6 (1) Subject to subsection (2), the place at which the directed Crown quantity must be delivered to the Commission is, (a) if the majority of the lessee’s share of oil sands product recovered from the development area of a Project is delivered through the Edmonton terminal, the inlet to a connected terminal, pipeline, storage facility or other point near the Edmonton terminal designated by the Commission from time to time, (b) if the majority of the lessee’s share of oil sands product recovered from the development area of a Project is delivered through the Hardisty terminal, the inlet to a connected terminal, pipeline, storage facility or other point near the Hardisty terminal designated by the Commission from time to time, or (c) if the majority of the lessee’s share of oil sands product recovered from the development area of a Project is not delivered through the Edmonton or Hardisty terminal, (i) the unloading facility nearest to the Project that is connected to a pipeline delivering to a market hub and capable of accepting deliveries of the directed Crown quantity, or (ii) if there is a point connected to a market hub capable of accepting royalty bitumen deliveries on account of the Commission entailing a higher net revenue return to the Crown than the point referred to in subclause (i), that other point. (2) The Commission may, in a particular case, direct or consent to the delivery of royalty bitumen to a place other than as prescribed under subsection (1), for an indefinite period or for a specified period. (3) If the directed Crown quantity passes through a processing or upgrading facility before the delivery point, then the person to whom the bitumen‑in‑kind direction is directed must deliver the product that was obtained from the directed Crown quantity as a result of the processing or upgrading. Forecast Crown quantity 7 (1) If a bitumen‑in‑kind direction is issued in respect of a Project, the operator must, at least 60 days before the start of each month to which the direction applies, provide the Commission with a forecast of the anticipated quantity of royalty bitumen to be recovered from the Project for that month in a form approved by the Commission. (2) For the purposes of subsection (1), if the royalty bitumen for which the forecast is generated is crude bitumen or cleaned crude bitumen contained in a blend with diluent that was added or deemed to be added before or at the royalty calculation point, the forecast must include the anticipated quantity of blended bitumen containing the royalty bitumen, the quantity of royalty bitumen and the quantity of diluent within the blended bitumen. (3) In completing a forecast under subsection (1), an operator (a) must make reasonable efforts to forecast accurately, and (b) may utilize any appropriate methodology, if the methodology is (i) applied consistently, (ii) based on reasonable and supportable assumptions, and (iii) verifiable by the Commission. (4) The Commission may give notice to an operator to furnish to the Commission, by the deadline specified in the notice, a description of the forecast methodology, data inputs and assumptions used in any forecast under subsection (1). (5) If the reported royalty quantity exceeds the forecast Crown quantity by 10% or more in 3 or more months of any 12‑month rolling period, then the Commission may, in respect of any month in the upcoming 12‑month period, (a) require that forecasts provided under subsection (1) be accompanied by detailed supporting calculations, including any data inputs and assumptions specified by the Commission, (b) require that forecasts provided under subsection (1) be accompanied by a statement indicating approval of the forecast by (i) the chief financial officer of the operator, or (ii) another individual, referred to by either the individual’s name or title, approved in advance by the Minister as an individual who may approve the forecast, or (c) substitute all or part of a forecast or the data inputs of a forecast prepared under subsection (1) with a forecast prepared by the Minister of the anticipated quantity of royalty bitumen to be recovered for that month. (6) An operator that fails to provide a forecast or other information required by this section within the required period is liable to pay to the Commission a penalty of up to $5000 for each day or part of a day after the deadline specified in the notice given under subsection (4) that any of the information referred to in the notice is not provided to the Commission. (7) If an operator fails to provide a forecast under subsection (1) within the prescribed period, the Commission may produce its own forecast of the anticipated quantity of royalty bitumen to be recovered for that month based on any information available to the Commission. Directed Crown quantity 8 (1) On receipt of a forecast Crown quantity under section 7, the Commission must determine the directed Crown quantity for the month to which the forecast relates, expressed as (a) a quantity of royalty bitumen, and (b) if the royalty bitumen is crude bitumen or cleaned crude bitumen contained in a blend with diluent that was added or deemed to be added before or at the royalty calculation point, a quantity of blended bitumen containing the royalty bitumen. (2) The Commission must provide notice of a determination made under subsection (1) to the operator not less than 45 days before the start of each month to which the bitumen‑in‑kind direction applies. (3) In making a determination under subsection (1), the Commission must set the directed Crown quantity at or below the forecast Crown quantity. Delivery under bitumen-in-kind direction 9 (1) A lessee to whom a bitumen-in-kind direction has been issued is not entitled to compensation for (a) royalty bitumen, (b) direct, indirect or consequential losses arising from a bitumen-in-kind direction, or (c) costs incurred in respect of the directed Crown quantity upstream from the royalty calculation point, subject to this section. (2) Royalty bitumen delivered under a bitumen-in-kind direction must be free and clear of all interests, charges and liens. (3) Despite subsection (1)(c), if the directed Crown quantity is contained in a blend with diluent that was added or deemed to be added before or at the royalty calculation point, the lessee may obtain compensation for diluent at the cost of diluent unless the cost of diluent has already been claimed as an allowed cost of the Project. (4) A lessee or a delivery agent acting as an agent of the Crown under a bitumen-in-kind direction is not entitled to compensation other than a handling allowance, if applicable. (5) A person bound by a bitumen-in-kind direction must mitigate any costs or losses resulting from the direction. (6) The Commission may determine that consideration applied for in respect of a handling allowance is not just and reasonable if a person has not complied with subsection (5). Suspension and cancellation of direction 10 (1) The Commission may, in accordance with this section, suspend or cancel a direction. (2) Unless the operator agrees to a shorter period, the Commission must deliver to an operator a notice to suspend or cancel a bitumen‑in‑kind direction not less than 45 days before the start of the month in which the suspension or cancellation takes effect. (3) Despite subsection (2), the Commission may amend, extend, suspend or cancel a bitumen‑in‑kind direction on reasonable notice if the Commission’s receipt of the directed Crown quantity is prevented or materially impaired by an event or circumstance beyond the reasonable control of the Commission, including a natural disaster, war, insurrection, labour dispute, infrastructure failure, regulatory action or market disruption. Royalty reporting 11 (1) If a bitumen‑in‑kind direction is issued in respect of a Project, the operator must, for each month to which the direction applies, report to the Commission and the Minister (a) the quantity of royalty bitumen determined by the operator to be owing to the Crown, and (b) if the royalty bitumen is crude bitumen or cleaned crude bitumen contained in a blend with diluent that was added or deemed to be added before or at the royalty calculation point, (i) the quantity of blended bitumen containing the royalty bitumen, and (ii) the quantity of diluent within the blended bitumen. (2) A report under subsection (1) must be provided to the Commission and the Minister (a) by the last day of the month following the month for which the report is required, or (b) by the date specified by the Minister. Quality and equalization reporting 12 (1) If a bitumen‑in‑kind direction is issued in respect of a Project, the operator must report to the Commission, for each month to which the direction applies, (a) the quality, characteristics and measurements of the directed Crown quantity at the royalty calculation point, (b) the quality, characteristics and measurements of the directed Crown quantity at the delivery point, (c) any quality, characteristic and measurement changes resulting from any commingling, blending, processing or upgrading of the directed Crown quantity between the royalty calculation point and the delivery point, and (d) the value to the Crown of any equalization applied to the directed Crown quantity as a result of any quality, characteristic or measurement changes between the royalty calculation point and the delivery point. (2) A report under subsection (1) must be provided by the 10th day of the month following the month for which the report is required. Origin reporting 13 (1) For the purposes of this section, (a) “competent authority” means the applicable regulatory body of the country of destination for the directed Crown quantity exported from Canada by the Commission; (b) “current statement” means a statement executed not more than 365 days prior to the applicable delivery; (c) “declarant” means (i) an operator, in respect of a directed Crown quantity identified in a current statement referred to in subsection (2), and (ii) a delivery agent, in respect of a directed Crown quantity identified in a current statement referred to in subsection (3); (d) “originate” means, in respect of a directed Crown quantity, that (i) the oil sands or oil sands product is a naturally occurring substance that was extracted or taken entirely within Canada, and (ii) if the oil sands product has been blended with diluent before the delivery point, that (A) the diluent is also a naturally occurring substance that was extracted or taken entirely within Canada, or (B) that the diluent constitutes 40% or less of the total volume of the bitumen diluent blend. (2) Subject to subsection (3), if a bitumen‑in‑kind direction is issued in respect of a Project, the operator must provide a current statement to the Commission certifying that the directed Crown quantity originates in Canada. (3) The Commission may accept a current statement from a delivery agent certifying that some or all of the directed Crown quantity originates in Canada. (4) A current statement referred to in subsection (2) or (3) must be in a form approved by the Commission and contain the information required to establish that the directed Crown quantity originated in Canada. (5) The declarant must, within 20 days of receipt of a request by the Commission, provide additional relevant documentation to support the statement that the directed Crown quantity originated in Canada, including (a) manufacturing process overview documents, such as flow charts, schematics, production capacity, product identification and specifications, (b) transportation documents, and (c) any other document necessary to support the assertion that the directed Crown quantity originated in Canada. (6) A current statement referred to in subsection (2) or (3) must be delivered to the Commission prior to or concurrently with each delivery of directed Crown quantity. (7) If, after delivery of the directed Crown quantity to the Commission and good faith efforts by the Commission to represent to a competent authority the originating status of the directed Crown quantity based on the information provided under this section, the competent authority determines that the directed Crown quantity is ineligible for preferential tariff treatment based on a failure to establish to the satisfaction of the competent authority that the directed Crown quantity originated in Canada, then the declarant is liable to pay to the Commission a penalty equal to any tariffs, customs, duties, taxes, fees, interest and penalties incurred directly or indirectly by the Commission as a result of that determination. Reconciliation of deliveries 14 (1) In this section, “actual supply” means, in relation to a month and a Project, the quantity of royalty bitumen supplied at the royalty calculation point, on the account of the Commission under a bitumen‑in‑kind direction, as determined by the Commission based on information in the possession of the Commission. (2) If royalty bitumen supplied under a bitumen‑in‑kind direction is crude bitumen or cleaned crude bitumen contained in a blend with diluent, the actual supply must be calculated by deducting the quantity of diluent contained in the blended bitumen from the quantity of blended bitumen. (3) If the actual supply calculated in accordance with subsection (2) is less than the reported royalty quantity owing, the operator must pay the royalty compensation owing in respect of the royalty bitumen that was not delivered in kind as required by a bitumen‑in‑kind direction. (4) If the actual supply calculated in accordance with subsection (2) is more than the reported royalty quantity owing, the Commission must pay the operator in cash, in accordance with subsection (5), for the value of the quantity of royalty bitumen actually supplied in excess of the reported royalty quantity. (5) For the purposes of subsection (4), (a) if the excess supply of royalty bitumen is contained in a blend with diluent that was added or deemed to be added before or at the royalty calculation point, (i) the quantity of the excess supply is the difference between the following, to be calculated based on the same ratio of royalty bitumen to diluent in both cases, as determined by the Commission: (A) the quantity of royalty bitumen contained within the blended bitumen in the actual supply; (B) the quantity of royalty bitumen contained within the blended bitumen in the reported royalty quantity, and (ii) the value of the excess supply is determined by multiplying the quantity of the excess supply by the applicable unit price less any amount already paid by the Commission under section 9(3) for the cost of diluent contained within the excess supply, or (b) if the excess supply of royalty bitumen is not contained in a blend with diluent at the royalty calculation point, (i) the quantity of the excess supply is the difference between the royalty bitumen contained in the actual supply and reported royalty quantity, and (ii) the value of the excess supply is determined by multiplying the quantity of the excess supply by the applicable unit price. (6) A payment made under subsection (5) must not be considered in any royalty recalculation under the Oil Sands Royalty Regulation, 2009 (AR 223/2008). Failure to provide information 15 An operator that fails to provide to the Commission the information required under section 11, 12, 13 or 14 within the time required by that section is liable to pay to the Commission a penalty of up to $5000 for each day or part of a day after the specified deadline that any of the information is not provided to the Commission. Part 2 Goods‑and‑services Direction Direction to provide goods and services 16 (1) For the purposes of section 16 of the Petroleum Marketing Act , (a) “goods” means (i) oil sands product other than royalty bitumen, (ii) diluent, and (iii) other substances or things required to facilitate the blending, processing, upgrading, transporting or storing of an oil sands product; (b) “supplier” means (i) a lessee, (ii) an operator, (iii) a person who provides access to or use of a terminal, blending facility, pipeline, processing facility, upgrading facility, storage facility or any other facility used in respect of oil sands products, (iv) a delivery agent, and (v) an agent or affiliate of any person set out in subclauses (i) to (iv). (2) For greater certainty, a goods‑and‑services direction made in respect of Crown volumes may direct (a) a supplier of a pipeline to transmit the oil sands product in the supplier’s pipeline to a point in Alberta designated by the Commission, (b) a supplier of a blending facility to accept the oil sands product for blending and to blend it with diluent or other hydrocarbon products in that blending facility, (c) a supplier of a terminal facility to manage and handle the oil sands product through that terminal facility, (d) a supplier of a storage facility to accept the oil sands product for storage and to store it in that storage facility, (e) a supplier to accept the oil sands product for any activity identified by the Commission that supports the management, delivery or disposal of the oil sands product, and (f) a supplier of a processing or upgrading facility to accept the oil sands product for processing or upgrading in that facility and to process or upgrade the oil sands product in that facility. (3) A goods‑and‑services direction may be made for an indefinite period or for a specified period. (4) A goods‑and‑services direction may direct a supplier to act as an agent of the Crown for purposes leading directly or indirectly to the disposal of Crown volumes. (5) No person has any of the rights, privileges, prerogatives or immunities of the Crown by reason only of acting as an agent of the Crown in respect of a goods‑and‑services direction. Content of goods‑and‑services direction 17 Without limiting the generality of section 16(2) of the Petroleum Marketing Act , a goods‑and‑services direction must contain the following information, as applicable: (a) the applicable Project, the operator of the Project and the directed Crown quantity to be delivered from the Project; (b) the required goods or services; (c) the period during which the direction is in effect, including whether it is a continuing direction; (d) the location to which the goods or services must be delivered; (e) the person to whom the goods are to be delivered; (f) the quantity of goods required to be delivered, if readily ascertainable; (g) the intervals during which the goods or services are to be delivered; (h) except with respect to the directed Crown quantity, (i) the consideration that the Commission will pay for the goods or services, or (ii) confirmation that the supplier may apply to the Commission for just and reasonable consideration for the goods or services. Suspension or cancellation of direction 18 The Commission may suspend or cancel a goods‑and‑services direction on reasonable notice to the supplier before the suspension or cancellation is effective. Part 3 Consideration and Handling Allowance Definition 19 In this Part, “applicant” means a person who applies for a handling allowance under subsection (2). Just and reasonable consideration 20 (1) For the purposes of section 16 of the Petroleum Marketing Act , the Commission may determine just and reasonable consideration based on one or more of the following: (a) the transportation allowance for a relevant Project determined under the Oil Sands Royalty Regulation, 2009 (AR 223/2008), if any; (b) the handling charges for a relevant Project, if reported under the Oil Sands Royalty Regulation, 2009 (AR 223/2008); (c) the actual unrecovered costs incurred to blend, transport and deliver the directed Crown quantity from a Project to a prescribed delivery point; (d) in the case of pipeline transportation, a tariff charged for the service, if the tariff is fixed or approved for such service by a regulatory authority having jurisdiction to do so or the tariff is generally agreed to and paid by persons who obtain the pipeline transportation service under an arm’s length transaction; (e) the amount charged by the supplier, or an affiliate of the supplier, in an arm’s length transaction for a good or service; (f) the actual cost incurred by a supplier to produce or acquire a good or deliver a service; (g) the price of comparable goods or services, if that price is published and generally adopted by buyers and sellers of such goods or services; (h) the price for comparable goods or services prescribed or determined under an enactment; (i) the average prices paid for comparable goods or services in an arm’s length transaction; (j) the net book value of the good according to the records of the owner of the good; (k) in the case of a good that is an oil sands product, where in the opinion of the Commission comparable open markets do not exist in relation to the oil sands product or a similar commodity, (i) the price for that kind of oil sands product, or a similar commodity, prescribed or determined under an enactment, (ii) the prices of products that could be derived from the oil sands product or similar commodities, or (iii) the prices for the feedstock from which the oil sands product or similar products could be obtained, or the prices for similar feedstock. (2) The Commission may publish (a) a schedule of standard consideration payable for goods and services, or (b) a standard mechanism or formula for determining consideration for goods and services. Application for handling allowance 21 (1) The following persons may apply to the Commission for a handling allowance in accordance with this section: (a) the lessee bound by a bitumen-in-kind direction, on their own behalf or on behalf of a delivery agent; (b) if the Commission has designated a lead delivery agent, the lead delivery agent, on their own behalf and on behalf of any delivery agent in respect of which they have been designated. (2) An application for a handling allowance must (a) be made in the form and manner approved by the Commission, (b) be submitted within one year of the end of the month in respect of which the handling allowance was incurred, (c) if the Commission requires, be accompanied by a statement indicating approval of the information provided by an authorized officer of the applicant, in any manner the Commission directs, and (d) include any other information or evidence the Commission requires. Eligibility for handling allowance 22 (1) Subject to subsection (2), the Commission must pay a handling allowance determined in accordance with this section and section 23 to the applicant for a month in which a handling goods‑and‑services direction is in effect, in respect of the goods and services referred to in this section that are provided to comply with the direction. (2) The Commission is not obligated to pay a handling allowance if the applicant, or a delivery agent on whose behalf the applicant is acting, has failed to satisfy any of the following conditions: (a) the directed Crown quantity must have been delivered on behalf of the Commission to the delivery point prescribed by the Commission; (b) the directed Crown quantity must have been delivered free and clear of all interests, charges and liens; (c) unless prior written consent for alternative transportation or handling was obtained from the Commission, the directed Crown quantity must have been (i) transported in an uninterrupted manner to the delivery point prescribed by the Commission, and (ii) handled and transported in a manner that preserved its quality and characteristics at the royalty calculation point; (d) the directed Crown quantity must not have been blended or otherwise altered in quality prior to its delivery to the Commission at the delivery point, unless prior written consent was obtained from the Commission; (e) if transportation consolidation necessitated physical commingling or blending, (i) the Commission was provided with (A) advance notice in writing detailing the nature, rationale and timing of the proposed commingling or blending, and (B) confirmation that the Commission will not be adversely affected by a lower net revenue return, (ii) the Commission has consented to the notice, (iii) appropriate measurement, segregation or equalization procedures, as required by industry practice or the Commission, must have been implemented to ensure that any changes in quality or value resulting from such commingling or blending do not affect the value of the directed Crown quantity, or to ensure that the Crown is compensated fairly for any changes in quality or value resulting from such commingling or blending, and (iv) the Commission has received access to records of all quality measurements, volumes and commingling or blending activities affecting the directed Crown quantity that it has requested. (3) A handling allowance may be paid in respect of the cost of goods or services that (a) were actually incurred by the applicant or a delivery agent for whom the applicant is acting, (b) are reasonably required to facilitate the handling and delivery of the directed Crown quantity between the royalty calculation point and the delivery point, including services required to (i) transport the directed Crown quantity between the royalty calculation point and the delivery point, (ii) if authorized by the Commission, (A) blend the directed Crown quantity with diluent or other hydrocarbon products added after the royalty calculation point, (B) process or upgrade the directed Crown quantity, including into a product obtained from the directed Crown quantity, or (C) store the directed Crown quantity, and (iii) otherwise handle the directed Crown quantity between the royalty calculation point and the delivery point, including in respect of any authorized blending, storage, processing or upgrading, and (c) are of a similar nature to the goods and services provided to the responsible delivery agent in respect of the delivery of that delivery agent’s share of the lessee’s share of the oil sands product recovered from the development area of a Project, unless the Commission has agreed in writing to other goods and services. (4) A handling allowance may not be paid in respect of recovery for any costs or charges that are allowed costs of a Project, or where the operator otherwise recovers such costs or charges against the Crown through the calculation of royalty compensation payable under the Oil Sands Royalty Regulation, 2009 (AR 223/2008) or otherwise. Amount of handling allowance 23 (1) Subject to section 22(2), the Commission may, in the determination of the handling allowance in respect of any month, (a) determine which costs referred to in section 22(3) are to be included in the handling allowance for that month, and (b) determine the amount to be paid in respect of each cost included in accordance with section 20. (2) The handling allowance for a month may not exceed the difference between (a) the fair market value of the directed Crown quantity, or the product obtained from the directed Crown quantity, at the delivery point, and (b) the sum of (i) the royalty compensation that would otherwise be payable if the directed Crown quantity was not subject to a bitumen‑in‑kind direction, and (ii) the cost of diluent blended with the directed Crown quantity, if any, when that diluent was added or deemed to be added before or at the royalty calculation point. (3) The Commission may, for the purposes of this section, (a) estimate the handling allowance for a month and, subject to clause (b)(ii), consent to that estimated amount, and (b) following the final determination of the handling allowance for the month referred to in clause (a), (i) if the handling allowance exceeds the estimated amount referred to in clause (a), consent to the higher handling allowance, or (ii) if the estimated amount referred to in clause (a) exceeds the handling allowance, (A) invoice the applicant, or a delivery agent on whose behalf the applicant is acting, for the difference, or (B) deduct the difference from the handling allowance consented to for the next month or months, as the case may be. (4) An applicant or delivery agent to whom an invoice is issued under subsection (3)(b)(ii)(A) must pay the Commission the amount invoiced on or before the last day of the month following the month in which the invoice was issued. (5) The Commission must pay the applicant the estimated amount for the handling allowance under subsection (3)(a) and (b)(i) on or before the last day of the month following the month referred to in that subsection. (6) If a condition referred to in section 22(2) is not satisfied, the Commission may (a) reduce or refuse to pay the handling allowance or the estimated handling allowance, in whole or in part, (b) set off the financial impact on the Crown of the loss of quality or value resulting from the failure against any other amount owing under this Regulation by the Commission to that applicant or to the delivery agent on whose behalf the applicant is acting, or (c) if the handling allowance has been paid, recover the amount of the payment by legal action. Amount of consideration 24 (1) The Commission may, in the determination of the consideration payable to a supplier in respect of a direction under section 16 of the Petroleum Marketing Act other than a handling goods-and-services direction, (a) determine which costs are eligible for the payment of consideration, and (b) determine the amount to be paid in respect of each eligible cost in accordance with section 20. (2) The Commission may, for the purposes of this section, (a) estimate the consideration payable for a month and, subject to clause (b)(ii), consent to that estimated amount, and (b) following the final determination of the consideration payable for the month referred to in clause (a), (i) if the consideration payable exceeds the estimated amount referred to in clause (a), consent to the higher consideration, or (ii) if the estimated amount referred to in clause (a) exceeds the consideration, (A) invoice the supplier for the difference, or (B) deduct the difference from the consideration consented to for the next month or months, as the case may be. (3) A supplier to whom an invoice is issued under subsection (2)(b)(ii)(A) must pay the Commission the amount invoiced on or before the last day of the month following the month in which the invoice was issued. (4) The Commission must pay the supplier the estimated amount for the handling allowance under subsection (2)(a) and (b)(i) on or before the last day of the month following the month referred to in that subsection. Review of decision 25 (1) The following persons may file a statement of objection with the Commission in respect of the Commission’s decisions under this Part: (a) in respect of a decision under section 23, (i) a lessee, on their own behalf or on behalf of a delivery agent; (ii) if the Commission has designated a lead delivery agent, the lead delivery agent, on their own behalf and on behalf of any delivery agent in respect of which they have been designated; (b) in respect of a decision under section 24, a supplier. (2) A statement of objection must (a) be filed with the Commission within 60 days after the date of the Commission’s decision, and (b) specify the grounds for the objection and the requested changes. (3) On receipt of a statement of objection, the Commission may (a) refuse to review the decision, or (b) review the decision. (4) If the Commission refuses to review the decision, the Commission must give notice of the refusal to the person who filed the statement of objection as soon as is reasonably practicable. (5) If the Commission proceeds with a review under subsection (3)(b), the Commission must, as soon as is reasonably practicable, inform the person who filed the statement of objection of (a) any persons to whom the person must give notice of the fact that the person has filed the statement of objection and the time within which the person must do so, (b) the manner in which the notice referred to in clause (a) must be given, and (c) the form and content of the notice referred to in clause (a). (6) A person who receives a notice under subsection (5) may file a submission in respect of the objection with the Commission within 20 days after the date on which the notice is given. (7) If the Commission proceeds with a review under subsection (3)(b), the Commission must, within 180 days of the filing of the statement of objection, (a) review the statement of objection, (b) either dismiss the application or amend or replace the original decision, and (c) provide copies of the decision to the person who filed the statement of objection and to any person who filed a submission under subsection (6). (8) Despite subsection (7), the Commission may, on application by any party or on its own motion, extend the period in which the activities referred to in subsection (7) must be completed by a reasonable period. Appeal of handling allowance 26 (1) Subject to subsection (2), a decision of the Commission under section 25 may be appealed to the Alberta Utilities Commission by the person who filed the statement of objection under section 25(1). (2) An appeal under subsection (1) (a) may only relate to the subject‑matter of the statement of objection, and (b) must be commenced by the filing of a notice of appeal with the secretary of the Alberta Utilities Commission within 60 days after the date of the Commission’s notification under section 25(4) or (7) and serving a copy of the notice of appeal on the Commission. (3) When served with a copy of the notice of appeal, the Commission must furnish to the Alberta Utilities Commission copies of the original decision, the statement of objection, any submissions filed with the Commission under section 25(6) and the Commission’s decision under section 25(4) or (7). (4) On hearing an appeal, the Alberta Utilities Commission may, by order, (a) confirm or vary the decision, (b) refer the matter back to the Commission with directions to make a new decision in accordance with any instructions given in the order, or (c) make any other disposition of the appeal that it considers appropriate in the circumstances. (5) A new decision made by the Commission in accordance with subsection (4)(b) may be reviewed by the Commission and appealed to the Alberta Utilities Commission in the same manner as the original decision. Part 4 Product Exchange Proposal to exchange directed Crown quantity 27 (1) A lessee that is the recipient of a bitumen‑in‑kind direction may propose an exchange of the directed Crown quantity for an alternative hydrocarbon product in accordance with this section. (2) An exchange proposal must (a) be submitted in writing to the Commission at least 40 days before the start of the delivery month in which the exchange is proposed to occur, (b) identify (i) a point before the delivery point at which the Commission will transfer ownership of the directed Crown quantity to the lessee, or the person directed by the lessee, and (ii) a point at which the Commission will receive delivery of the exchanged hydrocarbon product, (c) estimate the value of the directed Crown quantity for the month in which the exchange is proposed to occur in accordance with subsection (3), (d) identify the hydrocarbon product to be exchanged for the directed Crown quantity, including the quantity, quality and specifications of the product, (e) specify the actual value of the hydrocarbon product to be exchanged for the directed Crown quantity or propose a mechanism to determine the actual value of the exchanged hydrocarbon product, and (f) include any other information required by the Commission. (3) For the purposes of subsection (2)(c), an estimate must be based on (a) an estimate of the royalty compensation that would be payable on the directed Crown quantity if it was not subject to a bitumen‑in‑kind direction, and (b) if the transfer point identified in subsection (2)(b)(i) is not immediately downstream from the royalty calculation point, (i) an estimate of the cost of diluent blended with the directed Crown quantity, if any, when that diluent was added or deemed to be added before or at the royalty calculation point, and (ii) an estimate of the handling allowance that will be incurred in delivering the directed Crown quantity to the transfer point identified in subsection (2)(b)(i). Acceptance of proposal 28 (1) On receipt of a proposal under section 27(1), the Commission may (a) accept the proposal, (b) reject the proposal, or (c) propose changes to the proposal or specify further conditions which, if accepted, would result in the acceptance of the proposal. (2) If, at least 25 days before the start of the month in which the exchange is proposed to occur, the Commission fails to respond to a proposal in writing, or the proposal is otherwise not finalized, the proposal is considered to be rejected. (3) If the Commission accepts a proposal under this section, the Commission is considered to have consented to (a) the estimate of the amounts that constitute the value of the directed Crown quantity for the month, (b) the estimate of the value of the exchanged hydrocarbon product for the month if the actual value is not already determined in the exchange proposal, and (c) the point referred to in section 27(2)(b)(ii) modifying the delivery point in the original direction. (4) The acceptance of a proposal under this section is subject to compliance with the following conditions by the lessee: (a) the accepted quantity of exchanged hydrocarbon product must have been delivered on behalf of the Commission to the delivery location accepted by the Commission in the exchange proposal; (b) title to the exchanged hydrocarbon product must have transferred to the Commission, or to a person directed by the Commission, free and clear of all interests, charges and liens; (c) the exchanged hydrocarbon product must meet the accepted quality and specifications unless prior written authorization was obtained from the Commission; (d) the Commission must have received access that it has requested under section 31 to records in respect of the directed Crown quantity and the exchanged hydrocarbon product; (e) any other conditions specified in the accepted exchange proposal. (5) If a condition referred to in subsection (4) is not satisfied, the Commission may (a) refuse to complete the exchange, in whole or in part, (b) set off the financial impact on the Crown of the loss of quality or value resulting from the failure against any other amount owing to that lessee by the Commission under this Regulation, or (c) if the exchange has occurred, recover the amount of the payment by legal action. Reporting by lessee 29 (1) If a proposal under section 27 has been accepted by the Commission, the lessee must, in respect of each delivery month for which the exchange is in effect, report to the Commission (a) the unit price applicable to the directed Crown quantity, (b) the actual cost of diluent blended with the directed Crown quantity, and (c) any other information required by the Commission to establish the value of the directed Crown quantity or the exchanged hydrocarbon product. (2) A report under subsection (1) must be provided to the Commission by the last day of the month following the delivery month.

Reconciliation 30 (1) The Commission must, after the month following the delivery month referred to in section 27(2)(a), and based on the royalty reporting information provided by the operator to the Minister, determine the actual value of the directed Crown quantity at the royalty calculation point that would be payable for the delivery month if the directed Crown quantity was not subject to a bitumen‑in‑kind direction and (a) if the actual value at the royalty calculation point exceeds the estimated amount consented to by the Commission under section 27(2)(c), either (i) invoice the operator for the difference between the actual amount and the estimate consented to, or (ii) add the difference between the actual amount and the estimate consented to by the Commission to the value of the directed Crown quantity consented to for the next month or months, as the case may be, or (b) if the estimated amount consented to by the Commission under section 27(2)(c) exceeds the actual value at the royalty calculation point, pay to the operator an amount equal to the difference between the estimate consented to and the actual amount. (2) If the Commission has consented to an estimated amount under section 27(2)(c) for the cost of diluent blended or deemed to be blended with the directed Crown quantity at or before the royalty calculation point, after the month following the delivery month referred to in section 27(2)(a), the Commission must determine an actual cost of diluent based on the applicable unit price for the directed Crown quantity as blended bitumen, less the actual value of the directed Crown quantity at the royalty calculation point determined in accordance with subsection (1), and (a) if the actual cost of diluent exceeds the estimated amount consented to by the Commission under section 27(2)(c), either (i) invoice the operator for the difference between the actual cost and the amount consented to, or (ii) add the difference between the actual cost and the amount consented to by the Commission to the value of the directed Crown quantity consented to for the next month or months, as the case may be, or (b) if the estimated amount consented to by the Commission under section 27(2)(c) exceeds the actual cost of diluent, pay to the operator an amount equal to the difference between the amount consented to and the actual cost. (3) If the Commission has consented to an estimated amount under section 27(2)(c) for the value of the exchanged hydrocarbon product for the month, after the month following the delivery month referred to in section 27(2)(a), the Commission must determine the actual value of the exchanged hydrocarbon product received by the Commission based on the accepted pricing mechanism for the exchanged hydrocarbon product, and (a) if the estimated amount consented to by the Commission under section 27(2)(c) exceeds the actual value, either (i) invoice the operator for the difference between the estimated amount and the actual value, or (ii) deduct the difference between the estimated amount and the actual value from the value of the exchanged hydrocarbon product consented to for the next month or months, as the case may be, or (b) if the actual value exceeds the estimated amount consented to by the Commission under section 27(2)(c), pay an amount equal to the difference between the actual value and the estimated amount to the operator. (4) If the Commission has consented to an estimated amount for a handling allowance under section 27(3)(b)(ii), the amount consented to is considered to be the estimated amount consented to for the purposes of section 23(5), subject to any adjustments for the actual amount of handling allowance settled in accordance with section 23. Part 5 General Notice to provide information 31 (1) The Commission may give notice to any of the following to furnish to the Commission, by the deadline specified in the notice, information referred to in subsection (2): (a) a lessee of a Project that is the subject of an order under section 31(3) of the Oil Sands Royalty Regulation, 2009 (AR 223/2008); (b) an operator of a Project that is the subject of an order under section 31(3) of the Oil Sands Royalty Regulation, 2009 (AR 223/2008); (c) a person who is, at a point between the royalty calculation point and the delivery point, the owner of the lessee’s share of oil sand product recovered from the development area of a Project; (d) a supplier or potential supplier. (2) The Commission may request any of the following information: (a) an estimate of production of one or more oil sands products from the Project for a specified month or months; (b) an estimate of the anticipated quantity of royalty bitumen or blended bitumen containing royalty bitumen to be produced in the month or months specified in the notice; (c) the identity of each person who is, at a point between the royalty calculation point and the delivery point, the owner of the lessee’s share of oil sand product recovered from the development area of a Project; (d) the share of production owned by each person identified under clause (c); (e) the identity of each person that provides handling goods and services to or on behalf of each person identified under clause (c); (f) a description of the handling goods or services that each person referred to in clause (c) or (e) provides; (g) estimates of the costs of any necessary goods or services referred to in clause (f); (h) estimates of the costs of any other goods or services provided; (i) any other information the Commission determines is necessary. (3) A person who fails to comply with a notice given under this section is liable to pay to the Commission a penalty of up to $5000 for each day or part of a day after the deadline specified in the notice that any of the information referred to in the notice is not provided to the Commission. Records 32 (1) The operator of a Project that is the subject of an order under section 31(3) of the Oil Sands Royalty Regulation, 2009 (AR 223/2008) and any person who is the subject of a goods‑and‑services direction must maintain records in accordance with this section. (2) Records maintained under this section must include, in respect of each order or direction to which the person is subject, financial, technical and other information regarding (a) directed Crown quantities, (b) goods and services provided under a direction, (c) handling goods and services, (d) just and reasonable consideration, (e) approved exchange proposals, and (f) any other matter that may be relevant to a determination of the Commission under this Regulation. (3) The Commission may, on request, access any records referred to in this section if, in the opinion of the Commission, access to the information is necessary for the purposes of making a determination under this Regulation or section 16 of the Petroleum Marketing Act . Indemnity 33 (1) If the Commission has issued a bitumen‑in‑kind direction, the lessee to whom the direction was issued is liable and must indemnify and hold harmless the Commission for any costs, losses, damages or liabilities suffered or incurred by the Commission arising from (a) the failure of the lessee to deliver the directed Crown quantity in accordance with the direction, or (b) any act, omission or operation of the lessee or a delivery agent while the directed Crown quantity is in the possession, custody or control of that person, in performing the direction to the extent that the loss is caused by the person’s negligence, wilful misconduct or breach of this Regulation. (2) If the Commission has issued a goods‑and‑services direction, the supplier to whom the direction was issued is liable and must indemnify and hold harmless the Commission for any costs, losses, damages or liabilities suffered or incurred by the Commission arising from (a) the failure of the supplier to deliver the directed Crown quantity in accordance with the direction, or (b) any act, omission or operation of the supplier or an agent of the supplier while the directed Crown quantity is in the possession, custody or control of that person, in performing the direction to the extent that the loss is caused by the person’s negligence, wilful misconduct or breach of this Regulation. Readjustment 34 Nothing in this Regulation limits the powers of the Minister under section 38 of the Mines and Minerals Act to audit or examine records and make calculations and amendments.