Waterflood Development Program Regulations, C-50.2 Reg 33

1 WATERFLOOD DEVELOPMENT PROGRAM C-50.2 REG 33 The Waterflood Development Program Regulations being Chapter C-50.2 Reg 33 (effective November 21, 2019). NOTE: This consolidation is not official. Amendments have been incorporated for convenience of reference and the original statutes and regulations should be consulted for all purposes of interpretation and application of the law. In order to preserve the integrity of the original statutes and regulations, errors that may have appeared are reproduced in this consolidation. 2 C-50.2 REG 33 WATERFLOOD DEVELOPMENT PROGRAM Table of Contents 1 Title 8 Interest 2 Definitions 9 Repayment of repayable credits and accrued interest 3 Program established 10 Late repayment 4 Application for and approval of repayable credits 11 Cessation of well as qualifying waterflood injection well 5 Assignment of repayable credits 12 Publication of policies 6 Maximum repayable credits 13 Coming into force 7 Application of repayable credits 3 WATERFLOOD DEVELOPMENT PROGRAM C-50.2 REG 33 CHAPTER C-50.2 REG 33 The Crown Minerals Act Title 1 These regulations may be cited as The Waterflood Development Program Regulations. Definitions 2 In these regulations: “Act” means The Crown Minerals Act; “approved” means approved by the minister for the purposes of these regulations; “holder of credits” means a person: (a) who is a qualifying applicant whose application for a repayable credit has been approved pursuant to section 4 or an assignee elected by the qualifying applicant and approved pursuant to section 5; and (b) who is an operator, a special operator or a royalty payer; “horizontal injection well” means: (a) a well with a horizontal section, including any subsequent horizontal sections drilled in the same zone, that is approved as a horizontal well for the purpose of injection by an order of the minister pursuant to section 17 of The Oil and Gas Conservation Act; or (b) any other injection well approved as a horizontal injection well; “horizontal section” means a horizontal section as defined in clause 2(q) of The Crown Oil and Gas Royalty Regulations, 2012; “invoice” means an invoice of royalties or an invoice of taxes; “invoice of royalties” means an invoice of royalties provided pursuant to section 49 of The Crown Oil and Gas Royalty Regulations, 2012; “invoice of taxes” means an invoice of taxes provided pursuant to: (a) section 57 of The Freehold Oil and Gas Production Tax Regulations, 2012; or (b) section 8 of The Recovered Crude Oil Tax Regulations, 2012; “licensee” means a licensee as defined in clause 2(1)(h.2) of The Oil and Gas Conservation Act; 4 C-50.2 REG 33 WATERFLOOD DEVELOPMENT PROGRAM “operator” means an operator: (a) as defined in clause 2(ff) of The Crown Oil and Gas Royalty Regulations, 2012; (b) as defined in clause 2(dd) of The Freehold Oil and Gas Production Tax Regulations, 2012; or (c) as defined in clause 2(b) of The Recovered Crude Oil Tax Regulations, 2012; “program” means the Waterflood Development Program established pursuant to section 3; “qualifying applicant” means a person who: (a) applies to the minister to receive a repayable credit in accordance with section 4; (b) is the licensee of the qualifying waterflood injection well listed in the application to the ministry or is designated by the minister as suitable to apply; (c) does not have outstanding debts to the minister that are past due, in the opinion of the minister; and (d) otherwise satisfies the minister that the person is a qualifying applicant; “qualifying waterflood injection well” means: (a) a horizontal injection well or vertical injection well: (i) that has first injected water for the purpose of waterflooding on or after January 1, 2019 and before April 1, 2024; and (ii) that has never been a horizontal injection well or vertical injection well before the well commences injection of water for the purpose of waterflooding; and (b) that is part of a waterflood project approved pursuant to section 17 of The Oil and Gas Conservation Act; “repayable credit” means a credit amount that: (a) is issued pursuant to section 4; and (b) must be repaid pursuant to these regulations; “royalties” means royalties payable on Crown lands pursuant to The Crown Oil and Gas Royalty Regulations, 2012; “royalty payer” means a royalty payer as defined in clause 2(ll) of The Crown Oil and Gas Royalty Regulations, 2012; 5 WATERFLOOD DEVELOPMENT PROGRAM C-50.2 REG 33 “special operator” means a special operator: (a) as defined in clause 2(pp) of The Crown Oil and Gas Royalty Regulations, 2012; (b) as defined in clause 2(ll) of The Freehold Oil and Gas Production Tax Regulations, 2012; or (c) as defined in clause 2(e) of The Recovered Crude Oil Tax Regulations, 2012; “taxes” means the taxes imposed by sections 4 and 17 of The Freehold Oil and Gas Production Tax Act, 2010; “unpaid amount” means the amount of repayable credits that: (a) have been applied against an invoice pursuant to these regulations; and (b) have not been repaid; “vertical injection well” means any injection well that is not a horizontal injection well; “zone” means a zone as defined in clause 2(aaa) of The Crown Oil and Gas Royalty Regulations, 2012. 29 Nov 2019 c C-50.2 Reg 33 s2. Program established 3(1) The Waterflood Development Program is established for the purpose of providing a deferral of royalties and taxes by means of issuing repayable credits. (2) The minister shall administer the program in accordance with these regulations. 29 Nov 2019 c C-50.2 Reg 33 s3. Application for and approval of repayable credits 4(1) On and from April 1, 2019 and before January 1, 2025, a qualifying applicant may apply to have the minister issue a repayable credit with respect to a qualifying waterflood injection well. (2) On receipt of an application, the minister may: (a) approve the application if the minister is satisfied that: (i) the applicant is a qualifying applicant; (ii) the waterflood injection well is a qualifying waterflood injection well; and (iii) it is in the public interest to do so; or (b) refuse to approve the application. 6 C-50.2 REG 33 WATERFLOOD DEVELOPMENT PROGRAM (3) The minister shall notify the applicant of the minister’s decision and, in the case of a decision pursuant to clause (2)(b), provide written reasons for the decision. (4) The minister may impose any terms and conditions on an approval pursuant to subsection (2) that the minister considers reasonable. 29 Nov 2019 c C-50.2 Reg 33 s4. Assignment of repayable credits 5(1) At the time of application, a qualifying applicant may elect to assign all of the repayable credits issued pursuant to section 4 to another operator, special operator or royalty payer. (2) The minister may approve the assignment of repayable credits mentioned in subsection (1) if the assignee: (a) complies with: (i) the Act, these regulations and any other regulations made pursuant to the Act; and (ii) The Freehold Oil and Gas Production Tax Act, 2010 and the regulations made pursuant to that Act; and (b) otherwise satisfies the minister that it is appropriate to approve the operator, special operator or royalty payer, as the case may be, as an assignee. 29 Nov 2019 c C-50.2 Reg 33 s5. Maximum repayable credits 6 If the minister approves the application pursuant to clause 4(2)(a), the minister may issue a repayable credit in an amount not to exceed the following amounts: (a) $500,000 for any of the following: (i) a vertical injection well that was reclassified for the purpose of injecting water into an approved waterflood project; (ii) a vertical injection well that was drilled for the purpose of injecting water into an approved waterflood project; (iii) a horizontal injection well that was reclassified for the purpose of injecting water into an approved waterflood project; (b) $1 million for a horizontal injection well that was drilled for the purpose of injecting water into an approved waterflood project. 29 Nov 2019 c C-50.2 Reg 33 s6. Application of repayable credits 7(1) Subject to subsection (2), a repayable credit must be applied against the total amounts owing by the holder of credits as set out in the next invoice provided after the date on which the repayable credit is issued. 7 WATERFLOOD DEVELOPMENT PROGRAM C-50.2 REG 33 (2) If the amount of the repayable credits exceeds the total amounts owing mentioned in subsection (1), the repayable credits that have not been applied must be applied against amounts owing as set out in each subsequent invoice provided to the holder of credits until all repayable credits have been applied unless otherwise determined by the minister. (3) All repayable credits that have not been applied against amounts owing as set out in an invoice in accordance with these regulations expire on March 31, 2030. 29 Nov 2019 c C-50.2 Reg 33 s7. Interest 8(1) Interest accrues and the holder of credits shall pay to the minister interest at the rate set out in subsection (3) on the unpaid amount of all repayable credits. (2) The interest to be paid pursuant to subsection (1) must be calculated from the due date of the invoice against which the repayable credit was applied. (3) For the purposes of subsection (1), the annual rate of interest is the rate that is equal to the prime lending rate of the bank holding the general revenue fund as determined and adjusted in accordance with subsection (4). (4) The interest rate set out in subsection (3) is to be determined on June 15 and December 15 in each year and: (a) the interest rate as determined on June 15 applies to the unpaid amount that is owing on or after July 1; and (b) the interest rate as determined on December 15 applies to the unpaid amount that is owing on or after January 1 of the following year. 29 Nov 2019 c C-50.2 Reg 33 s8. Repayment of repayable credits and accrued interest 9(1) Every holder of repayable credits shall repay to the minister the unpaid amount and accrued interest in accordance with this section. (2) Any unpaid amount and accrued interest: (a) may be repaid to the minister at any time after the repayable credit is applied and before the 47th month after the repayable credit is applied; and (b) that remains unpaid in the 36th month after the repayable credit is applied must be repaid to the minister in a maximum of 10 approved consecutive monthly payments with the first payment due in the 37th month after the repayable credit is applied. (3) All outstanding repayments of unpaid amounts and all payments of accrued interest are due on March 31, 2030. 29 Nov 2019 c C-50.2 Reg 33 s9. 8 C-50.2 REG 33 WATERFLOOD DEVELOPMENT PROGRAM Late repayment 10 Scheduled repayments of the unpaid amount of all repayable credits and payment of accrued interest are subject to the payment requirements set out in Part VIII of The Crown Oil and Gas Royalty Regulations, 2012 and Part VI of The Freehold Oil and Gas Production Tax Act, 2010. 29 Nov 2019 c C-50.2 Reg 33 s10. Cessation of well as qualifying waterflood injection well 11(1) A qualifying waterflood injection well ceases to be a qualifying waterflood injection well if: (a) the minister determines that the volume of injected water is insufficient for the well to be considered a qualifying waterflood injection well; (b) the minister determines that the holder of credits with respect to the qualifying waterflood injection well no longer meets the requirements to be a qualifying applicant or approved assignee pursuant to section 5, as the case may be; or (c) the minister otherwise determines that the qualifying waterflood injection well is no longer considered a qualifying waterflood injection well. (2) If the minister makes a determination pursuant to subsection (1), the minister shall provide written notice of the determination to the holder of credits along with written reasons. (3) Notwithstanding section 9, if an injection well ceases to be a qualifying waterflood injection well: (a) the holder of credits issued with respect to that well shall repay any unpaid amount and any accrued interest owing to the minister; and (b) any repayable credit that has not been applied in accordance with these regulations is cancelled. 29 Nov 2019 c C-50.2 Reg 33 s11. Publication of policies 12 If the minister establishes policies for the purposes of these regulations, the minister shall cause those policies to be made public in any manner that the minister considers appropriate, including by publishing them on the ministry’s website. 29 Nov 2019 c C-50.2 Reg 33 s12. Coming into force 13 These regulations come into force on the day on which they are filed with the Registrar of Regulations. 29 Nov 2019 c C-50.2 Reg 33 s13. REGINA, SASKATCHEWAN Printed by the authority of THE QUEEN’S PRINTER Copyright©2019