Part II Regulations under the Regulations Act Printed by the Queen's Printer Halifax, Nova Scotia Vol. 23, No. 13 July 2, 1999 Contents Act Reg. No. Page Fisheries and Coastal Resources Act,

An Act to Amend

Chapter 25 of the Acts of 1996 Proclamation, S. 11, S.N.S. 1999, c. 2 .................... 6 8 / 9 9 4 0 4 General Assembly and Election P r o c l a m a t i o n s....................................... 7 3 / 9 9 4 9 4 Motor Vehicle Act D o c u m e n t s a n d S e r v i c e s F e e s R e g u l a t i o n s - A m e n d m e n t..... 6 7 / 9 9 4 0 3 Municipal Grants Act S t a n d a r d E x p e n d i t u r e P e r D w e l l i n g U n i t R e g u l a t i o n s........ 7 2 / 9 9 4 9 3 Offshore Petroleum Royalty Act O f f s h o r e P e t r o l e u m R o y a l t y R e g u l a t i o n s.................. 7 1 / 9 9 4 1 0 Registered Barbers Act Nova Scotia Registered Barbers Association By-laws - A m e n d m e n t..................................... 7 0 / 9 9 4 0 7

Summary Proceedings Act S u m m a r y O f f e n c e T i c k e t s R e g u l a t i o n s - A m e n d m e n t........ 6 9 / 9 9 4 0 6 Tobacco Access Act Tobacco Access Regulations - Amendment ................ 6 5 / 9 9 4 0 1 399

July 2, 1999 ROYAL GAZETTE

Part II Regulations Vital Statistics Act Fees for Searches and Transactions Regulations - A m e n d m e n t..................................... 6 6 / 9 9 4 0 2 COMING IN EARLY JULY A Folio Views® searchable CD of the consolidated regulations of Nova Scotia and the quarterly sectional index of regulations will be available from the Office of the Registrar of Regulations. For subscriptions or information please call 424-6723. 400

N.S. Reg. 65/99 ROYAL GAZETTE

Part II Regulations N.S. Reg. 65/99 Made: June 9, 1999 Filed: June 11, 1999 Tobacco Access Regulations Order in Council 1999-305 made June 9, 1999 Amendment to regulations made by the Governor in Council pursuant to

Section 13 of the Tobacco Access Act The Governor in Council on the report and recommendation of the Minister of Health dated May 13, 1999, pursuant to

Section 13 of

Chapter 14 of the Acts of 1993, the Tobacco Access Act, is pleased to make amendments to the regulations made by Order in Council 96-29 dated January 16, 1996, in the manner set forth in

Schedule “A” attached to and forming part of the report and recommendation.

Schedule “A” Amendments to the regulations made by the Governor in Council pursuant to

Section 13 of

Chapter 14 of the Acts of 1993, the Tobacco Access Act 1

Section 7 of the regulations respecting tobacco access made by the Governor in Council by Order in Council 96-29 dated January 16, 1996, is amended by: (

a) striking out “Communication” in clause (1)(

b) and substituting “Public Works”; (

b) adding “or” at the end of clause (1)(d); (

c) striking out “; or” at the end of clause (1)(

e) and substituting a period; (

d) striking out “Armed” in clauses (1)(

e) and (2)(d); and (

e) repealing clause (1)(f). 2 The Tobacco Access Act point of purchase identification sign prescribed by

Schedule “B” of the regulations is amended by (

a) striking out “N.S.” in the phrase “N.S. Photo Drivers License”; (

b) striking out “Communication” in the phrase “Photo I.D. Issued by N.S. Dept. of Transportation & Communication” and substituting “Public Works” (

c) striking out “N.S. Liquor Commission Proof of Age Card”; (

d) striking out “Armed” in the phrase “Canadian Armed Forces I.D. Card”; and (

e) striking out “Canadian” in the phrase “Canadian Passport”. 401

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Part II Regulations N.S. Reg. 66/99 Made: June 9, 1999 Filed: June 11, 1999 Fees for Searches and Transactions Regulations Order in Council 1999-306 made June 9, 1999 Amendment to regulations made by the Governor in Council pursuant to

Section 51 of the Vital Statistics Act The Governor in Council on the report and recommendation of the Minister of Business and Consumer Services dated May 20, 1999, pursuant to

Section 51 of

Chapter 494 of the Revised Statutes of Nova Scotia, 1989, the Vital Statistics Act, is pleased to amend the regulations respecting fees for searches and transactions made by Order in Council 94-125 dated February 15, 1994, by repealing clause 1(g). 402

N.S. Reg. 67/99 ROYAL GAZETTE

Part II Regulations N.S. Reg. 67/99 Made: June 9, 1999 Filed: June 11, 1999 Documents and Services Fees Regulations Order in Council 1999-318 made June 9, 1999 Amendment to regulations made by the Governor in Council pursuant to subsection 302(1) of the Motor Vehicle Act The Governor in Council on the report and recommendation of the Minister of Business and Consumer Services dated May 14, 1999, pursuant to subsection 302(1) of

Chapter 293 of the Revised Statutes of Nova Scotia, 1989, the Motor Vehicle Act, is pleased to amend the regulations respecting documents and services fees made by Order in Council 92-13 dated January 14, 1992, in the manner set forth in

Schedule “A” attached to and forming part of the report and recommendation.

SCHEDULE “A” Amendments to the regulations respecting documents and services fees made by the Governor in Council pursuant to subsection 302(1) of

Chapter 293 of the Revised Statutes of Nova Scotia, 1989, the Motor Vehicle Act 1 The regulations respecting documents and services fees made by the Governor in Council by Order in Council 92-13 dated January 14, 1992, is amended by striking out “Abstract of driver operating record as permitted by

Section 241(1) of the Motor Vehicle Act (Electronic) $7.00" and substituting the following: Abstract of driver operating record as permitted by subsection 241(1) of the Motor Vehicle Act (electronic copy) $15.00 403

N.S. Reg. 68/99 ROYAL GAZETTE

Part II Regulations N.S. Reg. 68/99 Made: June 9, 1999 Filed: June 11, 1999 Proclamation, S. 11, S.N.S. 1999, c. 2 Order in Council 1999-320 made June 9, 1999 Proclamation made by the Governor in Council pursuant to

Section 11 of

An Act to Amend

Chapter 25 of the Acts of 1996, the Fisheries and Coastal Resources Act The Governor in Council on the report and recommendation of the Minister of Fisheries and Aquaculture dated June 8, 1999, pursuant to

Section 11 of

Chapter 2 of the Acts of 1999,

An Act to Amend

Chapter 25 of the Acts of 1996, the Fisheries and Coastal Resources Act, is pleased to order and declare by proclamation that

Chapter 2 of the Acts of 1999,

An Act to Amend

Chapter 25 of the Acts of 1996, the Fisheries and Coastal Resources Act, come into force on and not before June 9, 1999. PROVINCE OF NOV A SCOTIA Sgd: J. James Kinley G/S ELIZABETH THE SECOND, by the Grace of God, of the United Kingdom, Canada and Her Other Realms and Territories, Queen, Head of the Commonwealth, Defender of the Faith. TO ALL TO WHOM THESE PRESENTS SHALL COME, OR WHOM THE SAME MAY IN ANY WISE CONCERN, GREETING: A PROCLAMATION

WHEREAS in and by

Section 11 of

Chapter 2 of the Acts of 1999,

An Act to Amend

Chapter 25 of the Acts of 1996, the Fisheries and Coastal Resources Act, it is enacted as follows: 11 This Act comes into force sixty days after this Act receives Royal Assent or such earlier day as the Governor in Council orders and declares by proclamation. AND

WHEREAS it is deemed expedient that

Chapter 2 of the Acts of 1999,

An Act to Amend

Chapter 25 of the Acts of 1996, the Fisheries and Coastal Resources Act, come into force on June 9, 1999; 404

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Part II Regulations NOW KNOW YE THAT WE, by and with the advice of the Executive Council of Nova Scotia, do by this Our Proclamation order and declare that

Chapter 2 of the Acts of 1999,

An Act to Amend

Chapter 25 of the Acts of 1996, the Fisheries and Coastal Resources Act, come into force on June 9, 1999, of which all persons concerned are to take notice and govern themselves accordingly. IN TESTIMONY WHEREOF We have caused these our Letters to be made Patent and the Great Seal of Nova Scotia to be hereunto affixed. WITNESS, Our Trusty and Well Beloved His Honour the Honourable J. James Kinley, C.D., S.M., D.Eng., P.Eng., F.E.I.C., Lieutenant Governor of the Province of Nova Scotia.

AT Our Government House in the Halifax Regional Municipality, this 9 th day of June, in the year of Our Lord one thousand nine hundred and ninety-nine and in the forty- eighth year of Our Reign. BY COMMAND: Sgd: R. S. Harrison Provincial Secretary Attorney General and Minister of Justice 405

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Part II Regulations N.S. Reg. 69/99 Made: June 16, 1999 Filed: June 18, 1999

Summary Offence Tickets Regulations Order in Council 1999-325 made June 16, 1999 Amendment to regulations made by the Governor in Council pursuant to

Section 8 of the

Summary Proceedings Act The Governor in Council on the report and recommendation of the Minister of Justice and Attorney General dated May 26, 1999, pursuant to

Section 8 of

Chapter 450 of the Revised Statutes of Nova Scotia, 1989, the

Summary Proceedings Act, is pleased to amend the regulations respecting

summary offence tickets made by Order in Council 85-187 dated February 28, 1985, in the manner set forth in

Schedule "A" attached to and forming part of the report and recommendation effective on, from and after June 16, 1999.

SCHEDULE "A" Amendment to the regulations respecting

summary offence tickets made by the Governor in Council pursuant to

Section 8 of

Chapter 450 of the Revised Statutes of Nova Scotia, 1989, the

Summary Proceedings Act

Schedule 85 of the regulations respecting

summary offence tickets made by the Governor in Council by Order in Council 85-187 dated February 28, 1985, is repealed and new

Schedule 85, in the form attached hereto, is substituted.

Schedule 85 Municipality of the County of Colchester By-law Out of Court Offence

Section Settlement By-law No. 35, Dogs 1. Owner failing to register dog 16(c) $165.00 2. Owning a dog that persistently disturbs 16(d) $165.00 quiet of neighbourhood by barking, howling or otherwise 3. Owner harbouring, keeping or having under 16(f) $165.00 care, control or direction a fierce or dangerous dog 406

N.S. Reg. 70/99 ROYAL GAZETTE

Part II Regulations N.S. Reg. 70/99 Made: June 16, 1999 Filed: June 18, 1999 Nova Scotia Registered Barbers Association By-laws Order in Council 1999-328 made June 16, 1999 Amendment to by-laws approved by the Governor in Council pursuant to

Section 6 of the Registered Barbers Act The Governor in Council on the report and recommendation of the Minister of Education and Culture dated May 27, 1999, pursuant to

Section 6 of

Chapter 390 of the Revised Statutes of Nova Scotia, 1989, the Registered Barbers Act, is pleased to approve the making by the Nova Scotia Registered Barbers Association of amendments to the by-laws made by the Nova Scotia Registered Barbers Association and approved by Order in Council dated September 19, 1957, in the manner set forth in

Schedule “B” attached to and forming part of the report and recommendation.

Schedule “B” Amendments to the by-laws of the Nova Scotia Registered Barbers Association made pursuant to

Section 6 of

Chapter 390 of the Revised Statutes of Nova Scotia, 1989, the Registered Barbers Act 1

Section 5 of the by-laws approved by the Governor in Council by Order in Council dated September 19, 1957, is amended by striking out “vote in favour of such readmission unanimously” and substituting “vote in favour of such readmission on a three[-]fourths vote”. 2

Section 6 of the by-laws is amended by striking out “vote in favour of such readmission unanimously” and substituting “vote in favour of such readmission on a three[-]fourths vote”. 3

Section 8 of the by-laws is amended by adding “which may be transmitted to or infect any other person in the normal practice of the trade of barbering” after infectious disease”. 4

Section 14 of the by-laws is amended by adding “, and shall keep a record of the sections of the trade that every member of the Association is qualified to practice or in which they may give instruction to an apprentice or in which they may supervise another registered barber who has not passed the examination for a

section of the trade” after “thereto”. 5

Section 17 of the by-laws is repealed and the following

Section substituted: 17 The President, Vice President, Secretary, Treasurer, Registrar, Sergeant at Arms and each other member of Council shall be reimbursed by the Association for expenses incurred in the normal performance of their duties. 407

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Part II Regulations 6

Section 24 of the by-laws is amended by striking out “Director of Technical Education” wherever it appears and substituting “Minister of Education and Culture”. 7 Subsection 24(2) of the by-laws is amended by (

a) striking “A majority of the” and substituting “Any two”; (

b) striking out “in the City of Halifax” and substituting “circulated throughout the Province”. 8 Subsection 24(3) of the by-laws is amended by striking out “City of Halifax and the Town of Dartmouth” and substituting “Halifax Regional Municipality”. 9 Subsection 26(1) of the by-laws is amended by adding “which may be transmitted to or infect any other person in the normal practice of the trade of barbering” after “infectious diseases”. 10

Section 28 of the by-laws is repealed and the following

Section substituted: 28 That the Examiners be reimbursed by the Association for expenses incurred in the normal performance of their duties. 11

Section 30 of the by-laws is amended by (

a) striking out “an admission fee of $15.00" and substituting “an admission fee of $25.00"; (

b) striking out “$15.00" in clause (

b) and substituting “$50.00"; (

c) adding the following clause immediately after clause (b): (

c) f o r e x a m i n a t i o n i n a n y o n e s e c t i o n o f t h e t r a d e ............$10.00 12

Section 32 of the by-laws is repealed and the following

Section substituted: Eligibility for membership 32 Every person who was on December 31, 1998, carrying on the trade of barber in the Province of Nova Scotia may apply to the Association for membership in the Association, and upon it appearing from such application or it being otherwise ascertained that such person possesses the qualifications, training and experience as prescribed by these by-laws, shall upon payment of the fees prescribed be entitled to be registered as a member of the Association and to practice any

section of the trade for which they are qualified as prescribed by these by-laws, the Registered Barbers Act or regulations under the Act. 408

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Part II Regulations 13

Section 33 of the by-laws is repealed and the following

Section substituted: Prohibition to instruct an apprentice 33

(1) A registered barber or barber holding a certificate of exemption may be prohibited from instructing an apprentice, only after a motion to this effect has been approved, by a two-thirds vote in favour of such prohibition, at any meeting of the Board of Examiners.

(2) A registered barber or barber holding a certificate of exemption may be prohibited from instructing an apprentice by reason of his failure to comply with the Registered Barbers Act, regulations under the authority of the Act or the by-laws of the Association.

(3) A registered barber or barber holding a certificate of exemption, prohibited from instructing an apprentice, may after a period of three months apply to the Board of Examiners for the withdrawal of said prohibition. At the next meeting of the Examining Board following the receipt of such application, a motion to withdraw the prohibition shall be presented. If said motion is approved by a two-thirds vote in favour, the registered barber or barber holding a certificate of exemption may again instruct an apprentice.

If the motion is not approved by a two-thirds vote in favour, the registered barber or barber hold a certificate of exemption will continue to be prohibited from instructing an apprentice, but after a period of three months may again apply to the Board of Examiners for the withdrawal of said prohibition. 14 The by-laws are further amended by adding the following

Section after

Section 33: Permitted to practice 34

(1) A registered barber will be permitted to practice only those sections of the trade on the examinations for which they have achieved a mark of 70% or more, and will not be permitted to practice those sections of the trade on the examinations for which they have failed to achieve a mark of 70%, until such time as they are able to successfully complete the examination for that

section of the trade.

(2) A registered barber will be permitted to practice a

section of the trade on the examination for which they have failed to achieve a mark of 70%, only under the immediate supervision of a registered barber who is qualified to practice that

section of the trade.

(3) A certificate of membership in the Nova Scotia Registered Barbers Association will indicate in a manner prescribed by the Council of the Association the sections of the trade that a registered barber is qualified to practice or in which they may give instruction to an apprentice or in which they may supervise another registered barber who has not qualified in any

section of the trade. 409

N.S. Reg. 71/99 ROYAL GAZETTE

Part II Regulations N.S. Reg. 71/99 Made: June 17, 1999 Filed: June 18, 1999 Offshore Petroleum Royalty Regulations Order in Council 1999-337 made June 17, 1999 Regulations made by the Governor in Council pursuant to

Section 23 of the Offshore Petroleum Royalty Act The Governor in Council on the report and recommendation of the Minister responsible for the Offshore Petroleum Royalty Act dated June 17, 1999, pursuant to

Section 23 of

Chapter 9 of the Acts of 1987, the Offshore Petroleum Royalty Act, is pleased to make the regulations respecting royalty on offshore petroleum in the form set forth in

Schedule "A" attached to and forming part of the report and recommendation, effective on, from and after June 17, 1999.

Schedule “A” Regulations respecting offshore petroleum royalty made by the Governor in Council pursuant to

Section 23 of

Chapter 9 of the Acts of 1987, the Offshore Petroleum Royalty Act

Short title 1 These regulations may be cited as the Offshore Petroleum Royalty Regulations.

Part I - Mandatory Provisions

Interpretation and application 2( 1 ) In these regulations (a) "Abandonment Cost" has the meaning set forth in

Section 3; (b) "Abandonment Loss" has the meaning set forth in

Section 4; (c) " Accord Act (Canada)" means the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act (Canada); (d) " Accord Act (Nova Scotia)" means the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation (Nova Scotia) Act; (e) "Act" means, unless the context otherwise requires, the Offshore Petroleum Royalty Act; (f) "Allowed Cumulative Field Costs" has the meaning set forth in

Section 5; (g) "Arm’s Length" has the meaning set forth in

Section 22; 410

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Part II Regulations (h) "Arm’s-Length Transaction" means, subject to subsection 22(3), any transaction between Persons that are dealing at Arm’s Length; (i) "Assessment" means an assessment made by the Minister pursuant to

Section 9 of the Act; (j) "Asset Proceeds Balance" has the meaning set forth in

Section 6; (k) "Assistance" in relation to a cost, expense or other amount means any amount that is a reimbursement, compensation or other payment from a government, municipality or other public authority in respect of the cost, expense or other amount, including any amount of related assistance, or reimbursement or benefit whether as a grant, subsidy, forgivable loan, investment allowance, tax credit or any other form of assistance, not including (

i) any resource allowance or a replacement or successor provision under the Income Tax Act (Canada), (ii) any deduction in computing income or taxable income that is not in excess of net cost, or (iii) any similar allowance, provision or deduction under a provincial income tax statute; (l) "Average BTU Production Content" has the meaning set forth in subsection 7(1); (m) "Average BTU Sale Content" has the meaning set forth in subsection 7(2); (n) "Avoidance Transaction" has the meaning set forth in

Section 28; (o) "Board" means the Canada-Nova Scotia Offshore Petroleum Board; (p) "Business Day" means a day on which chartered banks are open for business in both Calgary, Alberta and Halifax, Nova Scotia; (q) "Buyout Payment" has the meaning set forth in

Section 8; (r) "Canada-Nova Scotia Benefits" has the meaning set forth in

Section 9; (s) "Commercial Discovery" means a commercial discovery as that term is used in the Accord Act (Nova Scotia); (t) "Condensate" means a hydrocarbon other than crude oil that is in liquid form at the time of being measured by the relevant Petroleum Royalty Meter and that may contain LPG , excluding impurities; 411

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Part II Regulations (u) "Condensate Produced" means the volume of Condensate produced from the Field excluding any Condensate that is or will become LPG Produced from the Field, as measured by the relevant Petroleum Royalty Meter, adjusted to include Condensate that is Waste; (v) "Condensate Sale Price" has the meaning set forth in subsection 11(1); (w) "Condensate Sale Proceeds" has the meaning set forth in subsection 10(1); (x) "Crude Oil" means (

i) crude oil, regardless of gravity, produced at a well head in liquid form, excluding impurities, (ii) any other hydrocarbons except Condensate, Gas and LPG , and without limiting the generality of the foregoing, includes liquid hydrocarbons that may be extracted or recovered from deposits of oil sand, bitumen, bituminous sand, oil shale or from any other types of deposits on the surface or subsurface or the seabed or its subsoil of the Offshore Area, excluding impurities; (y) "Crude Oil Produced" means the volume of Crude Oil produced from the Field as measured by the relevant Petroleum Royalty Meter, adjusted to include Crude Oil that is Waste; (z) "Crude Oil Sale Price" has the meaning set forth in subsection 11(2); (aa) "Crude Oil Sale Proceeds" has the meaning set forth in subsection 10(2); (ab) "Cumulative Final Return Allowance" has the meaning set forth subsection 12(6); (ac) "Cumulative Gross Revenue" has the meaning set forth in

Section 16; (ad) "Cumulative Primary Return Allowance" has the meaning set forth in subsection 12(2); (ae) "Cumulative Secondary Return Allowance" has the meaning set forth in subsection 12(4); (af) "Fair Market Value" has the meaning set forth in

Section 14; (ag) "Final Date of Field Payout" has the meaning set forth in subsection 13(3); (ah) "Final Return Allowance" has the meaning set forth in subsection 12(5); 412

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Part II Regulations (ai) "Force Majeure" means an event including, without limiting the generality of the foregoing,

an act of God,

an act of the public enemy, war, revolution, insurrection, arrest, civil disturbance, blockade, riot, epidemic, strike, a lockout or other industrial disturbance, fire, lightning, earthquake, storms, floods, tsunami, washout, ice-flow, icebergs, high seas, fog, explosion, breakage or accident, shortage of or inability to obtain labour or materials or government restraint, action, delay or inaction, which the Interest Holder was unable to prevent or provide against by the exercise of reasonable diligence at a reasonable cost; (aj) "GAAP" means Canadian generally accepted accounting principles and all relevant accounting procedures and conventions of the Interest Holder provided that such policies are in accordance with Canadian generally accepted accounting principles; (ak) "Gas" means natural gas and includes all hydrocarbon substances, other than Crude Oil, Condensate, LPG and impurities, produced in association with gas; (al) "Gas Produced" means the volume of Gas produced from the Field excluding any Gas that is or will become LPG Produced from the Field, as measured by the relevant Petroleum Royalty Meter adjusted to include Gas that is Waste; (am) "Gas Sale Price" has the meaning set forth in subsection 11(3); (an) "Gas Sale Proceeds" has the meaning set forth in subsection 10(3); (ao) "Gross Revenue" has the meaning set forth in

Section 15; (ap) "Included Risk" for a Field means a risk relating to Field Assets, including the design, construction and assembly of Field Assets, or activities occurring in the Nova Scotia Area and that occur within, or in furtherance of activities within, the Field Area, other than activities in respect of Petroleum Produced that is downstream of the relevant Royalty Valuation Point, excluding political risks, abandonment other than risk related to the conduct of the abandonment work, business interruption or change in applicable Royalty; (aq) " Income Tax Act (Canada)" means the Income Tax Act, R.S.C. 1985, First Supplement as amended from time to time, except as noted in subsection 22(1); (ar) "Incremental Asset" means, subject to any agreement in writing between the Interest Holder and the Minister, the interest of the Interest Holder in any asset or any part thereof to the extent that that interest was acquired for use in respect of Petroleum other than Petroleum Produced from the Field, and where an asset would otherwise be a Field Asset, the Interest Holder may elect that the 413

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Part II Regulations asset be deemed to be an Incremental Asset, provided that the result of the election may not reasonably be expected to result in a significant overall reduction in Royalty payable in respect of the Field or any Other Field; (as) "Incremental Cost" means any cost that is (

i) incurred in respect of a Field Asset where the cost is a betterment under GAAP, to the extent that the cost is incurred for the purpose of use in respect of Petroleum other than Petroleum Produced from the Field, or (ii) the cost of an Incremental Asset; (at) "Independent Auditors’ Report" means a report by the independent auditors of an Interest Holder or of the operator of a Field or any Field Asset, in respect of a Royalty Return for a Period, stating that, in their opinion, the Royalty Return of the Interest Holder for the Period presents fairly, in all material respects, the amount of Royalty payable by the Interest Holder for the Period in accordance with these regulations and any agreement in writing between the Interest Holder and the Minister; (au) "Interest Holder" for a Field or an area that is subsequently determined to be a Field means (

i) a holder of a share in a Production Licence in respect of the Field or a portion of the Field or a former holder of a share in a Production Licence that has expired, or (ii) where a Production Licence has not been issued in respect of the Field or a portion of the Field, a holder of a share in an exploration licence or Significant Discovery licence in respect of the Field or a portion of the Field; (av) "LPG" means hydrocarbons that are composed principally of hydrocarbons that are heavier than methane but lighter than pentane and which are extracted from Condensate or Gas and sold as liquid or compressed ethane, butane or propane, or a mixture of such hydrocarbons; (aw) "LPG Produced" means, where LPG is extracted by or on behalf of the Interest Holder from Condensate or Gas that has been produced from the Field, the volume of LPG so extracted as measured by the relevant Petroleum Royalty Meter, adjusted to include LPG that is Waste; (ax) "LPG Sale Price" has the meaning set forth in subsection 11(4); (ay) "LPG Sale Proceeds" has the meaning set forth in subsection 10(4); 414

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Part II Regulations (az) "LTBR" has the meaning set forth in

Section 17; (ba) "Month" means a calendar month, except that where a Period is deemed to begin or end at a particular time under

Section 40, the first or last Month of that Period may be a portion of a calendar month, and the first Month shall be the calendar month in which the Field Commencement Date occurs; (bb) "Month of Cessation" means the Month in which Commercial Production from the Field ceases, other than where it may reasonably be considered that the cessation is only for a temporary period; (bc) "Net Loss" has the meaning set forth in subsection 18(2); (bd) "Net Revenue" has the meaning set forth in subsection 18(1); (be) "Non-Technical Costs" means personnel costs, expenses or other amounts in respect of advertising, public relations, community liaison or legal services, other than in respect of the regulatory process or as required by or under any Canadian federal or provincial enactment, financial services, financial accounting, financial auditing, executive search consultants, human resources, clerical staff, charitable donations, general management consulting, or management consulting in relation to any of the foregoing matters but does not include a cost, expense or other amount described in subclauses (ck)(

i) or (ii); (bf) "Noon Day Rate" for a particular Month or day in a Month in respect of a particular foreign currency means the exchange rate quoted by the Bank of Canada as its noon day rate for converting foreign currency into Canadian dollars utilizing the same method as that used by the Interest Holder for accounting purposes in converting foreign currency into Canadian dollars, except that if the method is contrary to industry standards, another reasonable method shall be used that is not contrary to industry standards and is acceptable to the Minister; (bg) "Notice" means any notice, consent, request and other document authorized or required to be given pursuant to these regulations or any agreement between the Minister and the Interest Holder entered into pursuant to the Act; (bh) "Nova Scotia Area" means collectively the Offshore Area and the geographical area of the Province to the inner limit of the Offshore Area; (bi) "Offshore Area" means the lands and submarine areas within the limits described in

Schedule I of the Accord Act (Nova Scotia); (bj) "Payout Statements" means the payout statements to be filed with a Royalty Return; 415

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Part II Regulations (bk) "Period" for an Interest Holder means a period of 12 consecutive Months ending on the last day of the fiscal period of the Interest Holder for financial reporting purposes, or such other date as is acceptable to the Minister, except that (

i) the following periods: (

A) the first Period (which shall start on the Field Commencement Date), (

B) the last Period (which shall end when the Interest Holder may no longer incur Abandonment Costs), and (

C) a Period that commences or ends by virtue of an assignment pursuant to

Section 40, may each be less than 12 Months in duration, and (ii) the Minister may permit a lesser number of Months in any Period pursuant to a request by an Interest Holder; (bl) "Person" means a natural person, corporation, association, union, government or government agency and includes a partnership or trust; (bm) "Petroleum" means a hydrocarbon that is Condensate, Crude Oil, Gas or LPG; (bn) "Petroleum Produced" means, subject to

Section 55, collectively (

i) Condensate Produced, (ii) Crude Oil Produced, (iii) Gas Produced, and (iv) LPG Produced, and a “Component of Petroleum Produced” means any one of the types listed in subclauses (

i) to (iv); (bo) "Petroleum Royalty Meter" for a Field means a device used to measure volume of Petroleum that is located as provided in

Section 19; (bp) "Petroleum Sale Price" means any or all of the Condensate Sale Price, Crude Oil Sale Price, Gas Sale Price or LPG Sale Price; (bq) "Pool" means a natural underground reservoir containing or appearing to contain an accumulation of Petroleum that is separated or appearing to be separated from any other such accumulation; 416

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Part II Regulations (br) "Primary Date of Field Payout" has the meaning set forth in subsection 13(1); (bs) "Primary Return Allowance" has the meaning set forth in subsection 12(1); (bt) "Production Licence" means a licence issued by the Board to produce Petroleum from a Field or Other Field or portion of a Field or Other Field; (bu) "Production Startup Date" for a Field means the later of the Field Commencement Date and the first day of the Month in which Commercial Production first occurs; (bv) "Related" and "Related Persons" have the meanings set forth in subsection 22(2); (bw) "Relevant BTU Adjustment Factor" has the meaning set forth in subsection 7(3); (bx) "Reservoir Performance Risk Amount" has the meaning set forth in

Section 20; (by) "Royalty" means, subject to any agreement in writing between the Minister and the Interest Holder, the royalty payable in respect to a Field pursuant to these regulations; (bz) "Royalty Benefit" means a reduction, avoidance or deferral of Royalty or other amount payable under these regulations or an increase in a refund of the Royalty or other amount; (ca) "Royalty Consequences" to a Person means the Royalty or other amount related to Royalty payable by or refundable to a Person under these regulations; (cb) "Royalty Paying Month" of an Interest Holder for a Field means a Month for which Royalty is payable by the Interest Holder; (cc) "Royalty Return" means the return to be filed with the Minister pursuant to

Section 29; (cd) "Royalty Valuation Point" means a place at which the Petroleum first leaves the Field Area; (ce) "Secondary Date of Field Payout" has the meaning set forth in subsection 13(2); (cf) "Secondary Return Allowance" has the meaning set forth in subsection 12(3); 417

N.S. Reg. 71/99 ROYAL GAZETTE

Part II Regulations (cg) "Short Term Rate" means the minimum rate, from time to time, at which the Bank of Canada makes short term Canadian dollar advances to members of the Canadian Payments Association; (ch) "Significant Discovery" means significant discovery as that term is used in the Accord Act (Nova Scotia); (ci) "Support Facility" means a facility located in the Nova Scotia Area including an office, railspur line other than a railspur line that was acquired or constructed primarily for the purpose of transporting Petroleum downstream of the relevant Petroleum Royalty Meter, weather station, helicopter pad, warehousing facility, pipeyard facility or other facility constructed in accordance with a requirement by a government or government authority that is used or intended to be used to provide services or support functions in respect of (

i) Petroleum Produced, or (ii) activities that occur either within or outside the Nova Scotia Area and that are in regard to the Field, the Field Assets or Petroleum Produced, other than services or support functions in respect of Petroleum that has passed downstream of the relevant Royalty Valuation Point; (cj) "Tariff Balance" has the meaning set forth in

Section 21; (ck) "Technical Costs" means (

i) costs, expenses or other amounts in respect of engineers, geologists, geophysicists and other scientists, field personnel, environmental health and safety experts, all experts reasonably required in conjunction with the regulatory process (including public affairs, community liaison and consultants) and management consulting in relation to any of the foregoing matters, (ii) charges of all regulatory bodies and agencies, excluding fines and penalties, and (iii) any other costs of personnel which are not Non-Technical Costs; (cl) "Third Party Costs" means, subject to the provisions of any agreement in writing between the Minister and the Interest Holder, any costs, expenses or other amounts incurred with a Person that deals at Arm’s Length with the Interest Owner and each Other Interest Holder other than 418

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Part II Regulations (

i) an amount arising under a back-to-back arrangement which is indirectly payable to a Person that does not deal at Arm’s Length with the Interest Holder or any Other Interest Holder of the Field, (ii) salaries, wages, remuneration, fees or related benefits of an individual who is employed by, or who performs services primarily for and is akin to a contract employee of the Interest Holder, the operator of the Field or any Field Asset or an Other Interest Holder of the Field or a Person that is Related to any such Person, and (iii) costs of temporary replacement of an individual described in subclause (ii), such as for vacation, sickness, disability, bereavement, maternity leave or paternity leave; (cm) "Transaction" includes any arrangement or event, and a "Series of Transactions" includes any related Transactions completed in contemplation of the series; and (cn) "Waste" means Petroleum that has been produced, saved and recovered from the Field Area (other than Petroleum that has passed through the relevant Petroleum Royalty Meter) that meets each of the following tests: (

i) it is waste within the ordinary meaning of that term or as understood in the oil and gas industry, (ii) it arises as a result of Gross Negligence, and (iii) it is attributable to one or more of the following: (

A) drilling, equipping, completing, operating or producing of any well in a manner that causes the unnecessary or excessive loss or destruction of Petroleum after being produced, saved and recovered (excluding blowouts), (

B) inefficient storage of Petroleum above ground or underground, (

C) production of Petroleum in excess of available storage, transportation or marketing facilities, or (

D) the escape or flaring of Gas that could be economically recovered or economically injected into an underground reservoir.

(2) Additional

definitions are found in

Part II of these regulations, and, subject to subsection (3), will apply together with the

definitions in subsection (1). 419

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Part II Regulations

(3) Except as may otherwise be agreed between the Minister and an Interest Holder, Parts I and II of the regulations apply together in determining the obligations and liabilities of the Interest Holder and the Minister in respect of Royalty and other matters relating to a Field Area. Abandonment Cost 3( 1 ) Subject to subsection (2), the Abandonment Cost of an Interest Holder for a Field shall be (

a) a cost, expense or other amount incurred in closing down, decommissioning, abandoning, or removing, in whole or in part, a Field Asset, including ongoing repair, maintenance, monitoring or keeping a Field Asset in a safe condition following the cessation of the use of that Field Asset in contemplation of abandonment of that Field Asset within the time frame contemplated by clause (2)(c), restoration of land or seabed in which a Field Asset is or was located and consulting in respect of, or obtaining approval to, any of the foregoing; or (

b) a Buyout Payment made by the Interest Holder, in connection with liabilities relating to a Field Asset, to a Person with whom the Interest Holder deals at Arm’s Length, and where a Buyout Payment has been received by an Interest Holder in respect of a Field Asset, any amount incurred by the Interest Holder and otherwise falling within clause (

a) in respect of the Field Asset shall be reduced, after taking into account the applicable Overhead Uplift, by the amount of the Buyout Payment attributable to the Field Asset, adjusted to reflect the intervening time period between the end of the Month in which the Buyout Payment was received and the end of the Month in which the Abandonment Cost under clause (

a) is incurred, using the LTBR applicable at the end of the Month in which the Buyout Payment was received, and if such reduction is greater than the actual aggregate Abandonment Costs under clause (

a) that are incurred in respect of the Field Asset, the difference shall be included in the Asset Proceeds Balance of the Interest Holder who received the Buyout Payment for the Month in which the final Abandonment Costs in respect of the Field Asset were incurred or the Month of Cessation, whichever is earlier.

(2) A cost, expense or other amount shall constitute an Abandonment Cost only to the extent that (

a) in the case of an amount that is not a Buyout Payment, it is a cost, expense or other amount that is (

i) required to be incurred by statute, regulation, rule or binding order of the Board or other applicable regulatory authority, (ii) incurred in accordance with prudent and desirable industry practices, or 420

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Part II Regulations (iii) approved by the Minister for inclusion as an Abandonment Cost; or (

b) in the case of a Buyout Payment made by the Interest Holder, it is a cost, expense or other amount that may reasonably be expected to be (

i) required to be incurred at a later time by statute, regulation, rule or binding order of the Board or other applicable regulatory authority, (ii) incurred in accordance with prudent and desirable industry practices, or (iii) approved by the Minister for inclusion as an Abandonment Cost, and that would have been an Abandonment Cost of the Interest Holder making the Buyout Payment if it were incurred by that Interest Holder at the later time referred to in subclause (i); and (

c) it is incurred (

i) prior to the end of the Month of Cessation or within 3 years after the end of the Month of Cessation, or (ii) in accordance with a decision made by the Interest Holder within 2 years after the end of the Month of Cessation to abandon the relevant Field Assets and the abandonment of those Field Assets is completed as soon as reasonably practicable after the decision is made, and in particular without any intentional material delay for the purposes of earning amounts that are of the type described in clause 21(

a) respecting Tariff Balance. Abandonment Loss 4 The Abandonment Loss of an Interest Holder for a Field at the end of the Month shall be (

a) where the Month is the Month of Cessation or any previous Month, the lesser of (

i) the Net Loss for that Month, taking into account any Net Loss brought forward under subsection 27(3) as an addition to Allowed Capital Costs, or (ii) the aggregate of the Abandonment Costs incurred in that Month and the Abandonment Costs included in any Net Loss from the previous Month brought forward to that Month under subsection 27(3), inclusive in each case of Overhead Uplifts and taking into account any reductions to such Abandonment Costs 421

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Part II Regulations under subsection 44(8), where the Abandonment Costs included in any Net Loss from the previous Month brought forward to that Month under subsection 27(3) means the lesser of (

A) the Net Loss from the previous Month, or (

B) the aggregate of the Abandonment Costs incurred in the previous Month and any Abandonment Costs included in a Net Loss brought forward to the previous Month under subsection 27(3), computed in accordance with this paragraph, inclusive in each case of Overhead Uplifts and taking into account any reductions to such Abandonment Costs under subsection 44(8); (

b) where the Month is after the Month of Cessation, the aggregate of (

i) the amount determined in clause (

a) at the end of the Month of Cessation, and (ii) the aggregate of all Abandonment Costs, inclusive of Overhead Uplifts, incurred after the Month of Cessation by the Interest Holder in respect of the Field Assets, taking into account any reductions thereto under subsection 44(8). Allowed Cumulative Field Costs 5 The Allowed Cumulative Field Costs of an Interest Holder for a Field as at the end of any Month shall be the aggregate of (

a) Allowed Predevelopment Costs of the Interest Holder incurred on or before the end of the Month; (

b) Allowed Capital Costs of the Interest Holder incurred on or before the end of the Month, excluding any amount added to Allowed Capital Costs for a Month under subsection 27(3) or 27(4); (

c) Allowed Operating Costs of the Interest Holder incurred on or before the end of the Month; (

d) Royalty payable by the Interest Holder for all previous Months; and (

e) the Royalty that would be payable for the Month if the Royalty were calculated using the formula for calculating Royalty that was applicable in determining the Royalty payable for the immediately preceding Month, minus (

f) the aggregate of the Tariff Balance and Asset Proceeds Balance of the Interest Holder, determined at the end of the Month but reduced to take into account any reduction in Tariff Balance or Asset 422

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Part II Regulations Proceeds Balance as a result of the reduction under subsection 44(8) to Allowed Operating Costs or Allowed Capital Costs incurred during the Month. Asset Proceeds Balance 6( 1 ) Subject to

Section 40, the Asset Proceeds Balance of an Interest Holder at any time during a Month shall be the amount, if any, by which (

a) subject to subsection (2), the aggregate of all amounts, each of which is an amount that is receivable or has been received by the Interest Holder on or before that time, including any deemed proceeds of disposition under Sections 41 or 48, for the sale, lease, licence or other disposition of Field Assets, to the extent of the amount of the cost of the assets, including Overhead Uplift, and taking into account any reduction of the cost for Assistance or increase to the cost under

Section 45, that have been included as Allowed Predevelopment Costs or Allowed Capital Costs of the Interest Holder in respect of the Field, before any reduction under subsection 44(8), excluding (

i) any consideration received or receivable on a transaction to the extent that the consideration is for the sale or grant of a working interest, overriding royalty interest, carried interest, net profit interest, penalty associated with acquiring a carried interest or any similar interest in the Field, and (ii) any insurance proceeds referred to in clause 18(1)(

b) respecting Net Revenue, reading that clause without reference to the reductions contemplated by it, exceeds the aggregate of (

b) the aggregate amount by which the Allowed Operating Costs or Allowed Capital Costs incurred in all previous Months have been reduced under clauses 44(8)(a), (b), or (f); and (

c) where the time is after the Month of Cessation, the amount included in Net Revenue for the Month of Cessation pursuant to subclause 18(1)(d)(i).

(2) For the purposes of clause (1)(a), the proceeds received or receivable by an Interest Holder for the disposition of a Field Asset shall be reduced by any amount that the Interest Holder pays to the purchaser or to another Person, under or concurrently with the disposition of the Field Asset, in consideration for the purchaser agreeing to assume the obligations of the Interest Holder in respect of Abandonment Costs in respect of the disposed Field Asset. 423

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Part II Regulations BTU content of Gas 7( 1 ) The Average BTU Production Content of the Interest Holder in a particular Month for Gas Produced shall be determined by dividing the total heating value of the share of Gas Produced of the Interest Holder that is measured by the relevant Petroleum Royalty Meter in that Month, by the total volume of the share of Gas Produced of an Interest Holder, expressed in such units as are consistent with the units used to determine the Average BTU Sale Content of the Interest Holder in a particular Month for Gas Produced.

(2) The Average BTU Sale Content of the Interest Holder in a particular Month for Gas Produced shall be determined by dividing the total heating value of the share of Gas Produced of the Interest Holder that is disposed of by the Interest Holder in that Month, by the total volume of the share of Gas Produced of the Interest Holder, expressed in such units as are reasonable in the circumstances.

(3) The Relevant BTU Adjustment Factor in a particular Month for Gas Produced shall be determined by dividing the Average BTU Production Content in that Month by the Average BTU Sale Content in that Month, and despite the foregoing, if in a particular Month there has been no sale of Gas Produced in that Month, the Relevant BTU Adjustment Factor for Gas Produced in that Month shall be deemed to be 1. Buyout Payment 8( 1 ) Subject to subsections (2) and (3), a Buyout Payment shall be, (

a) an amount that an Interest Holder of a Field pays to another Person to assume in whole or in part the liabilities of an Interest Holder for Abandonment Costs in respect of a Field Asset of that Field, other than under or concurrently with a Transaction governed by

Section 40 or other Transaction involving a disposition of that Field Asset, where the Interest Holder no longer proposes to use the asset for the purposes of any Field; (

b) an amount that an Interest Holder of a Field receives from an Interest Holder of an Other Field in consideration for assuming in part the liabilities of the Interest Holder of the Other Field for Abandonment Costs in respect of a Field Asset of the Other Field, other than under a transaction governed by

Section 40 or other transaction involving a disposition of that Field Asset, where the payor no longer proposes to use the Field Asset in whole or in part for the purposes of the Field or any Other Field and the recipient proposes to use the asset for the purposes of the Field; or 424

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Part II Regulations (

c) a cost of insurance in respect of liabilities for Abandonment Costs, which cost of insurance is not an Allowed Operating Cost, but would be an Allowed Operating Cost if the definition of Included Risk in clause 2(1)(ap) were read without reference to the words "abandonment other than risk related to the conduct of the abandonment work".

(2) A Buyout Payment made by an Interest Holder of a Field, or the portion of a Buyout Payment that reasonably relates to a particular Abandonment Cost, shall be deemed to have been made on the later of (

a) the day that it is actually made; or (

b) the earlier of the last day of the Month of Cessation and the last day of the Month in which the related abandonment cost was incurred.

(3) Where a Buyout Payment is actually made before the end of the Month of Cessation, the amount of the Buyout Payment shall be adjusted to reflect the intervening time period between the end of the Month in which the Buyout Payment was actually made and the date on which it is deemed to have been made by this definition, using the Short Term Rate if the intervening period is not more than 3 years, and otherwise using the LTBR, applicable at the end of the Month in which the Buyout Payment was actually made.

Canada-Nova Scotia Benefits 9 Canada-Nova Scotia Benefits shall be costs, expenses or other amounts incurred by or on behalf of the Interest Holder in respect of research, development, training or any other matters that contribute to the economy, people or government of the Province that are approved by the Minister for inclusion as Canada-Nova Scotia Benefits. Calculation of sale proceeds 10

(1) The Condensate Sale Proceeds of an Interest Holder in a particular Month shall be the sum of (

a) the aggregate actual sale or other proceeds of Condensate Produced that is disposed of in that Month by the Interest Holder in an Arm’s- Length Transaction, adjusted for Allowed Netback Costs pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder; and (

b) where Condensate Produced is disposed of by an Interest Holder otherwise than in a Transaction that is an Arm’s-Length Transaction, or is delivered by the Interest Holder to another Person in satisfaction of any obligation of the Interest Holder, the amount determined to be the Fair Market Value of the Condensate at the Royalty Valuation Point; and, for greater certainty, the Fair Market Value determined under this clause shall be adjusted, if necessary, for Allowed Netback Costs pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder. 425

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Part II Regulations

(2) The Crude Oil Sale Proceeds of an Interest Holder in a particular Month shall be the sum of (

a) the aggregate actual sale or other proceeds of Crude Oil Produced that is disposed of in that Month by the Interest Holder in an Arm’s- Length Transaction, adjusted for Allowed Netback Costs pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder; and (

b) where Crude Oil Produced is disposed of by an Interest Holder otherwise than in a Transaction that is an Arm’s-Length Transaction, or is delivered by the Interest Holder to another Person in satisfaction of any obligation of the Interest Holder, the amount determined to be the Fair Market Value of the Crude Oil at the Royalty Valuation Point; and for greater certainty, the Fair Market Value determined under this clause shall be adjusted, if necessary, for Allowed Netback Costs pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder.

(3) The Gas Sale Proceeds of an Interest Holder in a particular Month shall be the sum of (

a) the aggregate actual sale or other proceeds of Gas Produced that is disposed of in that Month by the Interest Holder in an Arm’s-Length Transaction, adjusted for Allowed Netback Costs pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder; and (

b) where Gas Produced is disposed of by an Interest Holder otherwise than in a Transaction that is an Arm’s-Length Transaction, or is delivered by the Interest Holder to another Person in satisfaction of any obligation of the Interest Holder, the amount determined to be the Fair Market Value of the Gas at the Royalty Valuation Point; and for greater certainty, the Fair Market Value determined under this clause shall be adjusted, if necessary, for Allowed Netback Costs pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder.

(4) The LPG Sale Proceeds realized by an Interest Holder in a particular Month for a particular type of LPG shall be the sum of (

a) the aggregate actual sale or other proceeds of LPG Produced of that type that is disposed of in that Month by the Interest Holder in an Arm’s-Length Transaction, adjusted for Allowed Netback Costs pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder; and (

b) where LPG Produced of that type is disposed of by an Interest Holder otherwise than in a Transaction that is an Arm’s-Length Transaction, or is delivered by the Interest Holder to another Person in satisfaction 426

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Part II Regulations of any obligation of the Interest Holder, the amount determined to be the Fair Market Value of the LPG at the Royalty Valuation Point; and for greater certainty, the Fair Market Value determined under this clause shall be adjusted, if necessary, for Allowed Netback Costs, pursuant to these regulations or an agreement in writing between the Minister and the Interest Holder. Calculation of sale price 11

(1) The Condensate Sale Price of an Interest Holder in a particular Month shall be determined by dividing the Condensate Sale Proceeds for that Month by the volume of Condensate Produced that is disposed of in that Month by the Interest Holder, and where there are no Condensate Sale Proceeds for the Month, the Condensate Sale Price shall be equal to the Fair Market Value at the Royalty Valuation Point of the share of the Condensate Produced of the Interest Holder in the Month, divided by the volume of that share.

(2) The Crude Oil Sale Price of an Interest Holder in a particular Month shall be determined by dividing the Crude Oil Sale Proceeds for that Month by the volume of Crude Oil Produced that is disposed of in that Month by the Interest Holder, and where there are no Crude Oil Sale Proceeds for the Month, the Crude Oil Sale Price shall be equal to the Fair Market Value at the Royalty Valuation Point of the share of the Crude Oil Produced of the Interest Holder in the Month, divided by the volume of that share.

(3) The Gas Sale Price of an Interest Holder in a particular Month shall be determined by dividing the product of the Gas Sale Proceeds for that Month multiplied by the Relevant BTU Adjustment Factor, by the volume of Gas Produced that is disposed of in that Month by the Interest Holder, and where there are no Gas Sale Proceeds for the Month, the Gas Sale Price shall be equal to the Fair Market Value at the Royalty Valuation Point of the share of the Gas Produced of the Interest Holder in the Month, divided by the volume of that share.

(4) The LPG Sale Price of an Interest Holder in a particular Month for a particular type of LPG shall be determined by dividing the LPG Sale Proceeds for that Month for that type of LPG by the volume of LPG Produced of that type that is disposed of in that Month by the Interest Holder, and where there are no LPG Sale Proceeds for that type of LPG for the Month, the LPG Sale Price for that type of LPG shall be the Fair Market Value at the Royalty Valuation Point of the share of the LPG Produced of that type of the Interest Holder in the Month, divided by the volume of that share. Return allowances 12

(1) The Primary Return Allowance of an Interest Holder for a Field for a particular Month, commencing with the Month in which the Field Commencement Date falls to and including the Month immediately preceding the Month in which the Primary Date of Field Payout occurs, shall be the product obtained by multiplying 427

N.S. Reg. 71/99 ROYAL GAZETTE

Part II Regulations (a) (X + LTBR) ÷ 12 where X is 0.05 or such other amount as may be specified in the provisions of an agreement in writing between the Interest Holder and the Minister, or if no such provisions exist, by the Governor in Council, in respect of the Field or a class of Fields to which the Field belongs and LTBR is expressed as a fraction, by (

b) the amount at the end of the particular Month by which the Allowed Cumulative Field Costs exceed Cumulative Gross Revenue of the Interest Holder for the Field.

(2) The Cumulative Primary Return Allowance of an Interest Holder for a Field in respect of any Month shall be the aggregate of the Primary Return Allowances for all Months that precede that Month.

(3) The Secondary Return Allowance of an Interest Holder for a Field for a particular Month, commencing with the Month in which the Field Commencement Date falls to and including the Month immediately preceding the Month in which the Secondary Date of Field Payout occurs, shall be the product obtained by multiplying (a) (Y + LTBR) ÷ 12 where Y is 0.20 or such other amount as may be specified in the provisions of an agreement in writing between the Interest Holder and the Minister, or if no such provisions exist, by the Governor in Council, in respect of the Field or a class of Fields to which the Field belongs and LTBR is expressed as a fraction, by (

b) the amount at the end of the particular Month by which the Allowed Cumulative Field Costs exceed Cumulative Gross Revenue of the Interest Holder for the Field.

(4) The Cumulative Secondary Return Allowance of an Interest Holder for a Field in respect of any Month shall be the aggregate of the Secondary Return Allowances for all Months that precede that Month.

(5) The Final Return Allowance of an Interest Holder for a Field for a particular Month, commencing with the Month in which the Field Commencement Date falls to and including the Month immediately preceding the Month in which the Final Date of Field Payout occurs, shall be the product obtained by multiplying (a) (Z + LTBR) ÷ 12 428

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Part II Regulations where Z is 0.45 or such other amount as may be specified in the provisions of an agreement in writing between the Interest Holder and the Minister, or if no such provisions exist, by the Governor in Council, in respect of the Field or a class of Fields to which the Field belongs and LTBR is expressed as a fraction, by (

b) the amount at the end of the particular Month by which the Allowed Cumulative Field Costs exceed Cumulative Gross Revenue of the Interest Holder for the Field.

(6) The Cumulative Final Return Allowance of an Interest Holder for a Field in respect of any Month shall be the aggregate of the Final Return Allowances for all Months that precede that Month. Dates of Field payout 13

(1) The Primary Date of Field Payout of an Interest Holder for a Field shall be the last day of the first Month in which Cumulative Gross Revenue is, at the end of that Month, equal to or greater than the sum of the Allowed Cumulative Field Costs and the Cumulative Primary Return Allowance.

(2) The Secondary Date of Field Payout of an Interest Holder for a Field shall be the last day of the first Month in which Cumulative Gross Revenue is, at the end of that Month, equal to or greater than the sum of the Allowed Cumulative Field Costs and the Cumulative Secondary Return Allowance.

(3) The Final Date of Field Payout of an Interest Holder for a Field shall be the last day of the first Month in which Cumulative Gross Revenue is, at the end of that Month, equal to or greater than the sum of the Allowed Cumulative Field Costs and the Cumulative Final Return Allowance.

Fair Market Value 14 Subject to any agreement in writing between the Minister and the Interest Holder, the Fair Market Value of any cost, expense, price, proceeds of disposition or other amount receivable or payable that arises in a Transaction that is not an Arm’s-Length Transaction shall be, the amount thereof computed in accordance with subsection 22(5) and, in the case of a deemed disposition at a particular time of an asset by an Interest Holder under these regulations or any agreement in writing between the Interest Holder and the Minister, the "Fair Market Value" of the asset shall be the proceeds of disposition that would reasonably be expected to arise if the asset had actually been disposed of by the Interest Holder to another Person at that time under a Transaction between Persons dealing at Arm’s Length, with neither Person under a compulsion to enter into the Transaction.

Gross Revenue 15 Subject to an agreement in writing by the Minister and the Interest Holder, the Gross Revenue of an Interest Holder for a Field for any Month shall be the aggregate of the following amounts: 429

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Part II Regulations (

a) the product obtained when the share of the volume of the Condensate Produced in that Month from the Field of the Interest Holder is multiplied by the Condensate Sale Price; (

b) the product obtained when the share of the volume of the Crude Oil Produced in that Month from the Field of the Interest Holder is multiplied by the Crude Oil Sale Price; (

c) the product obtained when the share of the volume of the Gas Produced in that Month from the Field of the Interest Holder is multiplied by the Gas Sale Price; and (

d) if LPG has been extracted by or on behalf of the Interest Holder from Condensate or Gas that was produced from the Field, for each type of LPG so extracted, the product obtained when the share of the volume of the LPG Produced of that type in that Month from the Field of the Interest Holder is multiplied by the LPG Sale Price for LPG of that type. Cumulative Gross Revenue 16 The Cumulative Gross Revenue of an Interest Holder for a Field as of the end of a Month shall be the aggregate of (

a) Gross Revenue for that Month and all previous Months; (

b) all amounts included in clause 18(1)(

b) respecting Net Revenue for that Month and all previous Months; and (

c) Miscellaneous Amounts for that Month and all previous Months. LTBR 17

(1) The LTBR in respect of a Month shall be the average annual yield of securities issued by the Government of Canada in Canadian dollars during the 12 Months immediately preceding that Month and maturing in over 10 years, as published by the Bank of Canada in the publication entitled the "Bank of Canada Review".

(2) If the rate described in subsection (1) is not available, the LTBR shall be (

a) a similar rate determined pursuant to the provisions of an agreement in writing between the Minister and the Interest Holder; (

b) if the provisions described in clause (

a) do not exist, a similar rate agreed to in writing by the Minister and the Interest Holder; or (

c) in the absence of an agreement in writing, a similar rate reasonably specified by the Minister. 430

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Part II Regulations

(3) Where it is necessary to apply the LTBR for purposes of these regulations or any agreement in writing between the Interest Holder and the Minister, other than to determine the Final Return Allowance, Primary Return Allowance or Secondary Return Allowance, each of which shall be calculated on a basis that does not involve any compounding, the LTBR shall be compounded with the same frequency as that used by the Bank of Canada in preparing the publication referred to in subsection (1) or by such alternative source as applicable. Net Revenue and Net Loss 18

(1) The Net Revenue of an Interest Holder for a Month shall be determined by the amount, if any, by which the aggregate of (

a) Gross Revenue for the Month; (

b) any amount receivable or deemed by subsection 44(6) to be receivable in the Month as proceeds under a policy of insurance to the extent and only to the extent that the insurance premiums on the policy have been included as an Allowed Operating Cost, Allowed Predevelopment Cost or Allowed Capital Cost of the Interest Holder for the Field, and proceeds included under this clause shall be reduced by (

i) reasonable costs of claiming and collecting the proceeds, and (ii) the amount (

A) incurred within one year of the date the proceeds are received or become receivable, or (

B) where it is yet to be incurred, as agreed to in writing by the Minister to replace or repair or otherwise remedy the incident for which the insurance proceeds were received or are receivable, provided in either case to the extent that amounts so incurred reduce the proceeds pursuant to this clause, the amounts so incurred shall not be included in Allowed Capital Costs or Allowed Operating Costs except for the purposes of computing Overhead Uplifts; (

c) any Miscellaneous Amounts for the Month; and (

d) where the Month is the Month of Cessation, the aggregate of (

i) the Asset Proceeds Balance, and (ii) the Tariff Balance, in each case determined at the end of the Month and reduced by the amount of any reductions under subsection 44(8) to costs incurred in the Month, 431

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Part II Regulations exceeds the aggregate of (

e) the Allowed Capital Costs and the Allowed Operating Costs incurred during the Month; and (

f) the amount if any by which the Tariff Balance is less than zero immediately before the end of the Month.

(2) The Net Loss of an Interest Holder for a Month shall be the amount, if any, by which the aggregate of the amount determined in clauses (1)(

e) and (

f) for the Month exceeds the aggregate of the amounts determined under clauses (1)(

a) to (

d) for the Month.

(3) Where the Interest Holder receives, after the Month of Cessation, any insurance proceeds that would have been included in Net Revenue pursuant to clause (1)(

b) but for the fact that they are received after the Month of Cessation, the Interest Holder and the Minister shall negotiate in good faith to determine by agreement the share of the Minister of the insurance proceeds.

(4) If the Interest Holder and the Minister are unable to reach an agreement pursuant to subsection (3) within 180 days of receipt by the Interest Holder of the insurance proceeds, the matter, subject to an agreement in writing between the Minister and the Interest Holder, shall be referred to a Board or Committee pursuant to

Section 73. Petroleum Royalty Meter 19

(1) Subject to an agreement in writing between the Minister and the Interest Holder, Petroleum Royalty Meters for the Field shall be selected by the Interest Holder and approved by the Minister, and placed at a location or locations selected by the Interest Holder and approved by the Minister that, unless otherwise agreed in the case of LPG Produced, shall be at or near the Royalty Valuation Point, recognizing there may be different Petroleum Royalty Meters for Condensate, Crude Oil, Gas or particular types of LPG .

(2) The approvals by the Minister of the meter or meters and their locations pursuant to subsection (1) shall not be unreasonably withheld. Reservoir Performance Risk Amount 20

(1) Subject to subsections (2) and (3), the Reservoir Performance Risk Amount of an Interest Holder in respect of a Field shall be any amount that the Interest Holder is required to pay to another Person other than a government or government agency, to the extent that the amount (

a) is computed based on the amount or value of production from the Field or any part thereof, whether the amount is determined by reference to a specific period of time or otherwise; 432

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Part II Regulations (

b) can reasonably be regarded as being for the acquisition of Field Assets or services provided within or in respect of activities within the Field Area; and (

c) is, or would be, but for any limitation relating to the treatment of a Reservoir Performance Risk Amount as a Disallowed Cost, an Allowed Predevelopment Cost, Allowed Capital Cost or Allowed Operating Cost of the Interest Holder for the Field.

(2) Despite subsection (1), an amount under subsection (1) shall be a Reservoir Performance Risk Amount only in situations where a contractor assumes financial risk relating to the performance of the underlying Pools by becoming a quasi working interest holder of the Field in economic terms.

(3) For greater certainty, the fact that a cash incentive payable by an Interest Holder is based on achievement of startup, construction or operating cost targets, completion or commencement of production within a specified time limit or performance or capacity of constructed facilities, as opposed to the underlying Pools, being of or in excess of a certain capacity, shall not in and of itself cause the incentive to be regarded as a Reservoir Performance Risk Amount. Tariff Balance 21 The Tariff Balance of an Interest Holder at any time during a Month shall be the positive or negative amount equal to the aggregate of (

a) the aggregate of all amounts, each of which is a Tariff Amount that is receivable or has been received by the Interest Holder on or before the earlier of that time and the end of the Month of Cessation, and if an Interest Holder makes a payment to or receives a payment from a Person to amend or terminate an agreement in writing under which there are amounts that would otherwise arise before the end of the Month of Cessation and be included under this clause, the portion of the payment that reasonably relates to such amounts shall be deemed to give rise to a negative amount or a positive amount, as applicable, under this subclause immediately before the end of the Month in which the payment or receipt arises; (

b) any Post-Production Net Tariff Amounts; and (

c) any amount deducted in computing Net Revenue under clause 18(1)(

f) respecting the definition of Net Revenue for any previous Month, minus the aggregate of 433

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Part II Regulations (

d) the aggregate amount (ignoring effects upon Overhead Uplift) by which the Allowed Operating Costs or Allowed Capital Costs (including Abandonment Costs) incurred in all previous Months have been reduced under clauses 44(8)(c), (

d) and (e); and (

e) where the time is after the Month of Cessation, the amount included in the calculation of Net Revenue for the Month of Cessation under subclause 18(1)(d)(ii). Non-Arm’s-Length Persons 22

(1) In this Section, a reference to the Income Tax Act (Canada) means the Act as amended to September 1, 1998, as the Act applies to taxation years that include September 1, 1998.

(2) In these regulations, the provisions of the Income Tax Act (Canada) of general application together with paragraph 80(2)(

j) of that Act shall apply, with the necessary changes in details as the circumstances require, in determining whether 2 Persons are Related Persons or whether 2 or more Persons are dealing at Arm’s Length, except that in applying the definition of "related persons" in subsection 251(2) of the Income Tax Act (Canada), "controls" or "controlled" shall be understood as meaning controls, or controlled, directly or indirectly in any manner whatever and 2 Persons are "Related" for the purposes of these regulations if they are Related Persons.

(3) Where a transaction involves the sale, lease, licence or other disposition or acquisition of an asset or the provision of a service (

a) from or by the operator of a Field or any Field Assets of a Field to the operator of an Other Field or any Field Assets of an Other Field; or (

b) from or by the operator of an Other Field or any Field Assets of an Other Field to the operator of a Field or any Field Assets, in each case on behalf of the Interest Holders of the respective Field or Other Field as applicable, the sale, lease, licence, disposition, acquisition of the asset or provision of the service shall prima facie be deemed to arise under an Arm’s-Length Transaction unless the working interests of the Person or Persons, including for this purpose working interests of any Persons who do not deal at Arm’s Length with the Persons, who are Interest Holders in the Field or Field Assets differs from the working interests of the Person or Persons, including for this purpose working interests of any Persons who do not deal at Arm’s Length with the Persons, who are Interest Holders of the Other Field by less than a 25% working interest in the Field, Field Assets or Other Field.

(4) In determining whether any 2 or more Persons are dealing at Arm’s Length in respect of a Field Area as a matter of fact, regard shall be given to all of the relevant circumstances, including Transactions in respect of and directly relevant to the activities carried on or to be carried on in 434

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Part II Regulations connection with the Field Area and where it may reasonably be considered that one of the primary purposes of a Transaction or of the terms under which a Transaction is entered into was to cause 2 or more Persons to not deal at Arm’s Length in order to reduce the amount of a Tariff Amount that would otherwise arise, those Persons shall be deemed to deal at Arm’s Length for the purposes of determining the amount of the Tariff Amount.

(5) Subject to subsection (6) and to the rules for computing and characterizing of Tariff Amounts, where an Interest Holder of a Field and another Person with whom the Interest Holder does not deal at Arm’s Length are participants in a Transaction, or a Series of Transactions that is or may be relevant to the determination of any amount payable under these regulations, and (

a) the terms or conditions made or imposed, in respect of the Transaction or Series of Transactions, between any of the participants in the Transaction or Series of Transactions differ from those that would have been made between Persons dealing at Arm’s Length; or (

b) the Transaction or Series of Transactions would not have been entered into between Persons dealing at Arm’s Length and can reasonably be considered not to have been arranged primarily for bona fide purposes other than to obtain a Royalty Benefit or to obtain a reduction, avoidance or deferral of income tax under applicable income tax legislation which, if achieved, would result in a misuse of the provisions of the relevant income tax legislation or an abuse having regard to the provisions of the relevant income tax legislation, read as a whole, unless the transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes, any amounts that, but for this

Section and

Section 28, would be determined for the purposes of these regulations in respect of the Interest Holder, and the nature of such amounts, shall be adjusted or recharacterized to the quantum or nature of the amounts that would have been determined if (

c) where clause (

a) applies, the terms and conditions made or imposed, in respect of the Transaction or Series of Transactions, between the participants in the Transaction or Series of Transactions had been those that would have been made between Persons dealing at Arm’s Length; or (

d) where clause (

b) applies, the Transaction or Series of Transactions entered into between the participants had been the Transaction or Series of Transactions that would have been entered into between Persons dealing at Arm’s Length, under terms and conditions that would have been made between Persons dealing at Arm’s Length. 435

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(6) Despite anything otherwise provided in this Section, in determining the amount of the Royalty payable in respect of a Field by an Interest Holder, the Minister shall be entitled to use the actual amount of any amount other than a Tariff Amount that is a cost, price or other amount, other than an insurance cost, arising in a Transaction that is not an Arm’s-Length Transaction, irrespective of whether the Minister uses the actual amount or Fair Market Value of the amount for the purpose of determining the amount of any Royalty payable by any other Person, where either (

a) the Interest Holder so requests and the Minister agrees; or (

b) the Interest Holder reported an amount other than the Fair Market Value in a deliberate attempt to evade or avoid Royalties payable by the Interest Holder or by any other Person in respect of the Field or an Other Field. Determining Fair Market Value 23 In determining the Fair Market Value of any Petroleum Produced or share of Petroleum Produced, regard may be given to any of the following matters: (

a) the grade of the Petroleum Produced; (

b) the points of disposition and delivery of the Petroleum Produced; (

c) the state and nature of the market for the Petroleum Produced being sold at the relevant time; (

d) the terms of relevant contracts or sales agreements and the quantities specified therein; (

e) the provisions of the contracts or sales agreements relating to the variation or renegotiation of prices; (

f) prices paid to producers of similar petroleum products in Arm’s- Length Transactions; (

g) any provisions in joint venture operating agreements that relate to Transactions between Related Persons; or (

h) such other matters as are relevant in the circumstances. Method of payment of Royalty 24

(1) An Interest Holder for a Field shall make payments to the Board to the credit of the Receiver General of Canada on account of Royalty arising in a Period in the following manner: 436

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Part II Regulations (

a) subject to

Section 25, by the end of each Month that follows a Royalty Paying Month in the Period, an amount equal to the aggregate Royalty owing for each Royalty Paying Month in the Period as estimated under

Section 26, divided by the number of Royalty Paying Months for the Period as estimated under

Section 26; and (

b) within 3 Months after the end of the Period, the balance of the Royalty owing for each Month in the Period.

(2) Any payments required to be made by an Interest Holder in respect of Royalty for a particular Field shall not be reduced other than by way of claims for adjustments in amounts payable under these regulations or any agreement in writing between the Minister and the Interest Holder in respect of the Field.

(3) Subject to

Section 46 of the Accord Act (Nova Scotia), where any Royalty, interest or other amount payable under these regulations in respect of a Field is due and payable to the Board, the amount owed is a debt due to Her Majesty in Right of the Province.

(4) Payment of an amount to the Board shall be deemed to be payment jointly to the Board and Her Majesty in Right of the Province.

(5) Her Majesty in Right of the Province shall have a first and prior charge on the share of the Interest Holder of all unsold Petroleum Produced from the Field but not on Petroleum Produced that has been sold and on the share of the Interest Holder of the proceeds from the sale of any Petroleum Produced from the Field.

(6) In addition to any legal remedy available to Her Majesty in Right of the Province in respect of the Royalty, interest or other amount payable under these regulations, but subject to any agreement in writing between the Minister and the Interest Holder in respect of the Field, the Minister may, upon 1 week’s Notice to each of (

a) the Interest Holder who is in default, or is reasonably expected to be in default within 30 days, in payment of any Royalty, interest or other amount payable under these regulations referred to in this subsection as the "Affected Interest Holder"; (

b) the operator of the Field or any Field Asset; and (

c) all Other Interest Holders of the Field, take immediate possession of the unsold Petroleum Produced of the Affected Interest Holder at the relevant Petroleum Royalty Meters or at such other location downstream of the relevant Petroleum Royalty Meter as is specified by the Minister and is reasonable in the circumstances or of 437

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Part II Regulations the proceeds of disposition of Petroleum Produced of the Affected Interest Holder, where the Minister determines that it is necessary to do so in order to ensure that the Royalty, interest or other amount will be paid.

(7) Except as provided in

Section 25, Royalty or amounts payable under these regulations on account of Royalty shall be paid in Canadian dollars. Payment in kind 25

(1) Despite

Section 24, the Minister may require a payment under clause 24(1)(

a) to be made in whole or in

part in kind at the relevant Petroleum Royalty Meter, in accordance with subsection (4), out of the share of the Interest Holder of such type or types of Petroleum Produced as may be specified by the Minister in accordance with subsection (3).

(2) Where the Minister requires that a payment be paid in kind pursuant to subsection (1), the Minister shall provide, in respect of a 12-Month period commencing on the first day of November or such other date as the Minister and the Interest Holder may agree, 6 Months prior Notice to the Interest Holder of the type or types of Petroleum Produced in respect of which the payments under clause 24(1)(

a) are to be made in kind during the 12-Month period and, subject to any agreement in writing between the Minister and the Interest Holder in respect of the Field, may specify such conditions as are reasonable in the circumstances.

(3) Where the Minister gives a Notice under subsection (2) and the Interest Holder is entitled to a share of more than 1 type of Petroleum Produced from the Field, the Notice shall (

a) specify the types of Petroleum in respect of which the payment under clause 24(1)(

a) is to be made in kind pursuant to subsection (1) during a 12-Month period commencing on November 1 of a year or such other date as the Minister and the Interest Holder may agree; (

b) require that, subject to subsection (6), Petroleum of the types specified, be delivered in kind as calculated and determined pursuant to subsection (4); and (

c) require that the payments in kind pursuant to subsection (1) in respect of the 12-Month period to which the Notice relates shall be made during the Royalty Paying Month in either of the ways prescribed in subsection (4).

(4) Payments in kind made pursuant to this

Section shall be made in either of the following ways: (

a) for each type of Petroleum Produced from the Field to which the Interest Holder is entitled to a share and that is a type of Petroleum in respect of which a payment in kind is required to be made, payment shall consist of Petroleum of that type with a value equal to 438

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Part II Regulations T x P/R where (

i) T is the total amount of the payment that is required to be made at that time, (ii) P is the estimated amount included in Gross Revenue for Petroleum of that type for the corresponding Royalty Paying Month, and (iii) R is the estimated Gross Revenue for the corresponding Royalty Paying Month, and P, R and T shall be based upon the estimates for the Period under

Section 26; or (

b) in such other manner as may be agreed upon by the Minister and the Interest Holder.

(5) The balance, if any, of the payment under subsection 24(1) shall be made in cash.

(6) The obligation of an Interest Holder to pay in kind under this

Section shall be subject to the following conditions: (

a) the Interest Holder shall not be required to make any payment in kind to the extent that it is unable to do so due to Force Majeure; and (

b) where there is a cutback or curtailment in production from the Field other than a cutback or curtailment that is entered into voluntarily primarily for the purpose of reducing Royalty payable in respect of the Field, the amount payable in kind under subsection (4) shall be reduced, pending any revision of the relevant estimates under

Section 26, on a pro-rata basis in accordance with the amount of the cutback or curtailment in production.

(7) For the purposes of subsections (4) and (5), the value of each type of Petroleum included in the payment in kind shall be determined by using the corresponding Petroleum Sale Price for that type of Petroleum upon which the estimates for the Period under

Section 26 are based.

(8) For the purpose of valuing a payment in kind in order to determine Net Revenue or Gross Revenue, the applicable Petroleum Sale Price, for the Month in which the payment in kind is made, shall be used.

(9) Where Petroleum Produced is to be delivered to the Minister as a payment of Royalty in kind and the Petroleum Produced is handled, stored, transported or processed by the Interest Holder, or using the capacity rights of the Interest Holder, downstream of the relevant Petroleum 439

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Part II Regulations Royalty Meter to the point of delivery to the Minister, the Minister shall pay a fair and reasonable fee for the handling, storage, transportation and processing, determined on commercial terms, and that fee shall be paid in cash. Estimates 26

(1) An Interest Holder for a Field shall provide to the Minister, in respect of each Period, written good faith estimates of the amount of the aggregate Royalty payable to the Board to the credit of the Receiver General of Canada and the number of Royalty Paying Months for the Period.

(2) The estimates shall be provided to the Minister not later than 30 days before the first day of the relevant Period except that, in the case of the 1st Period and any other Period that commences before production from the Field first occurs, the estimates shall be provided by the later of (a) 60 days after the day on which these regulations come into effect; or (b) 90 days before any production from the Field is reasonably expected to first occur.

(3) Subject to subsection (4), if in the opinion of the Minister, it may reasonably be considered that the estimates made pursuant to this

Section were not made in good faith or where it appears there is manifest error in the estimates, the Minister shall so advise the Interest Holder and the Interest Holder and the Minister shall use reasonable efforts to prepare revised good faith estimates.

(4) The Minister and the Interest Holder shall have 30 Business Days from the date on which the Minister advises the Interest Holder under subsection (3) to revise the estimates made pursuant to this Section.

(5) The Minister may, at any time, require revised good faith estimates for a Period for which estimates have been prepared or are to be prepared by the Interest Holder where the Minister believes that the estimates previously made may be materially inaccurate.

(6) Where the Interest Holder believes that estimates previously submitted may be materially inaccurate, whether due to a change or an error in the initial estimates or to subsequent events including without limitation, material changes in Petroleum prices, other costs or in production levels or schedules, the Interest Holder may submit revised estimates to the Minister.

(7) The Minister shall duly consider the revised estimates prepared pursuant to subsections (5) and (6) and the other subsections of this

Section shall apply with the necessary changes in detail in the event that the Minister disagrees with the revised estimates.

(8) Where the Minister and the Interest Holder are not able to agree on revised estimates prepared pursuant to this Section, or the Interest Holder fails to 440

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Part II Regulations provide a revised estimate within 30 days of being required to under subsection (4), the estimates of the Minister will prevail. Calculating costs 27

(1) Except as provided for in these regulations or in any agreement in writing between the Interest Holder and the Minister, GAAP, including any accounting principles or conventions that are in accordance with GAAP and have been adopted by the Interest Holder or operator of the Field or any Field Asset, will be applied in determining when a cost, expense or other amount has been incurred or whether a cost, expense or other amount is capital or operating in nature.

(2) All costs, expenses and other amounts shall be deemed to arise at the time that they were incurred.

(3) The Net Loss of an Interest Holder, exclusive of any portion of an Abandonment Loss that is carried back under subsection (4), for any Month that is (

a) subsequent to the Secondary Date of Field Payout; and (

b) prior to the Month of Cessation, shall be carried forward to the next Month by treating the Net Loss as an Allowed Capital Cost incurred in the next Month for the purpose of calculating the Net Revenue of the Interest Holder from the Field.

(4) Where the Month of Cessation is subsequent to the Month in which the Secondary Date of Field Payout occurs, and where at the end of a particular Month that is or is subsequent to the Month of Cessation the Abandonment Loss of the Interest Holder is greater than zero, the Abandonment Loss at the end of the particular Month shall be carried back in whole or in part to one or more previous Months, by treating the Abandonment Loss or a portion thereof as an Allowed Capital Cost incurred in the previous Month or Months for the purpose of calculating the Net Revenue of the Interest Holder from the Field for the previous Month or Months, provided that (

a) the Abandonment Loss at the end of the particular Month shall be carried back to earlier Months in reverse chronological order, starting with the Month of Cessation or, where the particular Month is the Month of Cessation, starting with the immediately preceding Month, and shall be applied to reduce or eliminate Net Revenue in each Month to the greatest extent possible, but not to a negative amount, before carrying the Abandonment Loss back to an earlier Month; (

b) no portion of the Abandonment Loss may be carried back to a Month that is prior to the Month in which the Secondary Date of Field Payout occurs; 441

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Part II Regulations (

c) the aggregate amount carried back under this subsection to all previous Months in respect of the Abandonment Loss at the end of the particular Month shall not exceed the amount of such Abandonment Loss; and (

d) where at the end of each particular Month after the Month of Cessation up to and including the 36th Month after the Month of Cessation, the Asset Proceeds Balance of the Interest Holder is greater than zero, the Asset Proceeds Balance at that time shall be carried back to reduce the Abandonment Loss at the end of that particular Month, and any loss carrybacks previously allowed under this subsection shall be readjusted accordingly and a payment or refund of any resulting amount owing by the Interest Holder on account of Royalty shall be made by the end of the 3rd Month following the particular Month.

(5) The Primary Date of Field Payout, Secondary Date of Field Payout and Final Date of Field Payout for a Field shall not be affected by the operation of subsection (3) or (4), or subject to the operation of

Section 54, by any subsequent events. Anti-avoidance rule 28

(1) Where a Transaction is an Avoidance Transaction as defined in this Section, the Royalty Consequences to a Person shall be determined as is reasonable in the circumstances in order to deny a Royalty Benefit that, but for this Section, would result, directly or indirectly, from that Transaction or from a Series of Transactions that includes that Transaction.

(2) An Avoidance Transaction shall be any Transaction (

a) that, but for this Section, would result, directly or indirectly, in a Royalty Benefit, unless the Transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the Royalty Benefit; or (

b) that is part of a Series of Transactions, which Series of Transactions, but for this Section, would result, directly or indirectly, in a Royalty Benefit, unless the Transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the Royalty Benefit.

(3) For the purposes of subsection (2), where one of the primary purposes of entering into a Transaction or Series of Transactions was to obtain a benefit under applicable income tax legislation that, if achieved, would result in a misuse of the provisions of the relevant income tax legislation or abuse having regard to the provisions of the relevant income tax legislation, read as a whole, the Transaction shall be deemed to be an Avoidance Transaction. 442

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(4) For greater certainty, a Transaction is not an Avoidance Transaction where it may reasonably be considered that the Transaction would not result directly or indirectly in a misuse of the provisions of these regulations or an abuse having regard to the provisions of these regulations, other than this Section, and any agreement in writing between the Interest Holder and the Minister relating to Royalty read as a whole.

(5) The fact that an Interest Holder has taken Royalty Consequences or the reduction, avoidance or deferral of income tax into account may not of itself justify a finding that a particular Transaction is an Avoidance Transaction or a misuse of the provisions of these regulations or income tax legislation or an abuse having regard to the provisions of these regulations or income tax legislation.

(6) Without restricting the generality of subsection (1), (

a) any amount included in computing Allowed Capital Costs, Allowed Netback Costs, Allowed Operating Costs or Allowed Predevelopment Costs or otherwise applied to reduce Net Revenue or Gross Revenue may be allowed or disallowed in whole or in part; (

b) the amount of any relevant balance, including the Allowed Cumulative Field Costs, Tariff Balance or Asset Proceeds Balance of the Interest Holder may be revised; (

c) the nature of any payment or other amount may be recharacterized; or (

d) the Royalty Consequences that would otherwise result from the application of these regulations may be ignored, in determining the Royalty Consequences to a Person as is reasonable in the circumstances in order to deny a Royalty Benefit that would, but for this Section, result, directly or indirectly, from an Avoidance Transaction.

(7) Despite any other provision of these regulations or any agreement between the Minister and an Interest Holder, the Royalty Consequences to any Person following the application of this

Section shall only be determined through an Assessment delivered pursuant to these regulations involving the application of this

Section to that Person.

(8) Where an Assessment involving the application of subsection (1) with respect to a Transaction has been sent to a Person, any other Person shall be entitled, within 180 days after the delivery of the Assessment, to request in writing that the Minister make an Assessment applying subsection (1).

(9) On receipt of a request by a Person made under subsection (8), the Minister shall, with all due dispatch, consider the request and an Assessment with respect to that Person may be made under this subsection 443

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Part II Regulations only to the extent that it may reasonably be regarded as relating to the Transaction referred to in subsection (8). Royalty Returns and Assessments 29

(1) An Interest Holder for a Field shall file with the Minister a Royalty Return for the Field for each Period (

a) ending after the Field Commencement Date until the later of the [the ] Month of Cessation and the last Month in which Abandonment Costs are incurred by the Interest Holder; and (

b) ending after the later of the Month of Cessation and the last Month in which Abandonment Costs are incurred by the Interest Holder in which proceeds of insurance that are required to be included in Net Revenue are received by the Interest Holder.

(2) The Royalty Return shall be filed on or before the later of 3 Months from the end of the Period to which the Royalty Return relates and the date on which these regulations come into force.

(3) A Royalty Return shall contain the following information in respect of each Month in the Period to which the return relates that is, or is prior to, the Month of Cessation: (

a) the respective total volumes of the share of the Interest Holder of Crude Oil Produced, Gas Produced, Condensate Produced and LPG Produced of each type; (

b) the respective total volumes of the share of the Interest Holder of Crude Oil Produced, Gas Produced, Condensate Produced and LPG Produced of each type sold; (

c) the respective total volumes of the share of the Interest Holder of Crude Oil Produced, Gas Produced, Condensate Produced and LPG Produced of each type disposed of otherwise than by way of sale; (

d) with respect to each of clauses (

b) and (c), the respective amounts that arose in Transactions that were not Arm’s-Length Transactions; (

e) the Crude Oil Sale Price, Average Gas Sale Price, Gas Sale Price and Condensate Sale Price and the LPG Sale Price for each type of LPG Produced; (

f) the amounts described in each of

Section 15 respecting Gross Revenue and

Section 16 respecting Cumulative Gross Revenue; (

g) the Allowed Predevelopment Costs, Abandonment Costs, Allowed Capital Costs and Allowed Operating Costs actually incurred in the Month and the amount of the costs that are deemed to have been incurred in the Month under

Section 54; 444

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Part II Regulations (

h) the Allowed Netback Costs incurred during the Month; (

i) the Abandonment Loss as at the end of the Month; (

j) the Net Loss as at the end of the Month; (

k) the Royalty payable in respect of the Month; (

l) the amount of the Asset Proceeds Balance and the Tariff Balance at the end of the Month, adjusted to take into account any reduction in Asset Proceeds Balance or Tariff Balance as a result of a reduction under subsection 44(8) to Allowed Operating Costs or Allowed Capital Costs incurred during the Month; and (

m) a Payout Statement for the Month, unless the Month is after the Final Date of Field Payout, providing the following information: (

i) the Cumulative Primary Return Allowance, Cumulative Secondary Return Allowance and Cumulative Final Return Allowance, (ii) the amount, if any, by which the sum of Allowed Cumulative Field Costs and Cumulative Primary Return Allowance exceeds Cumulative Gross Revenue, (iii) the amount, if any, by which the sum of Allowed Cumulative Field Costs and Cumulative Secondary Return Allowance exceeds Cumulative Gross Revenue, (iv) the amount, if any, by which the sum of Allowed Cumulative Field Costs and Cumulative Final Return Allowance exceeds Cumulative Gross Revenue, (

v) whether any contracts are subsisting to which the Interest Holder is a party or by which the Interest Holder is bound that have or may give rise to a Reservoir Performance Risk Amount becoming payable by the Interest Holder and if so whether (

A) any such amount became so payable, and (

B) any such contracts have been entered into or amended in the Month, (vi) whether any insurance policies have been placed, maintained or materially amended, in respect of Included Risks during the Month, by the Interest Holder or any Person that does not deal at Arm’s Length with the Interest Holder, (vii) whether any claims relating to an Included Risk have been made by the Interest Holder during the Period and any events have occurred that could give rise to such a claim during the Period under a policy of insurance, 445

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Part II Regulations (viii) whether any contracts for the sale of Petroleum have been entered into under which Petroleum Produced may be delivered 60 days or more after the date that the Petroleum Produced is paid for by the purchaser, (ix) whether there is a material change or difference in the accounting practices or principles used by the Interest Holder from those used in the immediately preceding Period, and (

x) whether the accounting practices or principles used by the Interest Holder in each of the Months of the Period are the same as for the other Months of the Period.

(4) A Royalty Return shall contain the following information in respect of each Month in the Period to which the return relates that is after the Month of Cessation: (

a) the Abandonment Costs incurred in the Month; (

b) the Abandonment Loss as at the end of the Month and a calculation of any resulting carrybacks under subsection 27(4); and (

c) the Tariff Balance and Asset Proceeds Balance at the end of the Month after reducing any Abandonment Costs incurred in the Month under subsection 44(8).

(5) The information required to be provided in a Royalty Return shall be in the prescribed form or in such other form as may be agreed to by the Minister and the Interest Holder.

(6) A Royalty Return shall be accompanied by an Independent Auditors’ Report or in the event that it is in the process of being prepared, the Independent Auditors’ Report shall be submitted as soon as possible thereafter but in any event within 6 Months after the end of the Period.

(7) Where a payment, other than a payment in kind pursuant to

Section 25, is made pursuant to these regulations or any agreement in writing between the Minister and the Interest Holder, the Interest Holder shall file a remittance statement with the Minister at the time of payment.

(8) The Royalty Return shall include a certificate by an officer, director or other Person employed by the Interest Holder who has the requisite authority to make the certificate, stating that the Person signing the certificate has examined the Royalty Return, including accompanying schedules and statements, and that the information given in the Royalty Return is, to the best of the knowledge of such Person, correct and complete. 446

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Part II Regulations

(9) The Minister shall examine a Royalty Return and assess the Royalty payable for each Month in a Period and any related interest or penalties with all due dispatch following the receipt of a Royalty Return for the Period.

(10) An Assessment shall be delivered by the Minister to the Interest Holder and shall include information pertaining to Gross Revenues, Abandonment Costs, Allowed Capital Costs, Allowed Operating Costs, Allowed Netback Costs, status of payout points, Net Revenue, Net Loss, Royalty, Tariff Balance, Asset Proceeds Balance, Abandonment Loss and interest or penalties payable in respect of each Month of the Period.

(11) The Royalty Return filed by the Interest Holder for the Period in which the Month of Cessation falls shall disclose all pending or outstanding insurance claims to the knowledge of the Interest Holder that may give rise to the receipt of insurance proceeds pursuant to clause 18(1)(

b) respecting Net Revenue, but for the fact that the insurance proceeds will be received after the Month of Cessation. Books and records 30

(1) An Interest Holder for a Field shall keep or cause to be kept all of the books, records, accounts, documents and other information of the operator pertaining to costs, expenses and other amounts attributable to the Field or any Field Asset at the head office of the Interest Holder or the operator of the Field or any Field Asset in Canada, or at such other place as may be provided for in an agreement in writing between the Minister and the Interest Holder, or as the Minister may permit.

(2) An Interest Holder for a Field shall keep or cause to be kept all of its books, records, accounts, documents and other information that are not maintained by the operator of the Field or any Field Asset pertaining to (

a) costs, expenses and other amounts attributable to the Field or the Field Assets or otherwise relevant to the calculation of Royalty; (

b) revenues relating to Petroleum Produced; (

c) other amounts received or receivable that are relevant to the calculation of Royalty; and (

d) Allowed Netback Costs, at the head office of the Interest Holder in Canada or at such other place as may be provided for in an agreement in writing between the Minister and the Interest Holder, or as the Minister may permit.

(3) An Interest Holder shall not destroy any records referred to in subsections (1) or (2) without prior written approval by the Minister. 447

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(4) Approval under subsection (3) shall not be unreasonably withheld, having regard to outstanding matters or issues relating to Royalty payable, in respect of requests to destroy records relating to Months that are at least 7 years prior to the time that the request is made.

(5) Where an Interest Holder or operator of a Field or any Field Asset maintains any of the materials referred to in subsection (1) outside the Province, the Interest Holder shall, at its election, either (

a) reimburse the Minister for all reasonable expenditures necessary for or incidental to verification of the amount of Royalty paid or payable and the information contained in the Royalty Return, including reasonable travel of Persons authorized by the Minister to examine the books, records, accounts, documents and other information at the location where they are maintained (but limited to the additional expenditure incurred by or on behalf of the Minister due to the information being located outside the Province); or (

b) provide access to the materials within the Province for that purpose.

(6) The Minister will use reasonable efforts to minimize the need for and costs of travel pursuant to subsection (5) and in selecting auditors shall take into consideration whether the auditors have audit personnel with the requisite expertise in the Province and the province where the books are maintained. GAAP 31

(1) Except where otherwise expressly provided in these regulations, or as otherwise agreed to in writing by the Minister and the Interest Holder, GAAP shall be adhered to by an Interest Holder in the keeping and filing of all books, records, accounts, documents and other information under these regulations.

(2) The accounting principles referred to in subsection (1) shall be applied on a consistent basis from Month to Month and from Period to Period unless the following conditions are met: (

a) any changes are desirable or required under GAAP; (

b) any changes are implemented on a prospective rather than a retroactive basis; and (

c) any changes are made in a manner that does not create any leakage of Net Revenue, Gross Revenue or other amount that is relevant to the calculation of Royalty in the transition from the previous method of accounting to the revised method of accounting. 448

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Part II Regulations Confidentiality of records 32

(1) The Minister and any representatives of the Minister shall keep confidential all information and records obtained pursuant to these regulations or any agreement in writing between the Minister and the Interest Holder, but these confidentiality requirements shall not apply to any information and records that (

a) are in the public domain at the time they are obtained; (

b) come into the public domain after they have been obtained other than by virtue of a breach of the provisions of this subsection; (

c) are available to the Province on a non-confidential basis from a source other than an Interest Holder if the source is entitled to disclose the information; or (d) [that ] are required by law to be disclosed, but only to the extent so required.

(2) Despite subsection (1), the Minister may disclose or provide information and records to any Person on a need-to-know basis for the purpose of enforcing or furthering any investigation under the Act or these regulations and any Person to whom a disclosure is made shall be considered to be a representative of the Minister for the purposes of this Section.

(3) All representatives of the Minister or their employers, other than governmental employees, shall, at the request of the Interest Holder, execute and deliver to the Interest Holder a confidentiality agreement prior to any information and records being made available to them by or on behalf of the Interest Holder.

(4) Subject to the terms of any agreement in writing between the Minister and the Interest Holder, the confidentiality agreement shall be in the prescribed form or in such form as is reasonably satisfactory in form and substance to the Interest Holder, provided that the approval of the Interest Holder to the form and substance of the confidentiality agreement shall not be unreasonably withheld. Audits 33

(1) An Interest Holder for a Field shall, for the purpose of an audit or examination made in accordance with this Section, (

a) make the books, records, accounts, documents and other information of the Interest Holder available at all reasonable times to any Person authorized by the Minister for the purpose and shall provide the Person with copies of documents requested by the Person that are reasonable for the purposes of the audit; 449

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b) make available copies of any contracts that have been entered into or amended during the Period and that may give rise to a Reservoir Performance Risk Amount becoming payable by the Interest Holder, at all reasonable times to any Person authorized by the Minister for the purpose; (

c) make available copies of all insurance policies placed or maintained by the Interest Holder in respect of Included Risks, including any amendments to the insurance policies; (

d) make available copies of any joint operating agreement or agreements between operators, and between operator or operators and other Interest Holders, at all reasonable times to any Person authorized by the Minister for the purpose; and (

e) give all reasonable assistance to a Person authorized by the Minister to carry out the audit or examination, provide access to all relevant sites and answer orally or in writing all questions relating to the audit or examination in each case at such times, upon such Notice and under such supervision by or on behalf of the Interest Holder as is reasonable in the circumstances.

(2) The attendance by an authorized Person pursuant to clause (1)(

e) shall be at the expense of the Minister, and the Interest Holder may require, as a condition of attendance, that the Person comply with any applicable safety or other requirements of the Interest Holder that are consistent with normal industry practices.

(3) The Minister shall be entitled to commence an audit of a Royalty of an Interest Holder arising in a Period and any related interest and penalties at any time following the date on which the Royalty Return for the Period was required to be filed, provided that the audit is commenced (

a) within 2 years, or 3 years where the Period ends on or before December 31 of the 6 th year following the year in which the Production Startup Date occurs, after the later of the day on which the Royalty Return was required to be filed and the day on which the Independent Auditors’ Report is filed, where (

i) the Minister has no reasonable basis to believe that the Interest Holder has made a misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the Royalty Return for the Period or in supplying any information under these regulations or any agreement in writing between the Interest Holder and the Minister, and (ii) the Interest Holder has not filed a waiver with the Minister; and (

b) at any time, where the Minister has a reasonable basis to believe that 450

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i) the Interest Holder has made a misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the Royalty Return for the Period or in supplying any information under these regulations or any agreement in writing between the Interest Holder and the Minister, or (ii) the Interest Holder has filed a waiver with the Minister which has not been revoked on at least 60 days prior Notice.

(4) Except as provided in subsection (7), the Minister shall give at least 30 days’ Notice to an Interest Holder for a Field of the intention of the Minister to conduct an audit or examination.

(5) The audit or examination shall be conducted in a prompt and timely manner and once commenced shall be diligently pursued.

(6) At the conclusion of the audit or examination, the Minister and the Interest Holder shall endeavour to resolve any outstanding matters.

(7) The Minister shall not be required to give any Notice of an audit where the Minister has reasonable cause to believe that the Interest Holder for a Field has made any misrepresentation that is attributable to neglect, carelessness, or wilful default, or has committed any fraud in filing a Royalty Return for any Period or in supplying information required under these regulations.

(8) Where the Minister is conducting an audit or examination pursuant to this Section, the Interest Holder shall make available to the Minister such additional or other information or documentation requested by the Minister as is necessary to assess or verify the accuracy and completeness of the information contained in the Royalty Return including, without limiting the generality of the foregoing, the computation of the Royalty.

(9) The Minister shall, within 6 Months following the conclusion of an audit, provide a written report to the Interest Holder of any questions or exceptions arising from the audit.

(10) The Interest Holder shall reply to the questions and exceptions referred to in subsection (9) in writing within 3 Months, or such longer period as the Minister permits, from the date of receipt of the written report.

(11) The Minister and an Interest Holder shall make reasonable efforts to resolve the questions and exceptions referred to in subsection (9) within 3 Months following the date of receipt of the reply of the Interest Holder, and where the question or exception has been resolved, the adjustments permitted by the Minister and the Interest Holder shall be rectified promptly. 451

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Part II Regulations Refunds 34

(1) The Minister shall refund, or apply against any other amounts owing by the Interest Holder under these regulations, any overpayment made on account of Royalty or other amount arising under these regulations or any agreement in writing between the Minister and the Interest Holder where (

a) there are reasonable grounds for concluding that an overpayment has been made, including an overpayment that arises as a result of the application of subsection 27(4); (

b) there are reasonable grounds for concluding that Royalties or other amounts were remitted in error; or (

c) it is evident from the Royalty Return, supported by the Independent Auditors’ Report, that for any Period the Royalty payment pursuant to clause 24(1)(

a) and subsection 25(1) exceeds the amount of the Royalty.

(2) The Minister shall effect a refund of any overpayment by making a payment in Canadian dollars regardless of whether the overpayment arose as a result of payments in cash or in kind. Interest 35

(1) Where an Interest Holder for a Field fails to make all or any portion of any payment required under these regulations by the day on which the payment is due, the Interest Holder shall pay to the Board to the credit of the Receiver General of Canada interest on the outstanding amount at the daily rate determined under subsection (6), calculated and payable in arrears from and including the date that the payment became due to the day before the day it is paid.

(2) Subject to subsection (3), where the Minister is required under subsection 34(1) to refund or apply an overpayment of Royalty or other amounts, Her Majesty in Right of the Province shall pay interest on the amount of the overpayment at the daily rate determined under subsection (6), calculated and payable in arrears from and including the latest of the day that is (a) 30 days after the day of receipt by the Minister of a Royalty Return for the Period; (b) 15 days after the day of receipt by the Minister of the Independent Auditors’ Report for the Period; and (

c) the date that the overpayment arose, to the day before the day on which the refund is paid or applied. 452

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(3) Where an overpayment of Royalty for a particular Month arises as a result of the application of subsection 27(4) to an Abandonment Loss of the Interest Holder that arises in a particular Month (

a) except to the extent provided in clause (b), clause (2)(

a) shall be applied as if "day of receipt by the Minister of a Royalty Return for the Period" were replaced with "day of receipt by the Minister of a Royalty Return for the Period containing the Month in which the Abandonment Loss arose, containing a written request that subsection 27(4) be applied to the Abandonment Loss, or any later date on which such a request is made by the Interest Holder to the Minister"; and (

b) where (

i) all or part of the Abandonment Loss at the end of a particular Month that is after the Month of Cessation is carried back under subsection 27(4) to any previous Month that is contained in any earlier Period, and (ii) the Interest Holder files the Royalty Return and Independent Auditors’ Report for the Period that contains the particular Month within the respective times required under

Section 29, interest on the refund resulting from carrying back the Abandonment Loss to such previous Month shall be calculated from the end of the particular Month to but not including the date of payment of the refund by Her Majesty in right of the Province.

(4) Where the Minister and the Interest Holder disagree on revised estimates and the estimate of the Minister prevails in accordance with subsection 26(8) and the Interest Holder overpays the Royalty in an amount greater than 10% of the aggregate Royalty payable for the Period, the Minister shall pay interest to the Interest Holder, in addition to the interest payable under subsection (2), on the excess of the amount greater than 110% of the aggregate Royalty payable for the Period.

(5) In each case, the interest payable under subsection (4) shall be calculated from and including the date of the particular payment under subsection 24(1) or

Section 25 to but not including the first day in respect of which the Minister is required to pay interest under subsection (2) or the day on which the Minister makes a refund or application of the overpayment under subsection 34(1) in respect of