This is an official version.

Copyright 2001: Queen’s Printer,
St. John's, Newfoundland and Labrador, Canada

Important Information
(Includes details about the availability of printed and electronic versions of the Statutes.)

Statutes of Newfoundland and Labrador 2001


Statutes of Newfoundland and Labrador 2001 Chapter 41

CHAPTER 41

AN ACT TO AMEND THE PETROLEUM AND NATURAL GAS ACT

(Assented to December 13, 2001)

Analysis

1. S.2 Amdt.
Definitions

2. S.9.1 Amdt.
Fees and forms

3. S.20 Amdt.
Fees, etc.

4. S.27 Amdt.
Order for entry

5. S.28 Amdt.
Offence

6. S.29 Amdt.
Penalty

7. S.30 R&S
Definitions

8. Ss.31 to 38 R&S
31. Royalty reservation
32 Royalty share
33. Royalty agreement
34. Royalty share in kind
35. Lien for royalties
36. Liability on payment
37. Artificial transactions

9. S.39 Amdt.
Regulations

10 Ss.40 to 44 R&S
40. Notice to pay Crown
41. Reports, returns and
audit
42. Assessment
43. Additional powers
44. Fees and forms
45. Penalty
46. Offence and penalty
47. Application
48. Commencement

11. RSNL1990 cC-43 Amdt.

Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:


RSNL1990 cP-10
as amended

1. Section 2 of the Petroleum and Natural Gas Act is amended by adding immediately after paragraph (c) the following:

(c.1) "lease" means a lease issued under the regulations;

 

2. Section 9.1 of the Act is amended by deleting the word "Act" and substituting the word "Part".

 

3. (1) Subsection 20(1) of the Act is amended by deleting the word "Act" and substituting the word "Part".

(2) Subsection 20(2) of the Act is repealed and the following substituted:

(2) Fees, rentals, payments and interest referred to in subsection (1) may be recovered as a debt in a court.

(3) Subsection 20(3) of the Act is amended by deleting the word "sums" and substituting the words and figure "fees, rentals, payments and interest referred to in subsection (1) ".

 

4. Subsection 27(1) of the Act is amended by deleting the words and comma "Act, the regulations or an order made under this Act or the regulations" and substituting the words "Part or an order made under this Part".

 

5. (1) Paragraphs 28(a) and (b) of the Act are amended by deleting the words "Act or the regulations or an order made under this Act or the regulations" wherever they occur and substituting the words "Part or an order made under this Part".

(2) Paragraph 28(c) of the Act is amended by deleting the words "Act or the regulations" and substituting the word "Part".

(3) Section 28 of the Act is amended by deleting the word "Act" where it last occurs and substituting the word "Part".

 

6. Section 29 of the Act is amended by deleting the word "Act" and substituting the word "Part".

 

7. Section 30 of the Act is repealed and the following substituted:

Definitions

30. (1) In this Part

(a) "debtor" means a person owing royalty share to the Crown under this Part;

(b) "interest holder" with respect to a lease or a share in a lease, means the holder of that lease or share as recorded in the appropriate registry for that lease or share;

(c) "lease" includes a production licence issued by the Canada-Newfoundland and Labrador Offshore Petroleum Board under the Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act and the Canada-Newfoundland Atlantic Accord Implementation Act (Canada);

(d) "royalty share" means royalty on petroleum and interest, penalties and other amounts payable to the Crown by an interest holder under this Part;

(e) "secured creditor" means a person who has a security interest in the assets of another person or who acts for or on behalf of that person with respect to the security interest and includes a receiver or a receiver-manager appointed by a secured creditor or by a court on the application of the secured creditor, a trustee appointed under a trust deed relating to a security interest or another person performing a similar function; and

(f) "security interest" means an overriding royalty, a deemed or actual trust, assignment or encumbrance not resulting in a complete transfer of title and beneficial ownership, and an interest in property that secures payment or performance of an obligation created by or arising out of a debenture, mortgage, lien, judgment, pledge, charge and a retention of title, however or wherever arising, deemed to arise or otherwise provided for and whether absolute, contingent, fixed, floating, perfected or not perfected.

(2) In this Part

(a) a reference to the "Crown" shall be considered to be a reference to "Her Majesty in Right of the province";

(b) a reference to "Part" shall be considered to include a reference to regulations made under this Part; and

(c) a reference to "royalty" shall be considered to include basic royalty, incremental royalty, another royalty on petroleum produced under a lease and a combination of these.

 

8. Sections 31 to 38 of the Act are repealed and the following substituted:

Royalty reservation

31. Royalty share determined under this Part is reserved to the Crown on all petroleum recovered under a lease.

Royalty share

32. Petroleum produced under a lease is subject to and an interest holder is liable for and shall pay royalty share to the Crown in an amount and in a manner prescribed by regulation.

Royalty agreement

33. (1) The Lieutenant-Governor in Council may make an agreement with an interest holder, with one or more holders of shares in a lease or with another person, including an agreement that is inconsistent with regulations made under this Part.

(2) Where an agreement made under subsection (1) is inconsistent with regulations made under this Part the agreement shall prevail.

Royalty share in kind

34. (1) The Crown is entitled to take royalty share or a portion of royalty share in kind.

(2) The Crown shall give notice to an interest holder of its intent to take royalty share in kind under subsection (1) and upon receipt of that notice the interest holder shall deliver the royalty share in kind in the time and manner required by regulation.

(3) After a notice has been delivered under subsection (2), the Crown may, in accordance with the regulations, give notice

(a) to another interest holder in the lease from which the Crown is taking in kind to deliver the royalty share in kind owed by the interest holder referred to in subsection (2); and

(b) requiring a person to make available to the Crown all facilities, assets and services in which that person has an interest, that are being used for the handling, storage or transportation of petroleum produced under a lease from which the Crown is in whole or in part taking royalty share in kind.

(4) The Crown shall, in accordance with the regulations made under this Part, pay for facilities, assets and services used to take royalty share in kind.

Lien for royalties

35. (1) Notwithstanding a provision of this or another Act or regulation, royalty share due to the Crown under this Part, until paid, shall constitute a first and paramount lien in favour of the Crown on all assets of the person owing the royalty share, and on assets held by a secured creditor of that person that, but for a security interest, would be assets of the person owing the royalty share.

(2) A lien created under this section shall attach on the date that the royalty share is due and payable to the Crown and continues in force until paid or released by the Crown.

(3) Notwithstanding subsections (1) and (2), where the Lieutenant-Governor in Council is satisfied that the Crown has sufficient security for royalty share, the Lieutenant-Governor in Council may

(a) restrict the lien to a portion of the assets of the person owing that royalty share; and

(b) postpone, subordinate or release the rights of the Crown under the lien, in whole or in part,

under terms and conditions that the Lieutenant-Governor in Council may establish.

(4) The minister may register a notice of a lien created under this section in a registry established under

(a) this Act;

(b) the Registration of Deeds Act;

(c) the Personal Property Security Act; and

(d) the Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act and the Canada-Newfoundland Atlantic Accord Implementation Act (Canada),

but failure to register that notice in a registry established under an Act referred to in paragraphs (a) to (d) shall not be necessary to perfect the lien.

Liability on payment

36. (1) A receiver, liquidator, administrator, executor and other like person, other than a trustee in bankruptcy, shall, before distributing assets of an interest holder, obtain confirmation from the minister that all royalty share payable by that interest holder has been paid or that security for that payment has been accepted.

(2) A receiver, liquidator, administrator, executor and other like person, other than a trustee in bankruptcy, that distributes property without the confirmation required under subsection (1), is personally liable for the amount of the unpaid royalty share of the interest holder whose property has been distributed.

(3) A confirmation under this section shall be obtained in the manner required by regulation.

Artificial transactions

37. (1) Where, in the opinion of the minister, the result of an action, agreement, arrangement, transaction or operation artificially or unduly reduces the amount of royalty share due to the Crown, that royalty share shall be calculated as if the action, agreement, arrangement, transaction or operation had not occurred or had occurred at fair market value between parties dealing at arms length.

(2) A decision of the minister under subsection (1) may be arbitrated in accordance with arbitration procedures and requirements established under the regulations made under this Part.

 

9. (1) Paragraphs 39(1)(a) and (b) of the Act are repealed and the following substituted:

(a) prescribing royalty on petroleum and the type, structure and amount of royalty;

(b) designating two or more leases as a single lease for the purposes of this Part;

(b.1) allocating production, revenue, valuation of petroleum, costs, expenses, allowances, credits and other deductions between 2 or more leases subject to a unit agreement or unit operation order;

(2) Paragraph 39(1)(e) of the Act is repealed and the following substituted:

(e) prescribing the rate of interest on royalty share or overpayments of royalty share under this Part and the manner of determining the interest that is due;

(e.1) respecting the manner of determining royalty share, the components of royalty share and their values, including

(i) revenue, including the valuation of petroleum used in determining royalty share,

(ii) costs, expenses, allowances, credits and other deductions used in determining a royalty share, and

(iii) another matter related to a determination under subparagraphs (i) and (ii);

(e.2) respecting the retention of records and documents and respecting audits and examinations that may be required for the purposes of this Part;

(e.3) respecting the subordination of rights with respect to liens and the postponement and release of liens, in whole or in part;

(e.4) respecting the requirements for obtaining confirmation from the minister under subsection 36(1);

(e.5) respecting the assessment and reassessment of interest holder royalty share and respecting procedures for that assessment and reassessment of royalty share amounts owing under this Part, including procedures for the settlement of disputes with respect to assessments and reassessments;

(e.6) respecting the time for the completion of the filing of reports and returns and respecting the information and documentation to accompany reports and returns;

(e.7) respecting the giving of notice;

(3) Paragraph 39(1)(f) of the Act is amended by deleting the words "quantity of the royalty on petroleum" and substituting the words "amount of royalty share".

(4) Paragraph 39(1)(g) is amended by deleting the words "on petroleum" and substituting the word "share".

(5) Paragraphs 39(1)(h) to (k) of the Act are repealed and the following substituted:

(h) respecting the taking of royalty share in kind by the Crown including the requirements for notice, calculation of amounts and quantities to be delivered in kind, the handling, storage, transportation, delivery of amounts and quality of petroleum taken in kind and the costs of that taking in kind payable by the Crown;

(i) restricting, modifying or limiting the meaning of a word or phrase defined in the Act and used in the regulations made under this section;

(j) respecting the application of rules of arbitration under the Commercial Arbitration Act (Canada) or a part or schedule of that Act to matters arising under this Part;

(k) prescribing penalties that may be assessed or imposed for the purposes of this Part; and

(l) generally, to give effect to the purpose of this Part.

(6) Subsection 39(3) of the Act is amended by deleting the word "Where" and substituting the words and comma "Subject to section 33, where" and by adding immediately after the word "royalty" the word "share".

(7) Section 39 of the Act is amended by adding immediately after subsection (3) the following:

(4) Regulations made under this section may be made with retroactive effect.

(5) Subsection (4) shall not apply to a regulation made under paragraph (1)(a).

 

10. Sections 40 to 44 of the Act are repealed and the following substituted:

Notice to pay Crown

40. (1) Where, in the opinion of the minister, a person is or is about to become indebted or liable to make a payment of money to a debtor, the minister may, by notice in writing, require that person to pay money otherwise payable to the debtor, to the minister, on account of the liability for royalty share of the debtor, and on receipt of that notice the amount of money required to be paid to the Crown shall be paid to the Crown in priority to any security interest that may exist in that money.

(2) Where a notice is given to a person under subsection (1), the requirement to pay is applicable to all future payments by that person to the debtor until all liability with respect to royalty share owed to the Crown is paid.

(3) The receipt by the minister of payments under subsection (1) or (2) is a sufficient discharge of the liability of the person to the debtor to the extent of the payment received by the Crown.

(4) A person who discharges a liability to a debtor without complying with a notice given to that person under subsection (1) is liable to pay to the minister an amount equal to the liability discharged or the amount that person was required to pay to the minister, whichever is lesser.

Reports, returns and audit

41. (1) A person required under this Part to file reports and returns shall

(a) file the reports and returns; and

(b) submit information and documentation related to reports and returns,

as required by the minister and by regulation.

(2) Reports, returns, information and documents required to be filed under this Part are subject to the audit and examination requirements that may be established by regulation.

Assessment

42. (1) Unless otherwise prescribed by regulation, liability for royalty share is not affected by an incorrect or incomplete assessment or by the fact that an assessment has not been made.

(2) An assessment and reassessment are valid and binding notwithstanding an error, defect or omission that may occur in that assessment or reassessment.

(3) Notwithstanding subsection (2), an assessment and a reassessment may, in accordance with the regulations, be varied or vacated on objection or appeal.

Additional powers

43.  Sections 231 to 231.5 of the Income Tax Act (Canada), as amended from time to time, apply to this Part with those modifications that the circumstances require with respect to the administration and enforcement of this Part as if the references in that Act to

(a) "Canada Customs and Revenue Agency" were references to the department presided over by the minister;

(b) "Deputy Attorney General of Canada" or "Minister" were references to "minister" as defined in this Act;

(c) "return of income or a supplementary return" were references to "a report or return" filed under this Act; and

(d) "Tax Court of Canada" were references to the Trial Division or another court that is prescribed by regulation.

Fees and forms

44. The minister may set fees and prescribe forms for the purpose and administration of this Part.

Penalty

45. (1) Where a person has contravened a provision of this Part that is specified in the regulations, the minister or a person authorised by him or her may, in writing, notify that person that he or she is to pay to the Crown a penalty in the amount set out in the notice for each day that the contravention occurs.

(2) A person who pays a penalty under subsection (1) may not be charged with an offence under this Part with respect to a contravention that gave rise to that penalty.

(3) Where a person fails to pay a penalty in accordance with a notification under subsection (1), the minister may recover the amount as a debt owed to the Crown.

(4) For the purposes of this section a penalty is a monetary penalty imposed in accordance with the regulations.

Offence and penalty

46. (1) A person who

(a) makes, participates in, assents to or acquiesces in the making of a false or deceptive statement in a return, certificate, statement or answer required to be submitted or filed under this Part;

(b) destroys, alters, mutilates, hides or disposes of records of account of an interest holder for the purpose of not complying with this Part;

(c) makes, participates in, assents to or acquiesces in the making of false or deceptive entries, records or books of account, including by omission, for the purpose of not complying with a provision or requirement under this Part; and

(d) does not pay or evades or attempts to evade the payment of royalty share that the person is required to pay under this Part,

is guilty of an offence.

(2) A person who is guilty of an offence under subsection (1) is liable on summary conviction to a fine of,

(a) not less than $5,000; and

(b) not more than $100,000 or an amount of royalty share that was attempted to be evaded by that offence, whichever is greater.

(3) A person who contravenes a provision of this Part as specified in the regulations, is guilty of an offence and liable on summary conviction to a fine that may be established by regulation.

(4) In a prosecution for an offence under this section, it is sufficient proof of the offence to establish that it was committed by an employee or agent of the accused, whether or not the employee or agent is identified or has been prosecuted for the offence, unless the accused establishes that the offence was committed without the knowledge or consent of the accused and that all reasonable measures were taken to prevent the commission of the offence.

(5) Where a corporation has been convicted of an offence under this section, an officer, director or agent of that corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence is guilty of that offence and liable on summary conviction to the penalties referred to in subsections (2) and (3).

(6) Notwithstanding section 7 of the Provincial Offences Act, an information or complaint with respect to an offence under subsection (1), (3) or (5) may be laid or made before a day 6 years from the day when the matter of the information or complaint arose.

Application

47. (1) This Part shall apply to all leases issued after April 1, 1990.

(2) A lease issued before April 1, 1990 is subject to the provisions of this Part in force immediately before the coming into force of this section.

Commencement

48. Sections 10 to 19 of this Act shall come into force on a date to be proclaimed by the Lieutenant-Governor in Council.

RSNL1990 cC-43 Amdt.

11. Section 9 of the Crown Royalties Act is repealed and the following substituted:

Exemption

9. This Act does not apply to

(a) the Hibernia Development Royalty Agreement made or to be made between the Crown and Mobil Oil Canada Properties, Chevron Canada Resources, Petro-Canada Hibernia Partnership, Gulf Canada Resources Limited, Mobil Oil Canada, Ltd., Chevron Canada Resources Limited and Petro-Canada Inc.; and

(b) petroleum as defined in the Petroleum and Natural Gas Act.

 

 

©Earl G. Tucker, Queen's Printer