Frontier Lands Petroleum Royalty Regulations — 7
7 (1) Subject to subsections (2) and (3), facility operating costs are costs or expenses, other than costs or expenses relating to depreciable assets, that are reasonably related to the operation of the facility and that are (a) incurred on account of the salary, wages or other remuneration or related benefits of persons employed by the operator of the facility; (b) incurred (i) in respect of the repair or maintenance of the facility, where the cost of the repair or maintenance is less than fifty per cent of the cost of an equivalent new facility, (ii) on account of taxes in respect of the facility, or (iii) on account of the rental or leasing of the facility; (c) incurred on account of premiums paid in respect of a policy of insurance other than insurance for loss of revenue; (d) incurred on account of (i) the use of or the right to use any property, (ii) compensation for the performance of a service, or (iii) the acquisition of material, parts or supplies; (e) incurred on account of telecommunications, power, water or fuel; or (f) incurred on account of the disposal of sewage. (2) Subject to subsection (4), the following are not facility operating costs: (a) the part of a cost subject to reimbursement, compensation or other payment, including any amount of assistance or benefit from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan, deduction from royalty or tax, investment allowance or any other form of assistance or benefit where, at the time the cost is incurred, the interest holder who incurs the cost has received or has an absolute right to receive the payment; (b) an amount on account of interest, including an amount or expense described in paragraph 20(1)(c), (d) or (e) of the Income Tax Act , as amended from time to time; (c) a payment to a person who does not deal at arm’s length with the interest holder making the payment to the extent the payment exceeds the fair market value of the property, the use of the property, the right to use the property or the performance of a service in respect of which the payment is made; (d) a cost or expense in respect of the administration, management, overhead or financing of an interest holder or of the operator of the facility; (e) a cost or expense resulting from any act or omission that constitutes a breach of any federal, provincial or municipal law; (f) a facility operating cost of another facility; (g) a cost or expense that is an allowed capital cost or an allowed operating cost of a project under Schedule I; (h) a cost or expense in respect of the transportation of petroleum produced from the project lands to a point within the boundary of the project lands; (i) a tax imposed under Part IX of the Excise Tax Act , as amended from time to time; or (j) a cost or expense not expressly provided for in subsection (1). (3) Facility operating costs that are attributable to more than one facility shall be allocated to each facility on a reasonable basis. (4) For the purposes of paragraph (2)(a), where a person has transferred or assigned a right referred to in that paragraph, the person is considered to have received the amount of the reimbursement, compensation or other payment at the time of transfer or assignment.