Information Letter: Expanded Royalty Reporting Requirements and Jurisdiction
June, 2020
Indian Oil and Gas Canada (IOGC) announces that:
- the Indian Oil and Gas Act (IOGA) and the Indian Oil and Gas Regulations (IOGR) both came into force on August 1, 2019, expanding royalty reporting requirements and jurisdiction;
- it is now a full member of Petrinex; and
- Gas Cost Allowance administration process is now available on Petrinex.
The IOGA:
- increased limitation periods;
- expanded the authority of inspectors to include locations outside of First Nation lands;
- confirmed IOGC's right to audit, examine, and inspect information, records, and sites; and
- includes enhanced compliance and enforcement tools.
The IOGR:
- increased the time limitation of 10 years for the keeping of documents related to royalty reporting (see 82(1) below);
- now includes obligations for "any person who produces, sells, acquires or stores" oil or gas recovered from First Nation lands (see 82(1), (2) and (3) below); and
- includes administrative monetary penalties, a new compliance and enforcement tool.
Applicable royalty reporting excerpts from the IOGA and IOGR are in Appendix A (below) for ease of reference. Remember: If your company produces, sells, acquires or stores oil or gas that originated on First Nation lands, then you may be subject to additional requirements including provisions in the areas of:
- who must provide royalty information;
- increased time limitations for the providing of royalty information;
- increased time limitations for the keeping and production, for inspection, of royalty information;
- compliance and enforcement tools aimed at improving compliance related to royalty information or royalty payment; and
- jurisdiction of federal and provincial penalties.
Any queries concerning the information in this letter may be directed to:
Manager, Royalty
Indian Oil and Gas Canada
100-9911 Chiila Blvd
Tsuut'ina AB T3T 0E1
Telephone: 403-292-5625
Email: munir.jivraj@canada.ca (Please use "Royalty Reporting Requirements" in subject line)
Appendix A: Applicable Excerpts from IOGA and IOGR
IOGA (website: https://laws-lois.justice.gc.ca/eng/acts/I-7/):
Definitions
2 (1) The following definitions apply in this Act.
first nation lands means
- (a) reserve lands that have been surrendered, other than absolutely, under the Indian Act for a purpose that includes oil or gas exploration or exploitation;
- (b) lands that have been absolutely surrendered under the Indian Act but not sold;
- (c) subsurface rights and interests in lands that have been absolutely surrendered under the Indian Act and of which only the surface rights and interests have been sold; or
- (d) rights and interests in reserve lands that have been granted to Her Majesty in right of Canada for oil or gas exploration or exploitation pursuant to a land code adopted under the First Nations Land Management Act.
Moneys
4.2(6) Unless otherwise provided by the regulations, moneys collected by a provincial official or body under laws of the province that are incorporated by the regulations are non Indian moneys for the purpose of the Indian Act or public money for the purposes of the Financial Administration Act.
Limitation period
5.1(1) Without limiting any other right or remedy available to the Minister, the Minister may commence an action to collect an amount owing to Her Majesty in right of Canada under this Act – and any interest owing on the amount – within 10 years after the end of the calendar year in which the amount became owing.
Exception – fraud, misrepresentation
5.1(2) Despite subsection (1), the Minister may commence an action at any time to collect an amount owing to Her Majesty in right of Canada under this Act that was unpaid by reason of fraud or because of a misrepresentation that is attributable to neglect, carelessness or wilful default, together with any interest owing on that amount.
Inspection on first nation lands
9 (1) An inspector and any person accompanying an inspector may, at any reasonable time, enter and inspect any place on first nation lands, other than a dwelling-place, if the inspector has reasonable grounds to believe that an activity to which this Act applies is being carried on, or has been carried on, in that place.
Outside first nation lands
9(2) An inspector and any person accompanying an inspector may at any reasonable time, for the purpose of verifying the quantity or quality of oil or gas recovered from first nation lands or the amount of any costs or allowances prescribed under subparagraph 4.1(1)(g)(ii), enter and inspect any place outside first nation lands where such oil or gas is handled, treated or processed or its volume measured.
Audits and examinations
10 (1) A person authorized by the Minister to do so may, at any reasonable time,
- (a) enter any place where a business is carried on, other than a dwelling-place, in which the person has reasonable grounds to believe that there are documents or information required to be kept under the regulations; and
- (b) conduct an audit or examination of any documents or information found in the place that the person has reasonable grounds to believe are relevant to the administration of this Act or the regulations.
Demand to produce documents
11 The Minister may, for the purposes of an audit or examination, order any person who is required by the regulations to keep documents or information to produce – at the place, within the time and in the manner specified by the Minister – any document or information that the Minister has reasonable grounds to believe is relevant to the administration of this Act or the regulations.
Compliance order
12 (1) A judge may, on application, order a person to provide to the Minister, an inspector or a person conducting an audit or examination any access, assistance, document or information that the person was required or ordered to provide under section 9, 10 or 11, unless – in the case of a document or information – the document or information is protected from disclosure by the privilege between legal advisers and their clients.
Offence
17 (1) A person who contravenes any provision of this Act or the regulations, other than a provision in relation to the payment of royalties or other amounts, or who fails to do anything ordered by the Minister under this Act, is guilty of an offence punishable on summary conviction and liable to a fine not exceeding $100,000.
False information
17(2) A person who provides information under this Act, knowing that it is false or misleading, or who knowingly misrepresents or fails to disclose a material fact, is guilty of an offence punishable on summary conviction and liable to a fine not exceeding the greater of $100,000 and any amount that was not paid by reason of the commission of the offence.
Continuing offences
18(1) When an offence under this Act is committed on more than one day or is continued for more than one day, it is deemed to be a separate offence for each day on which it is committed or continued.
Officers, etc., of corporations
18(2) Any officer, director or agent of a corporation who directed, authorized, assented to, acquiesced in or participated in the commission of an offence by the corporation under this Act is a party to and guilty of the offence and is liable on conviction to the punishment provided for the offence, whether or not the corporation has been prosecuted or convicted.
Offences by employees or agents
18(3) In the prosecution of a corporation for an offence under this Act, it is sufficient proof of the offence to establish that it was committed by an employee or agent of the corporation, whether or not the employee or agent is identified or prosecuted.
IOGR (website: https://laws-lois.justice.gc.ca/eng/regulations/SOR-2019-196/index.html):
Information
3 Despite any provision of these Regulations, a person is not obliged to submit information to the Minister that the Minister has stated is in his or her possession or is available to him or her from another source such as Petrinex.
Holder's responsibility
7 A contract holder must ensure that any requirement that is related to their contract and is imposed by these Regulations on a person other than the holder is satisfied.
Incorrect information
24 A person that submits information to the Minister and becomes aware that it is incorrect must submit the correct information to the Minister as soon as the circumstances permit.
Keeping of information
82 (1) Any person that produces, sells, acquires or stores oil or gas that has been recovered from First Nation lands, or acquires a right to such oil or gas, must keep, for a period of 10 years, all information that may be used to calculate the royalty owing in respect of that oil and gas, including any information required by this section.
Information – royalties
82(2) Any person referred to in subsection (1) must submit the following information to the Minister in the prescribed form as soon as it becomes available:
- (a) the volume and quality of the oil or gas produced, sold, acquired or stored, or to which a right was acquired, by that person during the month in which the oil or gas was produced;
- (b) the value for which the oil or gas, or a right to the oil or gas, was sold or acquired;
- (c) any costs and allowances to be taken into account in determining the royalty payable on the oil or gas; and
- (d) any other information that is required to calculate or verify the royalty payable.
Information – related parties
82(3) The Minister may require a person referred to in subsection (1) to submit information for the purpose of determining whether the parties to a transaction are related parties.
Related parties
82(4) For the purpose of subsection (3), persons are related parties if they are related persons, affiliated persons or associated corporations within the meaning of subsection 251(2), section 251.1 and subsection 256(1), respectively, of the Income Tax Act.
Non-compliance notice
111(1) If a holder fails to comply with their contract, the Act or these Regulations, the Minister may send them a notice that identifies the non-compliance and warns that the contract will be cancelled if the holder is in default.
Response to notice
111(2) Within 30 days after the day on which the notice is received, the holder must remedy the non-compliance identified in the notice or, if the non-compliance does not relate to money owed under the Act, submit to the Minister a plan that shows how and when it will be remedied and why the proposed deadline is justified in the circumstances. Subsequently, the holder must remedy the non-compliance in accordance with the plan (emphasis added by IOGC).
Administrative Monetary Penalties
Designated provisions
113 The provisions set out in Schedule 6 are designated as provisions whose contravention is a violation that may be proceeded with under sections 22 to 28 of the Act.
Schedule 6
(Section 113)
Administrative Monetary Penalties
Part 2
Indian Oil and Gas Regulations
| Item | Column 1 Provision |
Column 2 Penalty ($) |
|---|---|---|
| 42 | 82(2)(a) | 1,000 |
| 43 | 82(2)(b) | 1,000 |
| 44 | 82(2)(d) | 1,000 |
| 45 | 83(2) | 2,000 |