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PASC COVID-19 Discussion Forum

The words “unprecedented” and “new-normal” are becoming common terms in today’s business environment.  With the economic downturn as a result of the COVID-19 pandemic, compounded in western Canada by the collapse in oil prices from global over-supply concerns and limited storage capacity, governments and business at the local, national and global levels are being challenged to rethink and retool in response.

In keeping with its mission to support the Canadian petroleum industry by identifying and addressing its accounting needs, PASC has set up a forum to discuss the accounting implications of operating under the current environment and any additional go-forward considerations to collaborate and discuss with your industry partners.

We invite members and industry stakeholders to begin the dialogue by submitting questions on the financial accounting, joint venture accounting, chargeability and joint venture audit implications and challenges we face now and as we move forward.  A multi-disciplinary group will do its best to provide suggestions and guidance with reference and due consideration to accepted accounting practices, existing PASC Accounting Procedures and typical agreements governing industry joint venture operations.

Please submit your questions to: info@petroleumaccountants.com  Subject Line:  COVID-19

 

Overview of Government Benefit Plans & Initiatives 

Alberta Site Rehabilitation Program

Dorman Site Reclamation Program (BC)

Accelerated Site Closure Program (SK)

Canada Emergency Wage Subsidy

BC Government Initiatives

Alberta Government Initiatives

 

Disclaimer

The Petroleum Accountants Society of Canada (PASC) does not assume any liability for the use or reliance upon any statements, whether oral or written or any procedure or publication (collectively, the “Forms”) or any variation thereof. Any use or reliance upon the Forms shall be at the sole discretion and risk of the user party and such user party agrees by the use of any of the Forms to release and hold PASC harmless from any or all harm. PASC further assumes no responsibility concerning the utility or operation of all or any part of the Forms, including but not limited to, any person’s or corporation’s particular requirements, and assumes no responsibility for any harm, losses and liabilities suffered, sustained and incurred, regardless of how they may have been occasioned, from the use of misuse of all or any part of the Forms. PASC responds to questions from time to time and any answer given is based solely on the amount of detail provided in the original question. PASC makes no warranty, expressed or implied, whether in fact or in law with respect to the Forms and to any response provided herein.

 

Alberta Site Rehabilitation Program (Quick Reference Overview)

Users are encouraged to consult the link below to for current program details

Source Link: https://abcabcabc.com

On May 1, 2020, the Government of Alberta announced new information regarding how the Alberta Site Rehabilitation Program will be administered. Since then details of the program have continued to evolve. The Program will distribute funds from the federal COVID-19 Economic Response Plan for the Canada's Energy Sector by issuing grants directly to oil field service (OFS) contractors to conduct specified closure and reclamation activities.

  • Site and Application Eligibility
    • Applications for the first increment of $100 million (Period 1) will be accepted between May 1 to 31, 2020, for contracts of up to $30,000 for oil and gas sites needing abandonment and/or reclamation. These funds will be directed to "zero-contribution contracts", which the Guidelines describe as "sites held by licensees for work done on licensed sites held by licensees with limited ability, either financial or otherwise, to contribute to costs of site rehabilitation work".
  • Department of Energy has stated the following:
    • Sites held by licensees in insolvency proceedings are eligible for Program grants, so long as the receiver—in its capacity as licensee—enters into the contract with the OFS contractor and is willing to agree to the Program in their capacity as licensee. However, it remains to be seen whether the terms of the agreement will be something that receivers will be prepared to sign. 
    • Given the volume of applications and the Program's purpose of getting OFS contractors back to work, applications are currently being judged on the reasonableness of the applied-for costs alone, without consideration of the licensee's ability to pay. It is not immediately clear how long this approach will continue.
    • Applications are currently being assessed on a first-come, first-serve basis.
    • Department of Energy indicated that it is currently rejecting applications where the total cost of the work exceeds $30,000, even if the amount to be paid for using the Program Grant is equal to or less than $30,000. This will limit the program to low-cost, low-risk sites.

Second increment – May 21 through June 18

$100 million in funding available. Grant applications will be accepted for: oil and gas sites on land where government is paying compensation to landowners as required under Section 36 of the Surface Rights Act (otherwise referred to as Section 36 lands) projects that require 100% government funding no contract cost limit.

The application review process will continue to use department and industry data to assess whether the contract’s costs and scope of work are reasonable. Applications for the second increment of $100 million (Period 2) will be accepted between May 15 and June 15, 2020. In Period 2, the Program will consider applications relating to sites where the licensee has defaulted on lease payments and, as a result, the Minister of Environment of Parks is paying compensation pursuant to section 36 lands of the Surface Rights Act (Guidelines, page 4). Sites eligible for grants during Period 2 must also be "zero-contribution contracts" limited to work that costs $30,000 or less

Dormant Sites Reclamation Program - British Columbia(Quick Reference Overview)

Users are encouraged to consult the link below to for current program details

Source Link: https://abcabcabc.com

The Dormant Sites Reclamation Program (Program) will access $100 million of federal funding provided to the Province of British Columbia to clean up dormant oil and gas wells. The funding was established as part of the federal government’s COVID-19 Economic Response Plan. 

Overview

  • $100 million in financial contributions is available to eligible applicants in two increments of $50 million.
  • Contractors whose application(s) are approved under the Program will receive: 10% of the estimated eligible costs for the work in the form of a financial contribution from the Province, once their application is approved and the Province and the contractor enter into an agreement. Up to another 60% after submitting interim invoicing of actual costs and reports in accordance with the terms of financial contribution agreement. The remainder of the financial contribution when the work is completed. This is subject to review by the Province in accordance with the terms of the financial contribution agreement. The Program requires all work to be complete by December 31, 2022.
  • Indigenous peoples, landowners and local communities can nominate dormant sites for work under the Program.

Eligibility

  • Oil and gas field service companies and contractors based in British Columbia, with registration, office and operations in British Columbia
  • Sites must be located in British Columbia and put British Columbians to work
  • Companies and contractors must have a valid contract with a British Columbian oil and gas activity permit holder for a dormant site
  • The company responsible for doing the contracted work must apply for the funding. Contractors and consultants may not apply on behalf of others.

Eligible Applicants

  • Oil and natural gas field services contractors who are experienced in completing upstream oil and gas infrastructure abandonment, including: Facility abandonment, pipeline segment removal, pipeline abandonment, wellsite abandonment.
  • Environmental contractors who are experienced in: Work associated with abandonment of oil or natural gas activities, stage 1 Preliminary Site Investigations (PSI), stage 2 Detailed Site Investigations (DSI) environmental site assessments, remediation and reclamation.

Eligible Activities

  • The following work in relation to oil and gas dormant sites: Closure work, Environmental site assessments (PSI and DSI), remediation, reclamation, preparation of applications for remediation and reclamation certificates.

Ineligible Activities

  • Suspension (wells and facilities) and discontinuation (pipelines) costs that are not part of dormant site eligible activity work.
  • Non-closure work on producing oil and natural gas sites (for example, spill remediation).
  • Closure work for dormant sites outside of British Columbia.
  • Closure work on orphan and legacy sites (these sites have separate funding streams).
  • Work completed before the Program comes into effect on May 25, 2020.

Program Requirements

  • Contractors must have a valid contract to undertake the proposed work with a British Columbian oil and gas activity permit holder.
  • The contract must be fully executed, with no ‘subject to’ clauses.
  • Only a contractor who has a signed agreement with a permit holder can apply.
  • A financial contribution will be awarded only to the contractor, not the permit holder.
  • The payment of applicable municipal taxes relating to an applied for site are in good standing by the permit holder.
  • The permit holder is responsible for ensuring the contractor has the skills, expertise, capacity and equipment to conduct the work to meet all provincial laws and regulatory requirements.
  • All laws, regulations, directives, environmental and occupational health and safety standards, including social distancing and COVID-19 related health guidelines of the Province will apply.

How to Apply

Online applications open Monday, May 25, 2020 at 10 am Pacific Time

Accelerated Site Closure Program - Saskatchewan (Quick Reference Overview)

Users are encouraged to consult the link below to for current program details

Source Link: https://abcabcabc.com

The Government of Saskatchewan is launching the Accelerated Site Closure Program (ASCP) to utilize $400 million in federal funding for the abandonment and reclamation of inactive oil and gas wells and facilities. The program is scheduled to run until December 31, 2022. The primary purpose of this program is to put Saskatchewan people and companies back to work in the struggling oil and gas services sector.

The ASCP will be overseen by the Ministry of Energy and Resources and administered by the Saskatchewan Research Council (SRC). The program will maximize the use of Saskatchewan-based service companies. As the program advances an Indigenous procurement program will be also developed.

It is estimated that up to 8,000 inactive wells and facilities will be abandoned and reclaimed over the life of this program. This funding is expected to support approximately 2,100 full-time equivalent jobs in the service industry.

The ASCP will be rolled out in several phases. Phase 1 will allocate up to $100 million in funding to Saskatchewan service companies contracted to do the abandonment and reclamation work. The goal of Phase 1 is to move as quickly as possible to get the service sector working on well and facility abandonments.

Under the ASCP, eligible licensees will use the Integrated Resource Information System (IRIS) to nominate inactive wells and facilities into the program. Through this process, licensees will also be able to identify preferred contractors. Each licensee will be assigned a portion of the planned expenditures based on its share of the total provincial liabilities for inactive wells and facilities.

Based on these nominations, the SRC will commence procuring services from eligible service companies to carry out the abandonment and reclamation work. The SRC will pay service companies directly, including an initial advance payment. Details on the schedule of payments to service providers will be released as part of the procurement process. All contracting for services will take place exclusively between eligible licensees and service companies.

Future phases will be developed with insights gained in Phase 1 to ensure that abandonment and reclamation work continues to be advanced in support of program objectives.

Eligibility

Phase 1 Funding Allocation and Eligibility

  • Eligible licensees will receive a funding allocation established by considering the eligible licensee's total deemed liability as a percentage of the total deemed liability of all eligible licensees. This ratio will be applied to the $100 million Phase 1 funding tranche to arrive at a licensee's eligible funding allocation. This calculation is subject to minimum funding allocations.
  • Each eligible licensee will receive a minimum funding allocation of $50,000 to support reclamation and abandonment activities.

Licensee Eligibility Criteria

  • In Phase 1 of the ASCP, eligible licensees are licensees who were in good standing in relation to debts owing to the Crown as of March 1, 2020. For the purposes of eligibility under ASCP, Crown debts include: Amounts owing for the Oil and Gas Administrative Levy; Amounts owing for the Orphan Well Levy; Amounts owing for Crown oil and gas royalties; Amounts owing for Crown mineral disposition rentals; and amounts owing for Crown surface lease rentals.
    • The Ministry of Energy and Resources will determine licensee eligibility and funding allocations. Eligible licensees will be notified of their funding allocation via their IRIS service administrator email address on June 1, 2020.

Well and Facility Site Eligibility

  • Any wells, facilities and sites nominated into the program (see: How to Apply) must meet the following eligibility criteria: The well, facility, or site located in a municipality in which the eligible licensee owes municipal taxes will not be eligible; and If located on private lands, the licensee must be current on surface lease payments to the landowner with respect to the specific well, facility or site.
  • When nominating wells, facilities and sites into the program, the eligible licensee will be required to submit two declarations: A declaration stating that the licensee does not have any outstanding municipal taxes owing with respect to the nominated wells, facilities and sites; and A declaration stating that the licensee is current on surface lease payments to private landowners with respect to the nominated wells, facilities and sites. Submitting a false declaration may result in collection actions by the Crown and could render a licensee ineligible for future funding under the ASCP.

Eligible Activities

  • Eligible activities for Phase I will include: Abandonment of oil and gas wells, facilities and associated flow-lines; Environmental site assessments (Phase 1 and Phase 2); Site remediation activities; and Site reclamation activities.
    • In Phase I, preference will be given to abandonment and reclamation activities that can be approved routinely to support the rapid roll-out of funding to the service sector. However, deploying an area-based closure model is still a priority under this program and exceptions will be considered. Any work that commenced or was completed prior to the program launch date will not be eligible under the program. However, if the abandonment was completed prior to that date, the remaining remediation and reclamation work would be eligible under the program. The same principle will apply to the stages of remediation and reclamation for well and facility sites.

Eligible Service Companies

  • Service companies eligible under the program will be able to conduct well and facility abandonments, flow-line abandonments, Phase 1 and Phase 2 environmental site assessments, remediation and reclamation.

Service companies that wish to participate in Phase I of the program must be Saskatchewan-based. This includes:

  • Being located in Saskatchewan; Employing Saskatchewan people; Paying Saskatchewan taxes; and sourcing their supplies from Saskatchewan-based businesses based upon capacity, quality and availability.

Service companies must also meet a number of technical requirements to be eligible for the program. This includes: Employ and keep current all safety programs or safety management systems; Maintain a minimum of $2,000,000 Comprehensive General Liability Insurance; Maintain a minimum of $1,000,000 Automotive Liability Insurance; Be registered with the Workers Compensation Board (WCB); and where applicable, hold a valid Saskatchewan or home province Certificate of Recognition (COR) or Small Employer Certificate of Recognition (SECOR).

Eligible Expenses

  • All expenses associated with completing the work, and in accordance with the procurement contract, will be eligible, including: Materials and supplies; Wages; Equipment rentals; Laboratory analysis; and transportation of workers and equipment to and from sites.

How to Apply

Eligible Licensees: Nomination of Wells and Facilities

  • Once the eligible licensee has its funding allocation, they will be required to nominate wells and facilities through the Integrated Resource Information System (IRIS). Licensees are encouraged to take advantage of existing abandonment plans by nominating groups of wells, facilities, and sites that facilitates area-based closure.
  • A bulletin will be issued to notify licensees in advance of the launch date for the Phase 1 nomination process. Phase 1 will close once the $100 million is fully prescribed, or at a date to be determined with sufficient advanced notice.
  • If applicable, eligible licensees are asked to submit abandonment projects that cover up to 125% of their funding allocation. This will facilitate the formation of area based closure packages and will give the eligible licensee flexibility in the event that they are unable to abandon or reclaim a selected well or facility site for any reason. Note that an eligible licensee cannot receive work that exceeds their funding allocation under Phase 1.

Upon nomination of wells, facilities and sites, eligible licensees will identify preferred contractors. The program will make every effort to facilitate the licensee's use of preferred contractors, though this may not be possible in all circumstances.

Pre-Qualifying Eligible Service Companies

To become an eligible service company under the ASCP, service companies will be required to apply through SaskTenders. The application will be evaluated using the eligibility criteria set out above and, if successful, the service company will be added to the list of eligible ASCP service providers. Eligible service providers will be able to bid on procurement contracts tendered by the SRC. The application period will open on SaskTenders in the first week of June 2020.

Apply

  • Licensees

Licensees will nominate their wells and facilities for abandonment and reclamation through the IRIS system. A how-to guide is being prepared. Additional information can be found in Bulletin BT 2020-013

  • Service Companies

Service companies looking to participate in the program will apply through SaskTenders. The application period will open on SaskTenders in the first week of June 2020. Additional information can be found in Bulletin BT 2020-013

Canada Emergency Wage Subsidy (Quick Reference Overview)

Users are encouraged to consult the link below to for current program details

Source Link:  https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html 

The Federal Government’s CEWS program is designed to help employers with up to 75% of salaries, subject to certain conditions and limitations.  Below is a summary of the program:

  1.  Program is retroactive from March 15, 2020 and is in place for up to 12 weeks and includes taxable corporations.
  2.  Revenue reduction calculation is based on the following criteria:

Period

Baseline Revenue

Eligibility Period

Required Reduction

March 15, 2020 to April 11, 2020

  • March 2019, or
  • Average of January and February 2020

March 2020

15%

April 12, 2020 to May 9, 2020

  • March 2019, or
  • Average of January and February 2020

April 2020

30%

May 10, 2020 to June 6, 2020

  • March 2019, or
  • Average of January and February 2020

May 2020

30%

 

  1. Companies must have a CRA payroll account with CRA.  This means only employees that would be issued a T4 are eligible and not independent contractors.  An employee is eligible during a claim period, except if there was a period of 14 or more consecutive days in the days in the claim period in which the employee was not paid by the company
  2.  The subsidy is the lesser of 75% of employee’s base salary or $847 per week. 
  3.  The Federal Government has extended the program to August 29, 2020, with details on the extension yet to be announced.

 

British Columbia Government Initiatives

Users are encouraged to consult the link below to for current program details

Source Link: https://www2.gov.bc.ca/gov/content/taxes/tax-changes/covid-19-tax-changes

Effective immediately, B.C. is extending filing and payment deadlines for the following taxes until September 30, 2020.

  • Employer Health Tax, file and pay your employer health tax Updated March 25, 2020 
  • Sales Taxes, Provincial sales tax (including municipal and regional district tax*)
  • Carbon tax
  • Motor fuel tax
  • Tobacco tax
  • BC Oil & Gas Commission (OGC) is deferring the payment due date for the 2019/20 annual pipeline liability levy from 30 days to 90 days.
  • Postponing invoicing of the orphan liability levy.
  • Exercising discretion under ministerial order 98/2020, suspending the application timeline to extend a permit or authorization, which postpones expiry of a permit while the suspension is in effect.

Notes: 

*Municipal and regional district tax (MRDT) is the additional 2 or 3% tax on accommodation.

See Notice 2020-002, Covid-19 Sales Tax Changes for more information.

New Notice April 1, 2020

Additional COVID-19 Actions

  • Delayed Carbon Tax Increase (April 1 original increase date) Carbon tax rates will remain at their current levels until further notice. The tax measure announced in Budget 2020 aligning the carbon tax rates with the federal carbon pricing backstop is also postponed until further notice.
  • Reduced School Tax Rates for Businesses School tax rates for commercial properties (Classes 4, 5 and 6) will be reduced by 50% for the 2020 tax year

 Alberta Government Initiatives

  • Funding the Alberta Energy Regulator levy. We’re funding the Alberta Energy Regulator industry levy for a 6 months, achieving $113 million in industry relief.
  • Extensions for oil and gas tenures - extending the term of mineral agreements expiring in 2020 by 1 year to provide increased certainty for industry by allowing additional time to raise capital and plan future activities.
  • Orphan Well Association loan. A $100 million loan was recently extended to the Orphan Well Association to bolster immediate reclamation efforts, decommission about 1,000 wells, and start more than 1,000 environmental assessments – creating up to 500 direct and indirect jobs. Careful to ensure the credit amounts are out of our accounting overhead calculations.

Saskatchewan Government Initiatives

  • Extending a series of filing and other deadlines to assist the oil and gas sector in stabilizing operations, as their employees transition to working from home. These extensions do not impact health or environmental safety and apply to routine reporting activities, which will be addressed when the sector returns to normal operations.
  • Extending mineral rights, scheduled to expire in 2020, by one year. This includes rights granted under the terms of an oil and gas lease, exploration license or permit. The extension will provide oil and gas disposition holders with the time necessary to properly evaluate their properties once the current situation stabilizes.
  •  Reducing the industry portion of the Oil and Gas Administrative Levy by 50 per cent this fiscal year and delaying the invoicing of the remaining balance until October 1, 2020. This will provide the sector with relief of $11.4 million to address immediate liquidity challenges. (It is important to note that unlike other sectors, the oil and gas sector pays for 90 per cent of its own regulatory costs).
  • The Government of Saskatchewan also announced a draft agreement with the Government of Canada on the regulation of methane reductions in the upstream oil and gas industry has been reached. The federal government will now begin the process of confirming the terms of the agreement through the federal review process.

Link for Additional Information:

Industry Relief Bulletin - SK Ministry of Energy and Resources (Downloadable pdf)

 

 

 

 



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