The legislative requirement for expenditures related to research and development and education and training (hereinafter referred to collectively as ‘R&D/E&T’) in the Province is contained in Section 45 of the Accord Acts.
Section 151.1(1) of the Accord Acts (reference herein to federal version) authorizes the C-NLOPB to issue and publish in such manner as it deems appropriate, guidelines and interpretation notes with respect to the application and administration of Section 45.
In 2004, the C-NLOPB issued Guidelines for Research and Development Expenditures and since that time, has annually calculated an R&D/E&T spending obligation for each producing project. The Board annually calculates an operator’s required amount of R&D/E&T spending under the Guidelines using this formula:
annual oil production x oil price x US-CAD $ exchange rate x 5 year average of Statistics Canada R&D Benchmark
With effect from January 1, 2017, the five-year average of the Statistics Canada R&D Benchmark is capped at 0.5% (0.005).
Operators may submit R&D/E&T proposals to the C-NLOPB for determination of the proposal as an eligible R&D/E&T project. The C-NLOPB does not determine eligibility or pre-approve R&D/E&T proposals from researchers, contractors, or other third parties. All R&D/E&T applications must be submitted to the C-NLOPB by an Operator, including a detailed project description, costs and timelines.
R&D/E&T expenditures are required to be reported annually by Operators to the C-NLOPB. Prior to the C-NLOPB approving or renewing an Operator’s Operation Authorization (OA), any shortfall in spending against a project’s R&D/E&T spending obligation must be secured by an irrevocable bank Letter of Credit filed with the C-NLOPB until such time that R&D/E&T expenditures reach the required level.
News Release: Competitiveness and Regulatory Certainty in Research and Development Expenditures Provided in the Canada-Newfoundland and Labrador Offshore Area
Letter to Current Petroleum Operators and New Entrants