Page 18 - AIF - English

NARRATIVE DESCRIPTION OF SUNCOR’S BUSINESSES

In the normal course of business, Suncor enters into Oil Sands Base facilities are readily accessible by public

long-term strategic sales agreements for its proprietary sour road. MacKay River facilities are accessible by a
SCO, which contain varying terms with respect to pricing, combination of public and private roads. Firebag facilities

volume, expiry and terminations.
are accessible by air and private road.

Distribution of Products
Royalty Agreements
Production from Oil Sands Operations is gathered into
Oil Sands Base and Syncrude
Suncor’s Fort McMurray facilities at the Athabasca Terminal, New oil sands projects are subject to the New Royalty
which is operated by Enbridge Inc. (Enbridge). Suncor has
Framework issued by the Government of Alberta, and
various arrangements with Enbridge at this facility to store regulated by the Oil Sands Royalty Regulation 2009
SCO, diluted bitumen and diesel. Product moves from the
(OSRR 2009), and supporting regulations, which were
Athabasca Terminal in the following ways:
approved in 2008.

• To Edmonton via the Oil Sands pipeline, which is As part of the New Royalty Framework, Suncor entered
owned by Suncor and operated by the Refining and
into the Suncor Royalty Amending Agreement (Suncor
Marketing segment. At Edmonton, the product is sold RAA) with the Government of Alberta in January 2008 for
to local refiners, including Suncor, or transferred onto
royalties pertaining to its Oil Sands Base operations. For the
the Enbridge Mainline system or the TransMountain period from January 1, 2010 to December 31, 2015,
Pipeline system.
royalty rates are based on a sliding scale (depending on the
• To Cheecham, Alberta, on the Enbridge Athabasca Canadian dollar equivalent for WTI) from 25% to 30% of

Pipeline or the Enbridge Wood Buffalo Pipeline. From R – C (Revenue-Cost), where R is gross revenues, net of
Cheecham, the Enbridge Athabasca Pipeline continues bitumen quality adjustments and transportation costs, and

to Hardisty, Alberta.
C is allowable costs including allowable capital
expenditures, which excludes substantially all operating and
• To Edmonton via the Enbridge Waupisoo Pipeline, capital expenditures associated with upgrading facilities.
originating at Cheecham.
The minimum royalty rate is 1.0% to 1.2% of R. In 2013,
From Hardisty, where Suncor owns storage capacity with Suncor incurred royalties at Oil Sands Base mining
additional capacity under contract, Suncor has various
operations at a rate of 30% of R – C (2012 – 30%
options for delivering product to customers:
of R–C).

• To Suncor’s Commerce City refinery via the Express and In 2008, the Alberta government and the co-owners of
Platte pipelines. Suncor owns and operates a pipeline
Syncrude reached an agreement for the implementation of
that is connected to the Commerce City refinery, which the New Royalty Framework for the Syncrude project
originates from the Guernsey, Wyoming station that is
(similar to the Suncor RAA). Under the new terms,
part of the Platte pipeline.
Syncrude will continue paying the greater of 1% gross

• To Suncor’s Sarnia refinery on the Enbridge Mainline revenue, or 25% of net revenue, until the end of 2015.
and Lakehead systems.
For 2013, the royalty rate was 25% of net revenue (2012 –

• Through the Enbridge Mainline system, crude can reach 25%). As part of its agreement, Syncrude also exercised its
option to transition to a bitumen-based royalty from an
most major refining hubs via the Enbridge Mainline,
Express/Platte and Keystone pipeline systems.
SCO-based royalty. In addition, the co-owners of Syncrude
agreed to pay an additional royalty of $975 million over a
Commencing in 2014, Suncor has begun shipping heavy
six-year period starting in 2010, which is contingent on
crude on TransCanada’s Gulf Coast Pipeline, providing the achieving certain production levels.
company with more than 50 mbbls/d of heavy crude
As part of the implementation of the New Royalty
shipping capacity to the U.S. Gulf Coast and another outlet
for the growing bitumen production at Firebag.
Framework, the Alberta government enacted the BVM
Regulations effective January 1, 2009 to determine the
Natural gas is used in the production of SCO and bitumen.
value of bitumen for royalty purposes. The Crown notified
Natural gas is delivered to Oil Sands Base and In Situ Suncor that the BVM Regulation would apply to Oil Sands
facilities via the Nova Gas Transmission Limited (NGTL)
base mining operations for purposes of the Suncor RAA
pipeline system. Suncor also transports natural gas to Oil (Suncor BVM). In 2009, Suncor provided notice to the
Sands Base facilities on the company-owned and operated
Crown that the Suncor BVM was non-compliant with the
Albersun Pipeline, which extends approximately 300 km Suncor RAA. In December 2010, the Alberta Minister of
south of Oil Sands Base facilities and is connected to
Energy notified Suncor of the modifications to the
the NGTL.
Suncor BVM, providing for bitumen quality adjustments not

previously recognized and adjustments for transportation.

16 SUNCOR ENERGY INC. ANNUAL INFORMATION FORM 2014