Page 63 - AIF - English

recovery, depth of well, and the type or quality of the Land Tenure

petroleum product produced. Other royalties and In Canada, petroleum, bitumen and natural gas located in
royalty-like interests are, from time-to-time, carved out of the western provinces are owned predominantly by the

the owner’s working interest through non-public respective provincial governments. Provincial governments
transactions. These are often referred to as overriding grant rights to explore for and produce oil and natural gas

royalties, gross overriding royalties, net profits interests or pursuant to leases, licences and permits for varying terms,
net carried interests.
and on conditions set forth in provincial legislation,

Occasionally, the governments of the western Canadian including requirements to perform specific work or make
payments. Oil and natural gas located in such provinces
provinces create incentive programs for exploration and
development. Such programs provide for royalty rate can also be privately owned, and rights to explore for and
produce such oil and natural gas are granted by lease on
reductions, royalty holidays and tax credits, and are
generally introduced when commodity prices are low. The such terms and conditions as negotiated. In frontier areas
of Canada, the mineral rights are primarily owned by the
programs are designed to encourage exploration and
development activity by improving earnings and cash flow Canadian federal government, which, either directly or
through shared jurisdiction agreements with the relevant
within the industry. Royalty holidays and reductions would provincial authorities, grants tenure in the form of
reduce the amount of Crown royalties paid by oil and gas
producers to the provincial governments and would exploration, significant discovery and production licences.

increase the net income and funds from operations of In many other international jurisdictions, petroleum and
such producers.
natural gas are most commonly owned by national

The Canadian federal corporate income tax rate levied on governments that grant rights in the form of exploration
licences and permits, production licences, PSCs and other
taxable income was 15% for active business income,
including resource income. The average provincial income similar forms of tenure. In all cases, Suncor’s right to
explore, develop and produce petroleum and natural gas is
tax rate for Suncor in 2013 was 10.64%.
subject to ongoing compliance with the regulatory
requirements established by the relevant country.
Other Jurisdictions
Operations in the U.S. are subject to the U.S. federal tax
Environmental Regulation
rate of 35% and various state-level taxes, primarily 4.63%
in Colorado.
The company is subject to environmental regulation under
a variety of Canadian, U.S., U.K. and other foreign, federal,
There are no royalties on production from the U.K. sector
provincial, territorial, state and municipal laws and
of the North Sea; however, the income tax rate on oil and regulations. These regulatory regimes are laws of general
gas profits is 62%.
application that apply to Suncor and other companies in
Suncor earns refundable tax credits related to eligible the energy industry. The regulatory regimes require Suncor

exploration spending in Norway at a rate of 78%.
to obtain operating licences and permits in order to
operate, and impose certain standards and controls on
Amounts presented in the 2013 audited Consolidated
Financial Statements as royalties for production from our activities relating to mining, oil and gas exploration,
development and production, and the refining, distribution
Libya operations are determined pursuant to EPSAs. The
amounts calculated reflect the difference between Suncor’s and marketing of petroleum products and petrochemicals.
Environmental assessments and regulatory approvals are
working interest in the particular project and the net
revenue attributable to Suncor under the terms of the generally required before initiating most new major projects
or undertaking significant changes to existing operations.
respective EPSAs. All government interests in these
operations, except for income taxes, are presented
In addition, this legislation requires that the company
abandon and reclaim mine, well and facility sites to the
as royalties.
satisfaction of regulatory authorities and, in some cases,
Under our EPSAs in Libya, income taxes are payable. this burden may remain with the company even after
Suncor prepares corporate income tax declarations that are
disposition of an asset to a third party. Compliance with
processed by the NOC who, in turn, obtains a tax such legislation can require significant expenditures, and a
clearance certificate from tax authorities that is forwarded
breach of these requirements may result in suspension or
to Suncor. The NOC remits taxes on Suncor’s behalf. Until revocation of necessary licences and authorizations, civil
tax certificates are received, Suncor records both an income
liability for pollution damage, and the imposition of
tax payable to the taxation authority and an offsetting material fines and penalties. In addition to these specific,
receivable from the NOC.
known requirements, Suncor expects future changes to
environmental legislation, including anticipated legislation

for air pollution (Criteria Air Contaminants) and GHG

SUNCOR ENERGY INC. ANNUAL INFORMATION FORM 2014 61