Oil & Gas - Crown Share

The "Crown share" was established with the 1980 National Energy Program (NEP), which gave the federal government the right to an ownership interest (a "Crown share") in privately-owned oil and gas projects taking place on Canada lands, including those offshore from Nova Scotia.

In 1982, Canada gave the province the right to acquire a portion of the federal Crown share.

While the Crown share was abolished with the dismantling of the NEP in the mid-1980s, Canada agreed under the 1986 Canada-Nova Scotia Offshore Petroleum Resources Accord (1986 Accord) to compensate the province for the loss of the financial benefits that Nova Scotia would have received from a Crown share in oil and gas projects offshore Nova Scotia.

In essence, once specific conditions have been met, Nova Scotia would be entitled to receive annual payments from Canada equal to 75% of the notional profit that the province would have received in any particular year from a project, had it acquired a Crown share interest in that project.

The province would receive payment provided it meets the following conditions:

1. The gross Federal revenue entitlement derived from the production of petroleum offshore Nova Scotia exceeds an Offshore Revenue Threshold of $200 million;
2. Nova Scotia demonstrates that it would have acquired a Crown share, i.e. the rate of return in respect of a particular offshore project would meet a pre-determined rate of return threshold; and
3. Nova Scotia's fiscal capacity is below the national average for the year in question.

While these conditions are set out in the Accord and its implementing legislation, the technical regulations necessary to determine the entitlement for, and the amount of, payments were never put in place.

Both governments must agree to the regulations before they are put in place.

Governments agreed to the appointment of a joint, independent three-member panel to make recommendations concerning the calculation of the value of federal Crown Share Adjustment Payment (CSAP) obligations, with a view to facilitating the development of an approach agreeable to both governments.

Each government appointed one member, who then jointly selected a third member as Chair.

Accepting the recommendations of the panel, the federal and provincial governments were able to resolve the issue in July, 2008.

The recommendations defined that the Government of Canada was to provide Nova Scotia with $234.4 million for past payments up to March 31, 2008.

Going forward, the two governments have agreed to work together to take the steps necessary to implement the Chair's recommendation enabling the calculation of Crown Share Adjustment Payments for future years.

The panel estimates the value of those payments for future years for the Sable Offshore Energy Project and the Deep Panuke Offshore Project to be approximately $633 million.

For more information on Crown Share Adjustment Payments, including the agreement, backgrounder and the chair's recommendations go to the website.