N.L. settles royalty dispute over Terra Nova oil project

The Newfoundland and Labrador government has settled a dispute over royalties payable on the Terra Nova offshore oil project.

"It eliminates the province's risk, for example, on a decision maybe not being favourable in court," Natural Resources Minister Siobhan Coadytold CBCNews.

It eliminates the province's risk, for example, on a decision maybe not being favourable in court.- Natural Resources MinisterSiobhanCoady

"It made sure that we were able to gain some things for the province."

In 2015, six oil companies jointlyfiled a Newfoundland and Labrador Supreme Court action taking issue with how payments are calculated.

The Terra Nova partners who participated in the court action hold shares accounting for 99 per cent of the project.

They filed a notice of discontinuance ending that lawsuit last month.

• Terra Nova project partners sue over royalty calculations

On Dec. 21, the provincial cabinet authorized "the execution and delivery of an agreement with Terra Nova project interest holders to settle outstanding fiscal dispute issues."

That's according to an order-in-council posted on the government's website within the past 24 hours.

Details of agreement not released

It's not clear how much money was at stake, or exactly how the dispute was resolved.

There was no dollar figure referenced in court documents.

Coadysaiddetails of the agreement cannot be released at this point.

"Unfortunately, because it is a commercial settlement, and a commercial agreement, at this time I'd have to check and see if there is any impairment on releasing that information," Coadysaid.

Coadydid stress that the government resolved a number of issues related to Terra Nova in the settlement, not just those linked to royalties.

Others includeda tax-remission refund claim, as well as some audit findings related to the project.

"They were all wrapped into one," Coadysaid. "So that we basically made the best foot forward that we can, to make sure that we settled any dispute."

She indicated that the agreement provides clarity for Terra Nova.

SuncorEnergy,the operator of Terra Nova, did not reply to interview requests.

Companies sought ruling on royalty rules

In the lawsuit filed more than two years ago, the companies wanted a judge to rule on the correct interpretation of the royalty rules, and how certain deductions are applied "with respect to all past, current and future royalties payable for the Terra Nova project."

The companies who filed the action and their share of the project, according to those initial filings, were:

• Suncor Energy: 37.675 per cent.
• ExxonMobil Canada: 19 per cent.
• Statoil Canada: 15 per cent.
• Husky Oil: 13 per cent.
• Murphy Oil: 10.475 per cent.
• Mosbacher Operating Ltd.: 3.85 per cent.

Their court action did not involve all royalty calculations for Terra Nova, but only certain scenarios.

In the simplest of terms, the oil companies believed they were sometimes being forced to pay both levels of royalties when they moved from one royalty tier to the next.

Government officials said thatshift from tier to tier happens "occasionally."

They said itgenerally occurs in years where there are high costs and low sales revenues late in a year,such as a year when a project shutdown occurs.

Province reliant on royalties

Offshore oil royalties are a big chunk of revenuefor the cash-strapped Newfoundland and Labrador government.

Up to April 2016, the Terra Nova project funnelled a total of more than $5.8 billion in royalties to the provincial treasury, according to previously-released government figures.

The Terra Nova field is located offshore roughly 350 kilometres southeast of Newfoundland.