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2017 Federal Budget Impact on Oilfield Services – MNP
by ahnationtalk onMarch 24, 2017320 Views
The 2017 Federal Budget announced March 22 by Finance Minister Bill Morneau included some expected and unexpected amendments relating directly to Canada’s oil and gas industry. While a $30-million injection into Alberta’s Orphan Well fund was welcomed by industry, tax changes around drilling new wells and flow-through share credits for junior producer were not.
Prior to the new budget, producers were able to deduct full exploratory expenditures (Canadian Exploratory Expense or CEE) around new discovery wells – drilling, completion, new infrastructure – in the first year. Junior producers were able offer the tax credits off the first $1-million in expenditures to investors through flow-through shares, attracting funding for more exploration and development.
The new rule will put discovery wells under the same treatment (Canadian Development Expense or CDE), as other wells, limiting cost deductions to 30 per cent each year, on a declining basis, forcing companies to pay more tax upfront. The credit will still apply to geophysical and geochemical surveys, and abandoned drills (or at least not producing within 24 months).