Phase Out of Oil & Gas IndustryAs part of Trudeau's planned phase out of the oil & gas industry he made the change in CEE as below. Just trying to help Alberta out, I guess.
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Canadian Exploration Expense: Oil and Gas Discovery Wells
Currently, expenses incurred for the purposes of determining the existence, location extent or quality of an accumulation of petroleum or natural gas in Canada, including the expenses associated with drilling an oil or gas well that results in the discovery of a previously undiscovered petroleum or natural gas reserve, qualify as a “Canadian exploration expense” (CEE). CEE is fully deductible to the extent of an oil and gas company’s income, whereas expenses incurred with respect to drilling an oil or gas well are otherwise treated as a “Canadian development expense” (CDE) and only deductible on a declining-balance basis at a 30% rate.
Budget 2017 proposes measures that will generally classify expenses incurred with respect to drilling an oil or gas well that results in the discovery of a previously undiscovered petroleum or natural gas reserve as CDE (rather than CEE). Although such expenses do not necessarily result in a well which is capable of production, or change the rights of the working interest holder, it is the government’s view that such expenses result in the acquisition of an asset of an enduring benefit and should be deductible on the same declining-balance basis as expenses incurred with respect to drilling production wells.
However, drilling expenses incurred where (i) the oil or gas well has either been abandoned or has not produced within 24 months, or (ii) the Minister of Natural Resources has certified that the costs associated with drilling the well are expected to exceed $5 million and it will not produce within 24 months, may continue to be classified (or can be reclassified) as CEE and deducted on a current basis.
These new measures will apply to expenses incurred after 2018 (including expenses incurred in 2019 that can be deemed to have been applied in 2018 as a result of the flow-through share look-back rule described below). However, if the taxpayer has entered into a written commitment prior to March 22, 2017 (including a commitment to a government under the terms of a license or permit) to incur the particular expenses, the new measures will not apply to such expenses actually incurred prior to 2021. The grandfathering provision would appear to apply to commitments to incur expenses under flow-through share financing agreements.