Vol. 143, No. 10 — May 13, 2009

Registration

SOR/2009-129 April 30, 2009

CUSTOMS TARIFF

Order Amending the Mobile Offshore Drilling
Units Remission Order, 2004

P.C. 2009-666 April 30, 2009

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 115 (see footnote a) of the Customs Tariff (see footnote b), hereby makes the annexed Order Amending the Mobile Offshore Drilling Units Remission Order, 2004.

ORDER AMENDING THE MOBILE OFFSHORE DRILLING UNITS REMISSION ORDER, 2004

AMENDMENTS

1. (1) Paragraph 3(b) of the Mobile Offshore Drilling Units Remissions Order, 2004 (see footnote 1) is replaced by the following:

(b) the mobile offshore drilling units are temporarily imported into Canada during the period beginning on May 4, 2004 and ending on May 4, 2014 for exploration, delineation or development activities;

(2) Paragraph 3(d) of the Order is replaced by the following:

(d) a claim for remission is made to the Minister of Public Safety and Emergency Preparedness before May 4, 2016.

COMING INTO FORCE

2. This Order comes into force on the day on which it is registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Order.)

Executive summary

Issue

In May 2004, the Government introduced the Mobile Offshore Drilling Units Remission Order, 2004 to remit the duties imposed on MODUs used for offshore exploration, delineation and development drilling activities temporarily imported on or before May 4, 2009.

Objectives

The main objective of the amendment is to maintain the remission of duties on temporarily imported MODUs for a further period of five years (to May 2014). It is expected that the maintenance of this removal of costs will continue to serve as a stimulus to the offshore oil and gas industry, as well as provide downstream benefits of maintenance and repair to the shipbuilding and industrial marine sectors.

Description

The Order extends the remission of customs duties pursuant to the Mobile Offshore Drilling Units Remission Order, 2004 on MODUs temporarily imported until May 4, 2014.

Regulatory and non-regulatory options considered

There are no practical alternatives to the amendment and the extension of the existing Order. An Order in Council made pursuant to section 115 of the Customs Tariff is the appropriate mechanism.

Benefits and costs

During the May 2004 to February 2009 period, five MODUs were imported temporarily. Based on these recent trade patterns, this Order will result in revenues foregone by the Government estimated at $45 million for the period between May 2009 and May 2014. These revenues foregone represent corresponding benefits for companies temporarily importing MODUs for exploration in the Canadian offshore (Atlantic Ocean and Beaufort Sea). This will help lower costs of exploration and help the oil and gas industries remain competitive, especially with respect to offshore projects that are generally riskier and face higher costs than do on-land projects. The MODUs are imported on a temporary basis and are not available from Canadian energy service suppliers. The shipbuilding industry in Canada, which does not have the capacity to build these vessels, can also benefit through work, including maintenance and repair, being performed in Canadian shipyards while MODUs are in Canadian waters. The Canadian Association of Petroleum Producers and the Canadian Association of Oilwell Drilling Contractors estimate that there was $63 million of expenditures in Canadian shipyards during the five-year period of the first Order.

There will be no changes to the existing administrative requirements for the oil and gas industry which currently benefits from the remission Order.

Rationale

According to the oil and gas industry, exploration operations in the Atlantic offshore and the Beaufort Sea are amongst the most costly in the world, and the imposition of customs duties on MODUs can rank as a significant cost factor. The extension of the current remission Order is intended to maintain lower costs for the offshore oil and gas industry and make Canadian exploration projects more competitive when industry evaluates projects on a world-wide basis. There should be no adverse effects to the shipbuilding industry as Canadian shipyards do not have the building capacity for MODUs. There is also the potential for further maintenance and repair work while the MODUs are in Canadian waters.

Consultation

Extensive consultations were conducted by the Department of Finance in the second half of 2008 with the relevant stakeholders, including the domestic shipbuilding industry, drilling contractors and petroleum producers. The Order has the support of the Canadian Association of Petroleum Producers, the Canadian Association of Oilwell Drilling Contractors, the provinces of Newfoundland & Labrador and Nova Scotia, Natural Resources Canada, the Atlantic Canada Opportunities Agency, and Indian and Northern Affairs Canada. The domestic shipbuilding industry, supported by the Canadian Auto Workers, expressed concerns that they received less than the expected spin-off work from imports of these vessels in the last five years.

Implementation, enforcement and service standards

The Canada Border Services Agency will continue to monitor compliance with the terms and conditions of the Mobile Offshore Drilling Units Remission Order, 2004, as amended, in the normal course of its administration of customs and tariff-related legislation and regulations.

Contact

Paul Robichaud
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Telephone: 613-992-2510

Footnote a
S.C. 2005, c. 38, par. 145(2)(j)

Footnote b
S.C. 1997, c. 36

Footnote 1
SOR/2004-107

NOTICE:
The format of the electronic version of this issue of the Canada Gazette was modified in order to be compatible with extensible hypertext markup language (XHTML 1.0 Strict).