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Canadian Oil Sands Limited 2000 First Canadian Centre 350–7th Avenue SW Calgary, Alberta T2P 3N9

Tel: 403 218 6200
Fax: 403 218 6201

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Post-conversion tax information

On December 31, 2010, Canadian Oil Sands completed its reorganization from an income trust structure into a corporate structure (the “Conversion”) with the result that Canadian Oil Sands Trust (the “Trust”) was dissolved and the business was carried on through the corporate entity named “Canadian Oil Sands Limited” (“COSL”). 

Pursuant to the Conversion, all outstanding Trust units (“Units”) were exchanged for common shares of COSL (“COSL Shares”) on a tax deferred basis.  COSL is now subject to corporate taxes and dividends paid by it will be “eligible dividends”.

The following is a general summary of tax considerations for holders of COSL Shares (“Shareholders”) who hold the COSL Shares as capital property.  This is not intended to be tax advice and Shareholders should seek their own professional advice on all tax matters.


Eligible Dividends for Canadian Tax Purposes
Canadian Residents
U.S. and Other Non-Resident Tax Information
Premium Dividend, Dividend Reinvestment and Optional Share Purchase Plan


Eligible Dividends for Canadian Tax Purposes
Effective from January 1, 2011, all dividends paid by COSL will be designated as "eligible dividends" for Canadian tax purposes.  This designation will apply until a notification of a change is posted on this website.

Canadian Resident Tax Information

Each former unitholder of the Trust acquired COSL Shares at the holder's cost in his or her Units.  The cost amount of a particular COSL Share must generally be averaged with the cost of the holder's other COSL Shares to determine the adjusted cost base on a per share basis.

Canadian residents who are individuals (other than certain trusts) and who receive dividends on COSL Shares must include those dividends in computing their income and will be subject to the normal gross up and dividend tax credit rules applicable to dividends paid by taxable corporations under the Income Tax Act (Canada) (the “Tax Act”).  This will include the enhanced gross up and dividend tax credit treatment applicable to dividends which are designated as “eligible dividends”.  All dividends that COSL declares will be designated as “eligible dividends”.

Where the recipient is a corporation the dividends will generally be included in the corporation's income and may be deductible in computing the corporation's taxable income.  A corporation that is a “private corporation” or a “subject corporation” (as defined in the Tax Act) may be liable to pay a refundable tax of 33 1/3% under Part IV of the Tax Act on dividends received on COSL Shares.

On a disposition of a COSL Share a Shareholder will generally realize a capital gain or loss equal to the amount by which the proceeds exceed or are less than the aggregate of the Shareholder's adjusted cost base and any reasonable costs of disposition.  The cost of a COSL Share will generally be the average of the cost of all COSL Shares held as capital property.

Generally, one half of any capital gain realized in a taxation year must be included in income and one half of any capital loss realized in a taxation year must be deducted from capital gains realized in that year.  Allowable capital losses in excess of taxable capital gains may generally be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in a subsequent taxation year against taxable capital gains realized in such years to the extent and under circumstances described in the Tax Act.  The amount of any capital loss realized by a corporation on the disposition of a COSL Share may be reduced by the amount of dividends received or deemed to be received on such shares (or shares substituted therefor) to the extent under circumstances described by the Tax Act.  Similar rules may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns COSL Shares directly or indirectly through a partnership or trust.  A Shareholder that is, throughout the year, a Canadian controlled private corporation (as defined in the Tax Act) may be liable to pay in addition to tax otherwise payable a refundable tax on certain investment income including taxable capital gains.  Shareholders to whom these rules may be relevant should consult their own tax advisors.

COSL Shares Held in Deferred Plans

Subject to the provisions of any particular plan, COSL Shares that are listed on the Toronto Stock Exchange (“TSX”) will be qualified investments under the Tax Act for trusts governed by registered retirement savings plans, registered retirement income plans, deferred profit sharing plans, registered disability savings plans, registered education savings plans and tax free savings accounts. While held in these plans, income earned on the COSL Shares will generally not be subject to taxation.  Withdrawals from registered retirement savings plans, registered retirement income plans, deferred profit sharing plans and registered education savings plans as well as the taxable portion of withdrawals from registered disability savings plans will be included in income when withdrawn and will not be considered to be dividends or capital gains.   

U.S and Other Non-Resident Tax Information

On the Conversion each former non-resident unitholder of the Trust acquired COSL Shares at the holder's cost in his or her Units.  The cost amount of a particular COSL Share must be averaged with the cost of the holder's other COSL Shares to determine the adjusted cost base on a per share basis.

In circumstances where Units held by a non-resident were "taxable Canadian property" then the COSL Shares received on the Conversion will be deemed to be taxable Canadian property to that non-resident. 

Dividends paid to a non-resident on COSL Shares are subject to Canadian withholding tax at the rate of 25% unless the rate is reduced under the provisions of an applicable double taxation treaty.  Where a non-resident is a US resident entitled to benefits of the Canada – United States Income Tax Convention,1980 and is the beneficial owner of the dividends then the rate of Canadian withholding tax is generally reduced to 15%.

A non-resident will generally not be liable for Canadian income tax on a disposition of COSL Shares unless the COSL Shares are deemed to be taxable Canadian property at the time of disposition and the non-resident is not entitled to relief under an applicable double taxation treaty.

Generally, COSL Shares will not be taxable Canadian property at a particular time provided that:  (a) such shares are listed on the TSX; (b) at any time during the 60 month period beginning at that time the non-resident, persons not dealing at arm's length with the non-resident or the non-resident together with such persons have not owned 25% or more of the issued shares of any class or series of the capital stock of COSL; and (c) the shares are not otherwise deemed to be taxable Canadian property under another provision of the Tax Act.

Premium Dividend, Dividend Reinvestment and Optional Share Purchase Plan

Please note that Canadian Oil Sands' premium distribution, dividend reinvestment plan and optional share purchase plan are currently suspended. A press release will be issued if the plan is re-instated.

Pursuant to the Conversion, the premium distribution, distribution reinvestment and optional unit purchase plan of the Trust (the “Trust DRIP”) and all associated agreements were assigned to COSL. COSL amended and restated such agreements so that the Trust DRIP continues in effect as the premium dividend, dividend reinvestment and optional share purchase plan of COSL (the “COSL DRIP”).  Former Trust unitholders who were enrolled in the Trust DRIP at the effective date of the Conversion will continue to be enrolled in the COSL DRIP in respect of their COSL Shares upon the exchange of their Units for COSL Shares.  Shareholders will not be entitled to receive any dividends under the COSL DRIP until they have exchanged their Units for COSL Shares.  

What is the Premium Dividend, Dividend Reinvestment and Optional Share Purchase Plan?

The COSL DRIP enables holders of COSL Shares to:

(i)         accumulate additional COSL Shares by electing to reinvest dividends in additional COSL Shares at 95% of the Average Market Price (as described in the COSL DRIP);

(ii)        receive, in lieu of a declared cash dividend, a premium cash payment equal to 102% of such declared dividend by electing to reinvest the dividends in additional COSL Shares and directing the agent under the COSL DRIP to deliver those additional COSL Shares to a designated broker in exchange for the premium cash payment (as described in the COSL DRIP); and

(iii)       if a holder of COSL Shares elects to participate in either the premium dividend component or the dividend reinvestment component of the COSL DRIP, then such Shareholder will also be able to purchase additional COSL Shares through the optional share purchase component of the COSL DRIP by directly investing additional amounts within the limits established by the COSL DRIP (as described in the COSL DRIP). 

Shareholders in Canada are eligible to participate in the COSL DRIP.  Shareholders who are not resident in Canada are not eligible to participate in the premium dividend component or the optional share purchase component of the COSL DRIP.   

COSL Shares Acquired and Disposed of under the DRIP

Canadian Residents

A Shareholder’s reinvestment of dividends pursuant to the dividend reinvestment component or premium dividend component at 95% of the Average Market Price, should not, pursuant to the administrative practices of the Canada Revenue Agency (“CRA”), result in the Shareholder realizing a taxable benefit under the Tax Act.

The cost of COSL Shares acquired pursuant to the dividend reinvestment component or premium dividend component of the COSL DRIP will generally be 95% of the Average Market Price for that dividend payment date while the cost of COSL Shares acquired pursuant to the optional share purchase component of the COSL DRIP will be equal to the Average Market Price on the relevant date. Where such COSL Shares are held as capital property of a Shareholder, the adjusted cost base at a particular time will be the average cost of all COSL Shares owned by the Shareholder at that time, whether acquired through the dividend reinvestment component, the premium dividend component, the optional share purchase component or otherwise acquired outside the COSL DRIP.

The premium dividend will not be considered a dividend for the purposes of the Tax Act, but will represent proceeds of disposition.

Where a Shareholder has not made the irrevocable election permitted under subsection 39(4) of the Tax Act to treat his or her COSL Shares and any other “Canadian security” (as defined in the Tax Act) as capital property, the CRA may take the position that any COSL Shares acquired and sold by the Shareholder pursuant to the premium dividend component of the COSL DRIP are held in the course of an adventure or concern in the nature of trade or as inventory and not capital property, such that the tax consequences of the Shareholder’s sale of COSL Shares pursuant to the premium dividend component will not be considered a capital gain or loss.  In such circumstances a Shareholder may be considered to realize a profit equal to the amount of the premium dividend and should consult his or her own advisors with respect to the computation of such amount, reporting obligations and any tax liabilities.

Where a Shareholder disposes of COSL Shares (including dispositions pursuant to the premium dividend component) that are held as capital property he or she will generally realize a capital gain (or loss) on the disposition of the COSL Shares equal to the amount by which the proceeds of disposition are greater (or less) than the Shareholder’s adjusted cost base of such shares plus any reasonable costs incurred by the Shareholder in connection with the disposition.

Non-Residents

The reinvestment of dividends under the COSL DRIP (including those resulting in receipt of cash from the premium dividend component) does not relieve a non-resident Shareholder from any liability for income taxes that may otherwise be payable on such amounts. In this regard, a non-resident Shareholder who participates in the dividend reinvestment component or premium dividend component will be treated, for tax purposes, as having received, on each dividend payment date, a taxable dividend equal to the amount of the dividend payable on such date, which dividend will be subject  to Canadian withholding tax at the rate of 25% unless the rate is reduced under the provisions of a tax treaty between Canada and the non-resident Shareholder’s jurisdiction of residence.  Where the non-resident Shareholder is a United States resident entitled to benefits under the Canada-United States Income Tax Convention, 1980 and is the beneficial owner of the dividends, the rate of Canadian withholding tax applicable to dividends is generally reduced to 15%.

 



A   B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   Q   R   S   T   U   V   W   X   Y   Z  
A
Alberta Oil Sand(s) Deposits

The four deposits, Athabasca, Peace River, Cold Lake and Wabasca, have total resource in place estimated at 1.7 trillion to 2.5 trillion barrels. The Athabasca Oil Sands deposit, Alberta's largest and most accessible source of bitumen, contains more than one trillion barrels of bitumen over an area encompassing more than 30,000 square kilometers.

 
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B
Bitumen
The molasses-like substance that comprises up to 18 per cent of oil sands. Bitumen, in its raw state, is black, asphalt-like oil. It requires upgrading or blending to make it transportable by pipeline and usable by conventional refineries.
 
Bitumen cracking
A process that breaks large, complex hydrocarbon molecules into smaller, simpler compounds by means of heat.
 
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C
Carbon dioxide (CO2)
A non-toxic gas produced from decaying materials, respiration of animal life, and combustion of organic matter, including fossil fuels; carbon dioxide is the most common greenhouse gas produced by human activities.
 
Cokers
Vessels in which bitumen is cracked into its fractions and from which coke is withdrawn to start the process of converting bitumen to upgraded crude oil.
 
Conventional oil
Petroleum found in liquid form, flowing naturally, or capable of being pumped without further processing or dilution.
 
Cyclofeeder
Specialized equipment that receives oil sand feed and turns it into a slurry form for transport to the pump box.
 
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D
Debottleneck
An undertaking to systematically remove plant capacity limitations through modifications of existing facilities and/or addition of capital facilities.
 
Diesel cetane count
A quality specification important in the production of diesel fuels.
 
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E
Extraction
The process of separating bitumen from oil sand.
 
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F
Feedstocks
Raw material supplied to refinery, oil sands upgrader, or petrochemical plant.
 
Flue gas scrubber/desulphurizer
Equipment that removes sulphur dioxide and other emissions.
 
Fluid coking
A major part of the upgrading process whereby high temperatures in a coker break down the complex bitumen molecules, reject carbon and cause bitumen molecules to reformulate into lighter fractions that become the main ingredients in upgraded crude oil.
 
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G
Greenhouse gases
Any of the various gases that contribute to the greenhouse effect.
 
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L
LC-Finer hydroprocessor
A major upgrading unit that breaks down bitumen by adding hydrogen with the aid of a catalyst to produce gas oil.
 
Line-out
The process of optimizing an operational unit or facility to reach its design capacity.
 
Low-energy extraction
A process for extracting bitumen that uses about one-third of the energy of the traditional process, bringing significant cost and environmental benefits.
 
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M
Middle distillates
A classification of refined petroleum products that includes kerosene, diesel, and jet fuel.
 
Mine train
Modular units for crushing and mixing the oil sands with warm water to facilitate the extraction of bitumen from the oil sands.
 
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N
Naphtha
A refined petroleum product in the lighter classification that is often used to make gasoline.
 
Netback
Average realized selling price, after hedging, less operating costs and Crown royalties.
 
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O
Oil sand(s)
A composition of sand, bitumen, mineral-rich clays and water.
 
Oil sand(s) lease
A long-term agreement with the provincial government that permits the leaseholder to extract bitumen, other metals and minerals contained in the oil sands in the specified lease area.
 
Ore grade
The percentage of bitumen by weight in the oil sands.
 
Overburden
Layer of rocky, clay-like material that lies under muskeg and above oil sands deposits.
 
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S
Strip ratio
The ratio of waste (overburden material that covers mineable ore) to ore; used to define the quality of an oil sands ore body.
 
Sulphur dioxide (SO2)
A compound of sulphur and oxygen produced by burning sulphur.
 
Synbit
Typically, a synbit blend is a ~50/50 mix of bitumen and synthetic crude oil.
 
Syncrude Project
Canadian Oil Sands is a pure investment opportunity in light, sweet crude oil. Through our 36.74% interest in the Syncrude project, we offer a solid, robust production stream of fully upgraded crude oil, exposure to future crude oil prices, potential growth through high-quality oil sands leases and an attractive dividend.
 
Synthetic crude oil (SCO)
A high-quality product resulting from the mining, extraction and upgrading of bitumen.
 
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T
Tailings
A combination of water, sand, silt, fine clay particles and residual hydrocarbon that is a by-product of removing bitumen from oil sand.
 
Tailings systems
Separation of water from sand and clay to enable incorporation of solids into reclamation landscapes and recycling of water back into the operations.
 
Tar sands
Oil sands are also referred to as tar sands. Oil sands are a naturally occurring combination of clay, sands, water and bitumen (a heavy, black viscous oil), whereas tar is a man-made substance.
 
Total volume to bitumen in place (TV/BIP)
The ratio of total ore plus overburden volume to total bitumen in place.
 
Turnaround
A unit shutdown essential for good maintenance of the mining, producing and upgrading facilities. A turnaround reduces production but does not usually halt it entirely as the various operating units are often duplicated.
 
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U
Upgrader
A facility that upgrades bitumen (extra heavy oil) into synthetic crude oil.
 
Upgrading
The conversion of heavy bitumen into a lighter crude oil by increasing the ratio of hydrogen to carbon, either by removing carbon (coking) or adding hydrogen (hydroprocessing).
 
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V
Vacuum Distillation Unit (VDU)
Capable of processing 285,000 barrels of bitumen a day, the VDU pulls streams of light and heavy-gas oil from hot bitumen feed delivered by the diluents recovery unit.
 
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