Saskatchewan Oil and Gas Processing Investment Incentive (OGPII)

Insider Tip

Credits arrive slowly by design — 20% of the total in the first calendar year of operations, 30% in the second, 50% in the third — so model this as a three-year receivable rather than a lump sum, and note that the clock only starts once the facility is commercially operational, which on a refinery or petrochemical build can be years after the spend. The transferability is the underused feature: Saskatchewan says the credits are "fully transferable which gives non-producers/non-royalty payers an opportunity to benefit," so a builder or technology owner that pays no Crown royalties can still earn credits and sell them to an oil, gas or helium royalty payer through IRIS. Watch the category boundary closely: enabling infrastructure like a gas gathering pipeline or rail loading terminal is eligible only when it is directly linked to a qualifying value-added project — standalone pipelines and rail terminals are not, and gas gathering with routine flaring for non-commercial use is excluded. Unlike the sibling SCMII program, OGPII's eligible costs are construction-side only: operating utilities, transportation, labour and maintenance are all explicitly ineligible. Email [email protected] before building the file, and engage your auditor while the agreement is being drafted.

Rejection Pitfalls 9

• Eligible costs fall below the CAD$10 million minimum investment threshold
• The project does not fall within one of the eight project types fixed by clause 4(a) of the regulations
• The Minister is not satisfied the project produces a significant increase in Saskatchewan processing capacity

Success Profile

Incorporated companies building or expanding value-added oil, gas or chemical fertilizer processing capacity in Saskatchewan at a scale of CAD$10 million or more, before operations begin. The province's own examples of what has been funded are regional gas gathering and commercialization systems, gas processing plants, waste- and flare-gas-to-power facilities, and helium purification facilities (that last category has since moved to CMPII). Refineries, upgraders, partial upgraders, asphalt production, sulphur removal units, methanol, ammonia, polypropylene, olefins and ethylene facilities, gas-to-liquids and gas-to-chemicals plants, CCUS-for-enhanced-oil-recovery projects and chemical fertilizer facilities all fit the regulated categories. Non-producing developers are viable applicants because credits transfer.

Evaluation Criteria

Criteria-based, not a ranked competition. The Ministry of Energy and Resources assesses the application against the four tests in clause 4 of The Oil and Gas Processing Investment Incentive Regulations: (a) the project is one of the eight listed types — refinery, upgrading facility, petrochemical facility, associated gas commercialization project, associated gas pipeline gathering system, CCUS for enhanced oil recovery, commercialization of oil and gas production byproducts or waste products, or chemical fertilizer facility; (b) it will result in a significant increase in processing capacity as determined by the Minister; (c) it involves a minimum investment of CAD$10 million in eligible costs; and (d) it has not become operational before the application is submitted. In judging the capacity increase the Ministry weighs whether a new saleable product is created at commercial scale, whether an existing product increases significantly in quantity or improves in quality or value, incremental commercialization of byproducts and waste, and the proportionality between input volume and total eligible project costs. Success returns a Letter of Conditional Approval followed by a formal agreement — but because the program carries a royalty-credit cap shared with CMPII, conditional approval does not guarantee credits remain available when contract drafting begins.

Application Steps

Required Documents 9

Eligible Expenses 13

• Real property and depreciable assets
• Land on which the project is built and operates, at the lesser of actual cost or fair market value
• Capitalized costs of qualified professional services directly associated with and prorated to the project, in-house or third party
• Capitalized costs of installing and transporting depreciable assets, including under a capital lease
• Mobile or modular equipment and infrastructure essential to the project (requires a commitment to keep the assets in Saskatchewan for 10 consecutive years)
• Intellectual property licensing costs directly related to the project's design or operation
• Specialized software essential to the project's operation
• Labour costs directly related to project engineering and design
• Site preparation and construction costs — contracting, labour, equipment leasing or renting, and materials
• Utilities servicing costs directly related to constructing the eligible project
• Regulatory, licensing and development fees necessary for the project's approval, permitting and construction
• Direct costs of independent expert third-party accountants, engineers and real estate appraisers required by the Ministry or the agreement
• Capitalized interest and Front-End Engineering Design (FEED) studies

Ineligible Expenses 11

• Operating utility costs, operating transportation costs and operating labour costs
• Treating, capital asset turnover, maintenance (including routine well workovers), servicing and other materials related to pre-existing assets or the project after construction
• Administration and overhead costs, office supplies and furnishings
• Feasibility study costs
• Travel and subsistence, promotional and advertising, selling and marketing costs
• Insurance, spare equipment, generic software and computer costs
• GST, PST and HST
• Land not directly related to or necessary for the eligible project, and excess land the applicant could re-sell, lease or develop otherwise
• Non-compliance fees, fines and penalties; costs of asset ownership transfer
• Stakeholder engagement or community benefit agreements
• Costs already submitted under another OGPII submission, and non-arm's-length transactions

Claim timing

Continuous intake. The Ministry of Energy and Resources has accepted OGPII applications since 8:00 a.m. CST on July 8, 2019 and will continue to accept them until March 31, 2029. There are no annual windows. Applications may be filed before the final decision to construct, but must be filed before the project becomes operational.

Deadline Notes

Continuous intake with no annual application window. The Ministry of Energy and Resources has accepted OGPII applications since 8:00 a.m. CST on July 8, 2019 and will continue to accept them until March 31, 2029, following the five-year extension announced in Budget 2024-25. There is no dated cut-off for a current cycle — the only calendar constraint is the program's 2029 sunset. Apply before the project becomes operational: a project already operational when the application is submitted will be rejected. Applications may be filed before the final decision to construct. Because the program carries a royalty-credit cap shared with CMPII, a Letter of Conditional Approval does not reserve capacity, so earlier submission is safer. Unused credits expire March 31, 2040 or on the date set in the agreement.

Ineligible Organizations

• Unincorporated businesses — sole proprietorships and partnerships without a Certificate of Incorporation
• Applicants whose project is already operational at the time of application
• Applicants whose project involves under CAD$10 million in eligible costs
• Applicants proposing helium or lithium processing projects (these belong to CMPII)
• Applicants proposing oil pipelines or rail loading facilities that are not connected to an eligible value-added project
• Applicants proposing gas gathering infrastructure with components that involve routine flaring or combusting/incinerating for non-commercial uses

Compatible Programs

Clawback Risk

Low Risk

Credits are only issued against costs already incurred, verified by an arm's-length third party, and only once the facility is operating — so there is little to recover after the fact. The real exposure is cost disallowance at the verification stage: any expense that cannot be tied to the agreement, or that exceeds the maximum authorized eligible cost amount, is simply excluded from the credit calculation. Two commitments run for years afterwards: mobile or modular equipment claimed as eligible must stay in Saskatchewan for 10 consecutive years, and a CCUS project qualifying on the tonnage test must sustain an annual average of at least 25,000 tonnes of captured CO2 used for enhanced oil recovery for 10 consecutive years. Transferring project assets before the agreement's obligations are fulfilled requires written sign-off from both owners.