Section 211.6

On May 29, 2014, the National Energy Board decision MH-001-2013 on set-aside and collection mechanisms proposed a Model Trust Agreement to provide pipeline companies with guidelines for establishing qualifying environmental trusts as defined in ITA s. 211.6(1) for dealing with reclamation obligations when abandoning pipelines.

Section 2.04 of the model trust provided:

If property remains in the Fund after all Reclamation Obligations of the Beneficiaries are discharged, then the Trustee, with the approval of the Tribunal, may distribute the Fund or any part thereof among any of the Beneficiaries [essentially defined as those subject to the Reclamation Obligations] and Orphan Pipeline Fund [defined as a not-for-profit organization to be established by federal statute whose purpose includes paying for the cost to abandon a pipeline constructed or operated under a federal statute] as the Trustee in its sole discretion sees fit.

Section 2.05 provided that not more than five years before the expiration of any perpetuity period:

the Trustee shall pay the Fund to the Company, and the Company covenants upon receipt of the Funds, to establish, at once, a new irrevocable trust upon the terms and subject to the same conditions set out in this Agreement ("the New Trust Fund"), and to contribute to the New Trust Fund the entirety of the Fund.

CRA noted that "paragraph (b) of the definition of "qualifying environmental trust" in subsection 211.6(1) sets out the Sole Purpose Requirement" and indicated that these two clauses "do not, in and of themselves, offend the Sole Purpose Requirement ."

Four affiliated Canadian mining companies who operate Canadian mines directly (in the case of Corporation A and B) or through a partnership (in the case of Corporation C and D) will dissolve the four existing reclamation trusts with respect to such mining sites, receive the funds from the dissolved trusts as the respective beneficiaries and settle a single new reclamation trust (containing standard conditions) with respect to the mining sites, with all four corporations and the Province as beneficiaries. Under the Trust Deed for this "Single Reclamation Trust," each mining site will include "any land, water or watercourse used or disturbed by the construction or operation of such properties."

Rulings that the Single Reclamation Trust will be a qualifying environmental trust, that contributions by the Corporations will be deductible under s. 20(1)(ss) and the remaining amounts received by it upon dissolution of a previous reclamation trusts will be included in their income under s. 12(1)(z.1).

A public company (the Corporation) will dissolve existing reclamation trusts with respect to different mining sites, receive the funds from the dissolved trusts as the beneficiary and settle a single new reclamation trust (containing standard conditions) with respect to the mining sites. Under the Trust Deed for this "Single Reclamation Trust," each mining site will include "any land, water or watercourse used or disturbed by the construction or operation of the site."

Rulings that the Single Reclamation Trust will be a qualifying environmental trust, that contributions by the Corporation will be deductible under s. 20(1)(ss) and the remaining amounts received by it upon dissolution of a previous reclamation trusts will be included in its income under s. 12(1)(z.1).

A public company (Corporation A), and two "grandchild" Canadian subsidiaries (Corporations C and D), are the members of the Partnership. Corporation A, on behalf of the Partnership, enters into a trust agreement with the Province for the New Trust solely for the purpose of funding reclamation at a mining site, and settles the New Trust with a payment which is invested in qualified investments. In the event that the Partnership defaults in its reclamation or decommissioning obligations, the Province is authorized to direct the Trustee to disburse amounts with respect to reclamation or decommissioning work completed at the Province's direction. The Partnership is the residual beneficiary (i.e., once all reclamation obligations have been fulfilled).

Rulings that the New Trust will be a qualifying environmental trust, that contributions by the Partnership will be deductible under s. 20(1)(ss) and the remaining amounts received by it upon dissolution of a previous reclamation trust will be included in its income under s. 12(1)(z.1).

The summary states:

To define the mine site narrowly, such that only the shaft is included, does not support the policy of a QET. Thus for QET purposes the area included in the "operation of a mine" includes more than just the shaft and immediate workings.