The Government of Saskatchewan ("Saskatchewan") recently announced additional details of the two new incentives for eligible energy and mining projects contemplated by the Saskatchewan Critical Minerals Innovation Incentive Regulations, which came into effect on July 25, 2024 (the "Innovation Incentive Regulation") – the Saskatchewan Critical Minerals Innovation Incentive ("SCMII") and the Critical Minerals Processing Investment Incentive ("CMPII").
Applications for both SCMII and CMPII will be accepted until March 31, 2029. Both programs target the following qualified minerals: aluminum, cobalt, copper, gallium, helium, lithium, magnesium, natural graphite, rare earth elements and zinc and are administered by the Ministry of Energy and Resources (the "Minister").
The introduction of these incentives forms part of Securing the Future: Saskatchewan's Critical Minerals Strategy, first announced on March 27, 2023, which seeks to grow and expand the province's critical minerals sector. For discussion of Saskatchewan's mineral strategy and other incentives, see our previous blog. This blog provides a high-level summary of the Innovation Incentive Regulation, SCMII and CMPII.
Innovation Incentive Regulation
The Innovation Incentive Regulation establishes the Saskatchewan Critical Minerals Innovation Incentive Program (the "Program") and lays out the foundation of SCMII and CMPII. In particular, the Innovation Incentive Regulation establishes, among other things:
- Eligibility and application requirements;
- Details of agreements that must be entered into before credits are earned;
- The mechanics for how credits are remitted towards royalties and taxes;
- How credits can be transferred;
- Record retention and access requirements;
- Maximum application of credits and reimbursement; and
- Final technical reporting requirements.
The Innovation Incentive Regulation further authorizes the Minister to establish and publish policies supporting the Program. To this end, the Minister has divided the Program between SCMII and CMPII and published corresponding policies for each. Requirements of the Innovation Incentive Regulation and the relevant policy apply.
SCMII
Overview
SCMII offers transferrable royalty credits for qualified innovation commercialization projects at a rate of 25% of eligible project costs. Key components of SCMII include:
- Being a fully transferrable credit where eligible costs can be incurred by parties other than the principal applicant, encouraging multi-party projects;
- Having a project-specific credit cap of $5 million;
- Can be combined wit other Saskatchewan incentive and grant programs; and
- Costs incurred from April 1, 2024 onwards are eligible.
Eligibility
SCMII is open to pilot projects and commercial scaling projects, seeking to incentivize and support "first mover" projects or significant advancements such as those intended to be deployed at a large scale in the future and multi-site and multi-phase projects. In particular, to be eligible for SCMII, the project must:
- Be an eligible innovation with a minimum "SCMII Technology Readiness Level" rating of 7 that is either: (i) a pilot innovation project that is new to Saskatchewan's industry for that qualifying mineral with no equivalents in the Saskatchewan market; or (ii) a commercial scaling project that is on a significantly different commercial scale or conditions resulting in novelty or new technical challenges;
- Be associated with one of the following four eligible innovation criteria: (i) improve qualifying material recovery; (ii) manage adverse environmental impacts; (iii) increase valued-added processing capacity; or iv) commercialize production byproducts or waste for a qualifying material;
- Include at least $1 million in eligible capital and operating costs; and
- Not be operational before the application is submitted.
Although SCMII predominantly targets new innovation, existing innovations being redeployed may be eligible where it is demonstrated that: (i) it is considered necessary to overcome substantial technical challenges or proof of concept challenges; or (ii) it is conducted under different operating conditions that pose significantly new technical challenges.
Saskatchewan has published policy guidelines setting out the administrative process followed, a fact sheet and a cost submission form which set out further details of SCMII.
CMPII
Overview
CMPII provides a transferrable Crown royalty/freehold production tax credit for qualified greenfield or brownfield value-added processing projects at a rate of 15% of eligible program costs. Key components of CMPII include:
- Being a fully transferrable credit where eligible costs can be incurred by parties other than the principal applicant, encouraging multi-party projects;
- Having a project-specific credit cap of $75 million;
- Can be claimed at a rate of 20% of total credits in the first year of operations, 30% in the second year and 50% in the third year;
- Can be combined with other Saskatchewan incentive and grant programs; and
- Costs incurred from April 1, 2024 onwards are eligible.
Eligibility
CMPII is open to projects that:
- Are considered a value added project for the minerals listed above;
- Result in a significant increase for processing capacity (for brownfield projects);
- Include at least $10 million in eligible costs; and
- Must not be operational before a project application is submitted.
Saskatchewan has published policy guidelines setting out the administrative process followed, a fact sheet and a cost submission form which set out further details of CMPII.
Eligible costs
Eligible costs for both SCMII and CMPII include the following:
- Any real property and depreciable assets;
- The land on which the project is built and operates;
- The capitalized costs of qualified professional services directly associated and prorated with the project, whether in-house or third party;
- The capitalized costs of installing the depreciable assets, whether in-house, third party or of a capital lease;
- The capitalized cost of transporting the depreciable assets, whether in-house, third party or of a capital lease;
- The cost of mobile or modular equipment and infrastructure essential to the successful operation of the project;
- Intellectual property licensing costs directly related to the project's design or operation;
- Specialized software costs essential to the successful operation of the project;
- Labour costs directly related to project engineering and design;
- Any site preparation and project construction costs (contracting, labour, equipment leasing or renting and materials included);
- Any necessary utilities servicing costs directly related to the construction of the eligible new or expanded facility;
- Regulatory, licensing and other necessary development fees directly related to the project's approval, permitting and/or construction;
- Direct costs of contracting any independent expert third party accountants, engineers and real estate appraisers as requested by the Minister or as required by the terms of the agreement entered into by the project proponent and the Minister;
- Capitalized interest; and/ or
- Front-End Engineering Design (FEED) studies.
SCMII further includes as eligible costs (i) gaseous and liquid qualifying materials, well drilling and completion costs directly related and essential to the eligible project, and (ii) for solid state qualifying materials, extraction costs directly related and essential to the eligible projects.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.