Financial Statements and Notes - Canadian Oil Sands

e) Office lease
Canadian Oil Sands entered into a 10-year office lease agreement, beginning December 1, 2002, with
a right to terminate the lease after five years. The lease and Canadian Oil Sands’ share of operating
costs are paid on a monthly basis. Total annual lease costs, including operating costs, are anticipated
to average approximately $370,000 per year over the next four years.
f) Tax assessment
In December 2002, Canada Customs and Revenue Agency (CCRA) reassessed the 1997 tax year of
COSII. The nature of the reassessment pertained to the Syncrude Remission Order (SRO) and the
deductibility of certain royalties’ credits. Since December 2002, CCRA has audited the years up to
2000 for both COSII and AOSII. CCRA is still reviewing the SRO reassessments of both companies,
but it is expected that there will be no cash income taxes owing on the reassessments. The
reassessments will result in changes to various tax pool balances carried forward for deduction in
subsequent years, however, the timing of when the assessments will be resolved and the impact on
the tax pool balances are not yet determinable.
g) Pipeline commitments
Canadian Oil Sands has a long-term agreement with Athabasca Oil Sands Pipeline Limited (AOSPL)
to transport production from the Syncrude plant gate to Edmonton, Alberta, Canada. The agreement
provides for reimbursement on a cost of service basis, including operating expenses, cash taxes paid,
and a return on the depreciated rate base. The agreement commits Canadian Oil Sands to pay its
proportionate share of the cost of service whether or not it ships any production on the pipeline.
The cost of service in 2003, based on Canadian Oil Sands’ varying working interests during the year,
was $15.3 million (2002 – $6.4 million, based on a 21.74 per cent Working Interest). The projected
cost of service for 2004 is $21 million, based on Canadian Oil Sands’ 35.49 per cent Working Interest
at December 31, 2003 and is expected to remain around this level through 2008.
h) General
Various suits and claims arising in the ordinary course of business are pending against Syncrude
Canada Ltd., the agent for the participants. While the ultimate effect of such actions cannot be
ascertained at this time, in the opinion of the management, the liabilities which could reasonably
be expected to arise from such actions would not be significant in relation to the operations of Syncrude.
Syncrude Canada Ltd. as well as Canadian Oil Sands and the other Syncrude Joint Venture owners
also have claims pending against various parties, the outcomes of which are not yet determinable.
Canadian Oil Sands Trust Annual Report 2003