45Capital costs incurred before the production year—other marketable petroleum commodities produced first

45  Capital costs incurred before the production year—other marketable petroleum commodities produced first  (1) For the purposes of step 9 of the residual pricing method, this section applies to an included capital cost for the taxpayer if:  (a) the included capital cost is incurred before the production year; and  (b) marketable petroleum commodities other than project sales gas are produced in the operation; and  (c) the MPC production year for the operation is before the production year. Note 1: The start date for the included capital cost may have been affected: (a) by subsection 43(2), if that subsection applied to the cost; or (b) by subsection 41(2), if subsection 43(2) did not apply to the cost and an election was made under section 54.  The amount of the cost may also have been affected by subsection 43(2), if that subsection applied to the cost. Note 2: The steps of the method work sequentially. So, (assuming this section applies to the cost) the next applicable step or provision that refers to the cost will be referring to: (a) the cost as augmented or reduced under subsection (2), (3) or (4); and (b) a start date for the cost of 1 January in the production year (see subsection (5)).  (2) If the included capital cost is incurred for a unit of property that will be used solely for:  (a) the recovery of project natural gas; or  (b) the production of project sales gas; or  (c) the processing of project sales gas into project liquid; or  (d) the combustion of project sales gas to produce project electricity; or  (e) the transportation or storage of project product; the included capital cost is augmented for the number of calendar years between the start date for the included capital cost and the production date.  (3) If subsection (2) does not apply, and the included capital cost is incurred before the MPC production year, the included capital cost is:  (a) augmented for the number of calendar years between the start date for the included capital cost and the 31 December of the MPC production year; and  (b) reduced for the number of calendar years between the 31 December of the MPC production year and the production date.  (4) If subsection (2) does not apply, and the included capital cost is incurred in or after the MPC production year and before the production year, the included capital cost is reduced for the number of calendar years between the start date for the included capital cost and the production date.  (5) An included capital cost as reduced, or as augmented and reduced, under this section is taken to be incurred in the production year.