First CEIP applications expected this spring

Last year, Finance Minister Michael Wilson decided to phase out the 33.3% earned depletion allowance which was the critical component of the highly successful flow-through financing method. However, intense industry lobbying convinced the government to keep some form of the flow-through program alive. The government’s compromise was CEIP.

The 1989 CEIP budget for mineral exploration is $160 million. “If more is spent, we’ll go back to the house (parliament) for more money,” McLean says. “If people spend it we’ll pay it,” he reassured. Any company which uses flow- through is eligible for a CEIP grant. If the company can show that it has incurred allowable exploration expenditures, than it can apply for a cash grant amounting to 30% of those expenditures.

However, CEIP will not become a government `gravy train’. McLean notes that strict technical and financial audits will be enforced. “We have to realize that we’re in the busines of making a cash contribution to the mining industry. It’s subject to audit.”

To this end, CEIP will have 20 technical field inspectors who will ensure that reported dollars spent were actually spent on exploration activiti es. “We must be assured that what is reported is in fact being done.” Random technical audits will also be performed, McLean adds.

Despite industry concerns that CEIP will result in increased bureaucracy, McLean stresses that CEIP’s objective is to minimize paper work. For example, McLean expects that simple applications for work such as linecutting and some geophysics, could get processed within sixty days. “We want to get the money out as quickly as possible,” he says. However, more complex applications for multi-million exploration programs will take more time to process. “The process for both applications will be the same, but the amount of verification will vary,” McLean explained.

Another industry concern rests with the definition of exploration. CEIP grants are not applicable to mine development. “We know this is a concern to industry. We’ve put together an interpretive bulletin which defines exploration expenses.” This bullitin will be part of a complete application kit which will be available by late February. Copies of the actual act and regulations will be in print by the first week of February.

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