Canada Oil and Gas Land Regulations

Contents

1 #

These Regulations may be cited as the Canada Oil and Gas Land Regulations.

2 #

(1)In these Regulations,

allowable expenditure means the expenditure referred to in section 43; (dépenses admissibles)

arbitrator means the arbitrator referred to in section 97; (arbitre)

bond means bond or other securities of or guaranteed by the Government of Canada; (titre or garantie)

Canada lands means

(a)territorial lands as defined in the Territorial Lands Act, and

(b)public lands as defined in the Public Lands Grants Act for the sale, lease or other disposition of which there is no provision in the law,

and includes land under water; (terres du Canada)

Chief means the administrator of the Canada Oil and Gas Lands Administration of the Department of Energy, Mines and Resources and of the Department of Indian Affairs and Northern Development; (chef)

commercial quantity means the output of oil or gas from a well that, in the opinion of the Chief, would warrant the drilling of another well in the same area, and in determining that opinion the Chief may consider the costs of drilling and producing and the volume of production; (quantité commerciale)

Crown reserve lands means Canada lands in respect of which no interest granted or issued by or pursuant to these Regulations is in force and includes the submerged lands described in Schedule IV; (terres de réserve de la Couronne)

Department means,

(a)in respect of Canada lands located in that part of Canada described in Schedule VI, the Department of Indian Affairs and Northern Development, and

(b)in respect of Canada lands other than those lands located in that part of Canada described in Schedule VI, the Department of Energy, Mines and Resources; (ministère)

development structure means any structure, facility or undertaking erected for the purpose of drilling an exploratory well or a development well or erected for the production, gathering, storing, processing, transmission or other handling of oil and gas; (plate-forme d’exploitation)

development well means a well

(a)drilled pursuant to an order made under section 93, or

(b)the location of which is, in the opinion of the Chief, so related to the location of producible wells that there is every probability that it will produce from the same pool as the producible wells; (puits d’extension)

exploration agreement means an exploration agreement entered into by the Minister or a person designated by the Minister pursuant to section 30; (contrat d’exploration)

exploratory well means any well that is not a development well; (puits de sondage)

exploratory work includes test drilling, aerial mapping, surveying, bulldozing, geological, geophysical and geochemical examinations and other investigations relating to the subsurface geology and all work, including the construction and maintenance of those facilities necessarily connected therewith and the building and maintenance of airstrips and roads required for the supply of or access to exploratory operations; (travaux de sondage)

extraction plant means any plant or equipment, other than a well, used for the extraction of oil or other substances produced in association with oil from surface or subsurface deposits of oil sand, bitumen, bituminous sand, oil shale or other deposits from which oil may be extracted; (usine d’extraction)

gas means natural gas and includes all other minerals or constituents produced in association therewith, other than oil, whether in solid, liquid or gaseous form; (gaz)

holder means, in relation to any interest granted or issued under these Regulations, the person or persons registered as holder or holders of the interest; (titulaire)

interest includes an exploration agreement; (intérêt)

legal survey means a survey referred to in section 10; (arpentage officiel)

lessee means a person holding an oil and gas lease; (concessionnaire or titulaire de concession ordétenteur de concession)

licence means an exploratory licence issued pursuant to section 24; (licence)

licensee means a person holding a licence; (titulaire de licence or détenteur de licence)

Minister means,

(a)in respect of Canada lands located in that part of Canada described in Schedule VI, the Minister of Indian Affairs and Northern Development, and

(b)in respect of Canada lands other than those lands located in that part of Canada described in Schedule VI, the Minister of Energy, Mines and Resources; (ministre)

monument means a post, stake, peg, mound, pit, trench or other device used to mark a boundary or the location of a well as set out in a plan of survey approved pursuant to section 11; (borne)

offshore means with respect to a drill site, a location within a water-covered area of Canada lands; (au large des côtes)

oil means

(a)crude petroleum and other hydrocarbons regardless of gravity that are produced at a well head in liquid form by ordinary production methods,

(b)any hydrocarbons except coal and gas, that may be extracted or recovered from surface or subsurface deposits of oil sand, bitumen, bituminous sand, oil shale or other deposits, and

(c)any other hydrocarbons except coal and gas; (pétrole)

oil and gas lease means an oil and gas lease granted pursuant to section 54 or 57; (concession de pétrole et de gaz)

Oil Conservation Engineer means an officer of the Department or other person designated by the Minister; (ingénieur en conservation du pétrole)

permit means an exploratory permit issued pursuant to section 30 or 32 or renewed pursuant to section 40, as those sections read before August 3, 1977; (permis)

permittee means a person holding a permit; (titulaire de permis or détenteur de permis)

Petro-Canada Limited means the corporation established by section 4 of the Petro-Canada Limited Act; (Petro-Canada Limitée)

significant discovery means a discovery of oil or gas that justifies the drilling of any well or wells in addition to the well or wells in which the discovery was made; (découverte importante)

special renewal permit means a special renewal permit granted pursuant to section 116 or 117; (permis avec clause spéciale de renouvellement)

Surveyor General means the person designated as Surveyor General under the Canada Lands Surveys Act; (arpenteur général)

target area [Repealed, SOR/80-590, s. 1]

well means any opening in the ground that is not a seismic shot hole and that is made, or is in the process of being made, by drilling, boring or any other method,

(a)through which oil or gas could be obtained,

(b)for the purpose of searching for or obtaining oil or gas,

(c)for the purpose of obtaining water to inject into an underground formation,

(d)for the purpose of injecting gas, air, water or other substance into an underground formation, or

(e)for any purpose through sedimentary rocks to a depth of at least 500 feet. (puits)

(2)For the purpose of these Regulations, a well is deemed

(a)to be abandoned on the day that all cement plugs, as required by the Canada Oil and Gas Drilling and Production Regulations, are set to the satisfaction of the Oil Conservation Engineer;

(b)to be completed on the day that the well is first placed on steady or intermittent production of oil or gas or both, and appears, in the opinion of the Oil Conservation Engineer, capable of maintaining steady or intermittent production; and

(c)to be suspended on the day that drilling or production operations are suspended in a manner approved by the Oil Conservation Engineer but the well is not abandoned or completed.

(3)Commercial exploitation shall be deemed to begin, with respect to a well or extraction plant, on the day on which the Minister, having considered the economic conditions, decides that a market exists commensurate to the productive capacity of the well or extraction plant.

Application

3 #

These Regulations apply only to Canada lands that are under the control, management and administration of the Minister.

Land Division

4 #

For the purposes of these Regulations, Canada lands shall be divided into grid areas.

5 #

(1)A grid area, the whole or greater part of which lies south of latitude 70°, shall be bounded on the east and west sides by successive meridians of longitude of the series 50°00′00″, 50°15′00″, 50°30′00″, which series may be extended as required, and on the north and south sides by straight lines joining the points of intersection of the east and west boundaries with successive parallels of latitude of the series 40°00′00″, 40°10′00″, 40°20′00″, which series may be extended as required.

(2)A grid area, the whole of which lies north of latitude 70°, shall be bounded on the east and west sides by successive meridians of longitude of the series 50°00′00″, 50°30′00″, 51°00′00″, which series may be extended as required and on the north and south sides by straight lines joining the points of intersection of the east and west boundaries with successive parallels of latitude of the series 70°00′00″, 70°10′00″, 70°20′00″, which series may be extended as required.

(3)Every grid area shall be referred to by the latitude and longitude of the northeast corner of that grid area.

6 #

(1)Between latitudes 40° and 60° and between latitudes 70° and 75° the boundary

(a)between the north and south halves of a grid area is the north boundary of sections 5, 15, 25, 35, 45, 55, 65, 75, 85 and 95; and

(b)between the east and west halves of a grid area is the west boundary of sections 41 to 50.

(2)Between latitudes 60° and 68° and between latitudes 75° and 78° the boundary

(a)between the north and south halves of a grid area is the north boundary of sections 5, 15, 25, 35, 45, 55, 65 and 75; and

(b)between the east and west halves of a grid area is the west boundary of sections 31 to 40.

(3)Between latitudes 68° and 70° and between latitudes 78° and 85° the boundary

(a)between the north and south halves of a grid area is the north boundary of sections 5, 15, 25, 35, 45 and 55; and

(b)between the east and west halves of a grid area is the west boundary of sections 21 to 30.

7 #

(1)Every grid area shall be divided into sections.

(2)A section shall be bounded on the east and west sides by meridians spaced,

(a)in the case of a section within a grid area, the whole or greater part of which lies between latitudes 40° and 60° or between latitudes 70° and 75°, at intervals of one-tenth of the interval between the east and west boundaries of the grid area;

(b)in the case of a section within a grid area, the whole or greater part of which lies between latitudes 60° and 68° or between latitudes 75° and 78°, at intervals of one-eighth of the interval between the east and west boundaries of the grid area; and

(c)in the case of a section within a grid area, the whole or greater part of which lies between latitudes 68° and 70° or between latitudes 78° and 85°, at intervals of one-sixth of the interval between the east and west boundaries of the grid area.

(3)A section shall be bounded on the north and south sides by straight lines drawn parallel to the north and south boundaries of the grid area and spaced at intervals of one-tenth of the interval between the north and south boundaries of the grid area.

(4)A section shall be identified by the number to which it corresponds,

(a)in the case of a grid area described in paragraph (2)(a), as follows:100 | 90 | 80 | 70 | 60 | 50 | 40 | 30 | 20 | 10 | | | | | 49 | | | | | | | | | 48 | | | | | | | | | 47 | | | | | | | | | 46 | | | | 95 | 85 | 75 | 65 | 55 | 45 | 35 | 25 | 15 | 5 | | | | | 44 | | | | | | | | | 43 | | | | | | | | | 42 | | | | 91 | 81 | 71 | 61 | 51 | 41 | 31 | 21 | 11 | 1

(b)in the case of a grid area described in paragraph (2)(b), as follows:80 | 70 | 60 | 50 | 40 | 30 | 20 | 10 | | | | 39 | | | | | | | 38 | | | | | | | 37 | | | | | | | 36 | | | 75 | 65 | 55 | 45 | 35 | 25 | 15 | 5 | | | | 34 | | | | | | | 33 | | | | | | | 32 | | | 71 | 61 | 51 | 41 | 31 | 21 | 11 | 1

(c)in the case of a grid area described in paragraph (2)(c), as follows:60 | 50 | 40 | 30 | 20 | 10 | | | 29 | | | | | 28 | | | | | 27 | | | | | 26 | | 55 | 45 | 35 | 25 | 15 | 5 | | | 24 | | | | | 23 | | | | | 22 | | 51 | 41 | 31 | 21 | 11 | 1

8 #

(1)Every section shall be divided into units.

(2)Every unit shall be bounded on the east and west sides by meridians spaced at intervals of one-quarter of the interval between the east and west boundaries of the section.

(3)Every unit shall be bounded on the north and south sides by straight lines drawn parallel to the north and south boundaries of the section and spaced at intervals of one-quarter of the interval between the north and south boundaries of the section.

(4)Every unit shall be identified by the letter to which it corresponds in the following diagram:M | N | O | PL | K | J | IE | F | G | HD | C | B | A

9 #

All latitudes and longitudes used in these Regulations shall be referred to the North American Datum of 1927.^note

Surveys

10 #

(1)Subject to these Regulations, the provisions of The Canada Lands Surveys Act apply to any legal survey made pursuant to these Regulations.

(2)No person shall make a legal survey of Canada lands other than a Canada Lands Surveyor.

(3)A Canada Lands Surveyor may enter upon a permit area, lease area or development structure for the purpose of making a legal survey or other positional surveys if he gives prior written notice to the Chief.

(4)The lessee, permittee, holder or operator Of a development structure shall give reasonable assistance to a Canada Lands Surveyor entering under subsection (3).

(5)Any legal survey shall be authorized and paid for by the permittee, holder or lessee as the case may be.

11 #

(1)Every plan of legal survey shall be signed by the surveyor and submitted to the Surveyor General together with the surveyor’s field notes annexed to an affidavit of the surveyor verifying that he has executed the legal survey faithfully, correctly and in accordance with these Regulations and with any instructions issued to him by the Surveyor General.

(2)Every plan of legal survey shall, where relevant, show

(a)the position, direction and length of the boundaries of grid areas and divisions thereof;

(b)the position of existing wells;

(c)the nature and position of any monument used to mark, or placed as a reference to, any boundary or position referred to in paragraph (a) or (b); and

(d)any road allowance, surveyed road, railway, pipeline, high voltage power lines or other right of way, dwellings, industrial plants, permanent buildings, air fields and existing or proposed fight ways.

12 #

(1)Where any uncertainty or dispute arises respecting the position of any well or boundary, the Chief may require a permittee, holder or lessee to file a plan of legal survey, approved by the Surveyor General, showing the well or boundary in respect of which the uncertainty or dispute has arisen.

(2)A plan of legal survey shall show the position of such wells, boundaries and references as the Chief may specify.

13 #

The Surveyor General may, at the request of a permittee, lessee or holder, approve a plan of legal survey of the whole or part of a grid area, permit area, lease area, section, unit or the position of a well.^note

Monuments

14 #

The ground position of a grid area, permit area, lease area, section, unit or well may, in the discretion of the Surveyor General, be surveyed by reference to

(a)a monument shown on a plan of legal survey that has been approved by the Surveyor General;

(b)a geodetic survey triangulation station;

(c)a geodetic survey Shoran station;

(d)a marker placed for the purpose of marking a territorial boundary;

(e)a monument as defined in the Dominion Lands Surveys Act or the Canada Lands Surveys Act;

(f)a physical feature, the geographical position of which has been determined by means of a Shoran-controlled photogrammetric process;

(g)a marker, the geographic position of which has been determined by astronomic means; or

(h)any other marker approved by the Surveyor General.

^note

15 #

(1)Where a monument shown on a plan of legal survey is damaged, destroyed, moved or altered as a result of the operations of a licensee, permittee, holder or lessee, he shall report the matter to the Chief as soon as possible and shall

(a)pay to the Receiver General of Canada the cost of restoration or re-establishment of the monument; or

(b)with the consent of the Surveyor General, cause the monument to be restored or re-established at his own expense.

(2)Every permittee, lessee or holder shall maintain and keep in good repair all monuments that are located on or mark the boundaries of his permit area or lease area as the case may be.

(3)The restoration or re-establishment of a monument under subsection (1) shall be done by a Canada Lands Surveyor under the instruction of the Surveyor General.

(4)A permittee, lessee or holder shall give the Surveyor General and the Chief at least three months notice of any planned movement of an offshore development structure to which legal survey monuments have been attached and such movement shall not constitute movement of the monuments under subsection (1).

(5)A licensee, permittee, lessee or holder shall report the destruction, damage to, movement or alteration of any monument to the Chief forthwith after he has knowledge of it.

16 #

Where the position of any boundary of a grid area, permit area, lease area, section or unit or the position of a well has been established by a legal survey approved by the Surveyor General pursuant to these Regulations, the position of that boundary or well so established shall be deemed to be the true position thereof, notwithstanding that the boundary or well is found not to be located in the position required by these Regulations and shall determine the position of all other sections or units that lie within the grid area.^note

17 #

(1)Where, owing lo a discordance of reference points or imprecisions in measuring, a subsequently surveyed grid area, section or unit appears to overlap a grid area, section or unit the position of which is deemed to be true by section 16, the subsequently surveyed grid area, section or unit shall be laid out and surveyed as though no overlap existed except that it shall be reduced by that portion that lies within the overlap.

(2)Subject to subsection (1), a grid area that has been reduced pursuant to subsection (1) shall, for the purpose of these Regulations, be considered to be a whole grid area.

(3)Where, owing to a discordance of reference points or imprecisions in measuring, a parcel of Canada lands appears not to lie within a grid area, that parcel may be disposed of pursuant to subsection 30(7) or section 57.

Exploration Wells

18 #

Every licensee, permittee, holder or lessee shall, before drilling an exploratory well offshore, send to the Oil Conservation Engineer three prints of a tentative plan showing the locations of the proposed drilling and a description of the system and method of positioning the well.^note

19 #

(1)Every permittee, holder or lessee shall, before the suspension or abandonment of any exploratory well, send to the Oil Conservation Engineer a plan that clearly shows the surveyed position of that well relative to

(a)a reference point referred to in section 14; or

(b)a topographical feature that is identifiable on

(i)a map that has been published by or on behalf of the Government Of Canada within three years immediately preceding the date on which the plan is submitted, or

(ii)a vertical aerial photograph, of mapping standard, obtained from the National Air Photo Library or from such other source as may be acceptable to the Surveyor General.

(2)Where an aerial photograph is used pursuant to paragraph (1)(b), that photograph shall be sent to the Oil Conservation Engineer together with the plan.

(3)A permittee, lessee or holder may, in lieu of the plan referred to in subsection (1), send to the Oil Conservation Engineer the aerial photograph referred to in subparagraph (1)(b)(ii) on which the surface position of the exploratory well has been clearly marked in a manner acceptable to the Surveyor General, after the position thereof has been determined by a field comparison between the site and the photograph.

(4)Where a suspended or abandoned exploratory well is offshore, the electrical centres and other shore stations from which the position of the well was determined shall be permanently marked and the plan referred to in subsection (1) shall be accompanied by a report on the survey system describing all assumed parameters of the survey system and the shore station markings.

20 #

Every licensee permittee, lessee or holder shall, as soon as possible after an exploratory well is completed, send to the Oil Conservation Engineer three prints of a legal survey, approved by the Surveyor General showing the surface position of the well and the boundaries of the unit and section in which the well is located.^note

Development Wells

21 #

(1)Every permittee, lessee or holder shall, before drilling a development well, send to the Oil Conservation Engineer three prints of a tentative plan showing the approximate surface position of the proposed well and the proposed location of the well at total depth.

(2)In the case of a development well on land, the permittee, lessee or holder shall

(a)within sixty days of commencing drilling, submit to the Surveyor General for approval a plan of legal survey showing the surface position of the well and the boundaries of the unit and section in which the well is located; and

(b)on request of the Chief, submit three prints of a plan showing the locus of the drillhole with respect to the unit and section boundaries.

(3)In the case of a fixed offshore development structure, the permittee, lessee or holder shall

(a)as soon as possible after the erection of the development structure, submit to the Surveyor General for approval a plan of legal survey showing the unit and section in which the structure is situated and the positions of at least two monuments of the legal survey permanently fixed to the structure; and

(b)on request of the Chief, submit three prints of a plan showing the locus of the drillhole with respect to the unit and section boundaries and the position of the monuments of the legal survey.

22 #

(1)A tentative plan shall be approved by the Chief prior to the construction, alteration or extension of any work or works in the offshore that will, on completion thereof form all or part of an undertaking for the production, gathering, storing, processing transmission or other handling of oil and gas and such plans shall show the proposed work or works and the system of survey to be used in positioning the work or works.

(2)A final plan satisfactory to the Chief shall, on his request, be submitted to him within six months from the completion of any part of an undertaking described in subsection (1).

Prohibition

23 #

(1)No person shall, for the purpose of searching for oil or gas, carry out exploratory work on Canada lands except as authorized by these Regulations.

(2)No person shall produce, mine, quarry or extract from Canada lands any oil, gas or other minerals or substances that are produced, mined, quarried or extracted in association with any oil or gas except as authorized by these Regulations.

Part I · Licences, Exploration Agreements and Permits

Exploratory Licences

24 #

(1)Any individual who is 21 years of age or over may submit an application for a licence.

(2)Any corporation that is registered with the Registrar of companies pursuant to the Companies Ordinance of the Northwest Territories may submit an application for a licence with respect to Canada lands within the Northwest Territories.

(3)Any corporation that is entitled to carry on business in any province may submit an application for a licence with respect to Canada lands outside the Northwest Territories.

(4)Every person who submits an application for a licence shall forward his application to the Chief or Oil Conservation Engineer, together with the fee set out therefor in Schedule I.

25 #

(1)Upon receipt of an application referred to in section 24, the Chief or the Oil Conservation Engineer may issue a licence to the applicant.

(2)Every licence issued under subsection (1) expires on March 31st next following the date on which it was issued.

(3)No person shall assign or transfer a licence and any purported assignment or transfer of a licence is void.

26 #

(1)Subject to subsection (2), a licensee may, for the purpose of searching for oil or gas enter upon and use the surface of any Canada lands in order to

(a)make geological or geophysical examinations;

(b)carry out aerial mapping; or

(c)investigate the subsurface.

(2)No licensee shall enter upon Canada lands that have been disposed of in any way by Her Majesty, except Canada lands that are included in a permit or oil and gas lease granted under these Regulations, unless the licensee has obtained

(a)the consent of the occupier thereof; or

(b)an order for entry from the arbitrator.

27 #

No licensee shall drill on any Canada lands a hole deeper than 1,000 feet unless

(a)in the case of Canada lands included in a permit or lease, the licensee has obtained the written consent of the permittee or lessee; or

(b)in the case of Canada lands not included in a permit or lease, the licensee has obtained the written consent of the Chief.

28 #

Every licensee who carries out work on Canada lands not held by him under permit or lease shall, upon completion of the work, furnish the Chief with three copies of

(a)a map on a scale of not less than 4 miles to 1 inch showing the area covered by the examination and indicating the location of all roads and airstrips:

(b)information obtained as to the presence of water, coal, gravel, sand or other potentially useful minerals; and

(c)all reports, photographs, maps and data referred to in section 53.

29 #

A licensee shall upon request by the Oil Conservation Engineer report the location and progress of any field party employed by the licensee.

Exploration Agreements

30 #

(1)The Minister may, subject to this section, enter into an exploration agreement with any person relating to Crown reserve lands.

(2)An exploration agreement may provide for any matter relating to exploration for or development of oil or gas and, in particular, but without restricting the generality of the foregoing, may provide terms and conditions for

(a)payment and disposition of deposits,

(b)work programs and drilling requirements,

(c)reporting and disclosure of information,

(d)grouping of land areas described in exploration agreements, and

(e)surrender, cancellation and transfer of rights under the agreement,

but so long as this section is in force and unless otherwise specified in this section or section 31 or 32 or in the exploration agreement, the provisions of these Regulations relevant to a permit shall apply to an exploration agreement.

(3)Subject to subsection (7), before entering into any exploration agreement, the Minister shall publish a notice in the Canada Gazette and in any other publication he considers appropriate calling for the submission of proposals in respect of the interests to be conferred by the agreement.

(4)A notice calling for the submission of proposals under subsection (3) shall be published at least 60 days before the closing date fixed in the notice for the submission of proposals and shall set out any requirement or matter applicable to persons submitting proposals, including

(a)the amount of any deposit required and the conditions for its return;

(b)any work requirements, the term of the agreement and any rental payable;

(c)the royalty payable in respect of any oil or gas produced under a lease granted under section 54 if different from that payable under section 85;

(d)any requirements for

(i)Canadian equity participation,

(ii)participation by the Government of Canada or any department, branch or agency thereof, or

(iii)employment of Canadian goods and services; and

(e)such other terms and conditions as the Minister may determine.

(5)In selecting any proposal submitted pursuant to this section for the purpose of negotiating an exploration agreement, the Minister shall take into account any factors he considers appropriate in the public interest but is not bound to select any particular proposal submitted.

(6)Where no proposal is submitted before the closing date specified in a notice calling for the submission of proposals, the Minister may, within 90 days after that closing date, enter into an exploration agreement with any person on such terms and conditions as the Minister may determine.

(7)An exploration agreement may be entered into without a notice calling for the submission of proposals where

(a)the Minister does not consider it to be in the public interest to give such a notice owing to the limited area or the location of land available or owing to the need to act expeditiously; or

(b)the agreement is to be with Petro-Canada in respect of lands selected by Petro-Canada Limited for exploration and development pursuant to section 33.

31 #

(1)An exploration agreement shall be for a term not exceeding 10 years from the date the agreement takes effect and may be renewed for a term or terms not exceeding 10 years in the aggregate.

(2)An exploration agreement and any renewal thereof shall be subject to such terms and conditions as are determined by the Minister.

(3)Notwithstanding subsection (1), where the holder of an exploration agreement makes a significant discovery during the term of the agreement and a declaration thereof made under section 124 is in force on the expiration of the term, the exploration agreement continues in force, in respect of any grid area that is specified in the declaration, for so long as the declaration is in force, and the terms and conditions and royalty provisions that applied during the term of the agreement shall continue to apply during the continuation thereof.

32 #

(1)Subject to these Regulations, a person acting under an exploration agreement may, for the purpose of searching for or developing oil or gas, enter on and use any land described in the agreement in order to

(a)carry out or cause to be carried out exploratory work and the drilling of wells without limitation as to depth, including delineation and development wells;

(b)mine, quarry, extract and produce from the land such quantities of oil or gas or other minerals and substances in association therewith as, in the opinion of the Minister or person designated by the Minister, are necessary for test purposes or for conducting the operations by any person acting under the exploration agreement; and

(c)carry out any other work or activity agreed to under the exploration agreement.

(2)Subject to these Regulations, every exploration agreement confers on the holder thereof the exclusive option to obtain an oil and gas lease for the Canada lands described thereof.

Petro-Canada Limited

33 #

(1)Subject to subsections (2) to (8), Petro-Canada Limited has the right, in priority to any other person,

(a)during a period of one year commencing on August 3, 1977, to select lands from among the lands that are Crown reserve lands on such date in the manner and quantities approved by the Minister or a person designated by the Minister; and

(b)during a period of seven years commencing on August 3, 1977, to select, in the manner approved by the Minister or a person designated by the Minister, within one year from the date the Minister or a person designated by the Minister gives notice that the lands are available for selection, up to a maximum of 25 per cent of such Crown reserve lands as are specified in the notice.

(2)The Minister or a person designated by the Minister shall give prompt notice to Petro-Canada Limited of lands that are or have become Crown reserve lands whereupon Petro-Canada Limited may exercise the rights granted by subsection (1).

(3)In exercising its right to select lands pursuant to subsection (1), Petro-Canada Limited shall not select more than 25 per cent of the land in respect of which it has the right unless the Minister authorizes the selection of a greater percentage in any case where he considers it appropriate due to the limited area of land available.

(4)Any land selected by Petro-Canada Limited pursuant to subsection (1) shall be held by it under an exploration agreement subject to such terms and conditions consistent with these Regulations as are agreed on between it and the Minister or a person designated by the Minister.

(5)Where the Minister intends to give notice pursuant to section 30 calling for the submission of proposals in respect of any Crown reserve lands for which Petro-Canada Limited has the rights granted by subsection (1), he shall send notice in writing of his intention to Petro-Canada Limited specifying the lands in respect of which he intends to call for the submission of proposals and Petro-Canada Limited shall have 60 days from the day such notice is sent to make its selection of not more than 25 per cent of such lands, in the manner approved by the Minister or a person designated by the Minister.

(6)The Minister may, after the expiration of the 60-day period referred to in subsection (5), give public notice pursuant to section 30 calling for the submission of proposals in respect of any lands not selected by Petro-Canada Limited pursuant to subsection (1) and Petro-Canada Limited and all other persons are equally entitled to submit such proposals.

(7)Any lands not disposed of pursuant to a proposal submitted under subsection (6) or an exploration agreement entered into under subsection 30(6) shall remain subject to the rights granted to Petro-Canada Limited but nothing done under this section extends or suspends the period available to Petro-Canada Limited to exercise its rights under subsection (5).

(8)Petro-Canada Limited shall not, without the prior approval in writing of the Minister, which may be given on application by any interested party, transfer, assign or in any other manner dispose of any interest or right in lands it has selected pursuant to subsection (1), or any interest or right in an exploration agreement affecting such lands, otherwise than by way of charge or mortgage.

Permittees

34 #

(1)A permittee must be the holder of a licence before he may carry out exploratory work on Canada lands.

(2)Where a permittee is authorized to carry out exploratory work under these Regulations, that work may be performed by any person employed or hired by the permittee.

(3)A permittee may, for the purpose of carrying out exploratory work for oil and gas,

(a)enter upon the Canada lands described in his permit; and

(b)use such part of the surface of the Canada lands described in his permit as may be necessary.

(4)A permittee may produce, mine, quarry or extract from the Canada lands described in his permit such quantity of oil, gas and other minerals and substances that are produced, mined, quarried or extracted in association with any oil or gas as, in the opinion of the Oil Conservation Engineer, is necessary for test purposes or for conducting operations of the permittee on that permit area.

35 #

(1)Subject to these Regulations, a permittee has the exclusive option to obtain an oil and gas lease for the Canada lands described in his exploratory permit.

(2)Every permit shall state the term of the oil and gas lease for which an option is given and the royalty payable under the lease.

Term of Permit

36 #

(1)Except as provided in subsection (4), where the whole or greater part of a permit area is located south of latitude 65°, the permit is valid for three years from the date of issue.

(2)Except as provided in subsection (4), where the whole or greater part of a permit area is located between latitude 65° and latitude 68°, the permit is valid for four years from the date of issue.

(3)Where the whole or greater part of a permit area is located between latitude 68° and latitude 70°, the permit is valid for six years from date of issue.

(4)Where a permit area is located

(a)south of latitude 70° and within Canada lands other than those lands located in that part of Canada described in Schedule VI, or

(b)south of latitude 70° and east of longitude 90° and within Canada lands located in that part Of Canada described in Schedule VI,

and the whole or greater part thereof is, in the opinion of the Chief, covered by seacoast waters, the permit for that permit area is valid for six years from the date of issue.

(5)Where a permit area is located

(a)south of latitude 70° and west of longitude 90°, and

(b)within Canada lands located in that part of Canada described in Schedule VI,

and the whole or greater part thereof is, in the opinion of the Chief, covered by seacoast waters, the permit for that permit area is valid for six years from the date of issue.

(6)Where a permit area is located north of latitude 70°, the permit is valid

(a)in the case of a permit issued before 1968, for eight years from the date of issue, and

(b)in the case of a permit issued on or after January 1, 1968, for six years from the date of issue.

(7)In the case of a permit that was issued prior to July 1, 1967, in respect of a permit area, the whole or greater part of which is located north of latitude 70°,

(a)the period of the original term of the permit is extended by 12 months, as set out in Schedule V;

(b)each period of the permit that follows the extended period shall be computed as if it commences 12 months after the date on which it would otherwise commence;

(c)all references in these Regulations to the period that is extended shall be deemed to be references to that period as so extended; and

(d)each anniversary, referred to in section 53, of a permit a period of which is extended shall be computed as if that anniversary occurs 12 months after the date on which it actually occurs.

37 #

A permittee may at any time surrender the grid area or one-half of the grid area for which he holds a permit but, except as provided in section 41, no deposit shall be refunded to the permittee.

Permit Renewal

38 #

(1)An application for renewal of a permit shall be made to the Chief before the expiry date of the permit and shall be accompanied by the deposit required by section 40.

(2)Upon receipt of an application for renewal of a permit made pursuant to subsection (1) and of the deposit referred to in that subsection, the Chief shall renew the permit for a term of one year.

(3)Where a permittee does not make application for renewal of a permit in accordance with subsection (1), the Chief shall give written notice to the permittee informing him that if within 90 days of the date of the notice the permittee makes an application for renewal of his permit, accompanied by the deposit required by section 40, his permit may be renewed.

(4)Upon receipt of an application for renewal of a permit accompanied by the deposit required by section 40 in accordance with a notice given pursuant to subsection (3), the Chief shall renew the permit for a term of one year from the expiry date of the permit and the permit shall, for the purposes of these Regulations, be deemed not to have expired.

(5)A permit shall not be renewed pursuant to subsection (2) or (4) more than six times.

39 #

(1)Where

(a)a permit has been renewed six times,

(b)a well is being drilled in a manner satisfactory to the Chief, and

(c)in the opinion of the Chief, the well will not be completed or abandoned before the expiration of the permit,

the Chief may, upon application, extend the term of the permit for one or more periods of 90 days.

(2)The application for extension shall be made to the Chief and shall be accompanied by the deposit required by section 40.

Deposits

40 #

(1)Every permittee shall deposit with the Chief, before the commencement of a period set out in Column I of Schedule II, money, bonds or an approved note of a value equal to the amount set out opposite that period in Column II of that Schedule.

(2)Notwithstanding subsection (1) and subsection 108(1), where a permit for an area located north of latitude 70° was issued earlier than January 1, 1965, the permittee may make the deposit required by subsection (1) for the second 36-month period of the original term or for the 24-month period following the second 36-month period of the original term of a permit described in subsection 36(4) on a date later than the date referred to in subsection (1), but in such case he shall make the deposit before January 1, 1968.

(3)In this section, approved note means a promissory note payable on demand that a chartered bank has agreed, in terms acceptable to the Chief, to honour on presentment for payment.

41 #

(1)The portion of a deposit equal to the allowable expenditure made during the period, shall be returned to the permittee.

(2)Subject to subsection (3), the portion of the deposit not returned to the permittee is forfeited to Her Majesty.

(3)Where, in the opinion of the Chief, a permittee has not been able to make allowable expenditure equal to the deposit required for any period, and the permittee has given notice to the Chief, and during the renewal period next following the permittee makes allowable expenditure equal to the aggregate of

(a)the deposit required for the renewal period next following, and

(b)the portion of the deposit for the period, heretofore not returned to the permittee,

the portion of the deposit heretofore not returned shall be returned to the permittee.

(4)The notice required under subsection (3) shall be given before the end of the period and shall state the reasons that the permittee has not been able to make allowable expenditures equal to the deposit required for that period and that the permittee intends to make allowable expenditure, during the renewal period next following, equal to the aggregate of

(a)the deposit required for the renewal period; and

(b)the portion of the deposit for the period heretofore not returned to the permittee.

42 #

Where during a period a permittee expends an amount in excess of the aggregate of

(a)the deposit set out in Schedule II for that period, and

(b)any amount returned to the permittee pursuant to subsection 41(3) for allowable expenditures made during that period,

the deposit required for any succeeding period shall be reduced by the amount of that excess.

Expenditures

43 #

The Chief may at any time determine the amount of allowable expenditure made by the permittee on evidence submitted by the permittee and on such other evidence as the Chief may require.

44 #

(1)Every permittee shall, within 90 days after the end of a period, submit to the Chief a statement in triplicate of the expenditures made for exploratory work done on the permit area or group of permit areas during that period.

(2)A permittee may submit interim statements of expenditure from time to time during the term of the permit.

(3)Every statement of expenditure shall be verified by a statutory declaration and shall include

(a)the items of expenditure;

(b)the number of the permit area on which the work was done;

(c)the number of the permit area upon which the expenditure is to be applied;

(d)the specific purpose for which each item of expenditure was made; and

(e)three copies of all reports, photographs, maps and data referred to in section 53 concerning work for which expenditure is claimed.

(4)Where the information referred to in this section has been sent by the permittee to the Chief pursuant to section 28, the permittee is not required to send that same information to the Chief pursuant to this section.

45 #

Where expenditures are made for exploratory work done on or off a permit area for the purpose of obtaining information of a general nature that may be of value to the permittee in connection with work being done by the permittee, the Chief may consider the expenditures to have been made in such amounts as the permittee may request on any permit area or groups of permit areas for which, in the opinion of the Chief, the work done is beneficial.

46 #

Where the Chief has designated a well as an exploratory deep test well, the amount expended on drilling that well shall be deemed to be an amount equal to twice the amount actually expended on drilling that well.

47 #

(1)An amount expended for road building or geophysical examination or as a contribution to a well drilled outside a permit area may not be considered to be an allowable expenditure unless prior approval for the work was obtained from the Chief.

(2)An amount expended for research that, in the opinion of the Chief, is conducted with a view to developing new or improved methods, systems, processes or mechanisms, required especially for the exploration, development or transportation of oil and gas under Canada lands may be considered to be an allowable expenditure when prior approval for the research was obtained from the Chief.

Grouping

48 #

(1)A permittee may apply to the Chief to group permit areas not exceeding 2,500,000 acres any parts of which areas are within a circle having a radius of 100 miles or are contiguous.

(2)The application for grouping shall be made in triplicate on a form approved by the Chief and shall state the permit areas that are to be included in the group.

(3)A grouping shall commence on the date on which the application for grouping is approved by the Chief.

49 #

(1)Allowable expenditure made on any permit area within a group during the period of the grouping shall, at the request of the permittee, be applied to any or all of the permit areas within the group.

(2)Where allowable expenditure is applied to a permit area pursuant to subsection (1), that expenditure shall not be transferred to any other permit area.

^note

50 #

A permittee may from time to time regroup his permit areas.

Reports

51 #

(1)Every licensee, permittee or lessee shall, at least 15 days prior to commencing exploratory work, send a written notice, in duplicate, in a form approved by the Chief, to the Oil Conservation Engineer stating

(a)the date on which he expects to commence the work and to complete the work;

(b)the purpose and nature of the work;

(c)the approximate acreage of the area on which the work is to be done together with a map showing the boundaries of the area;

(d)the equipment he intends to use;

(e)the name of the person in charge of the work; and

(f)the number of persons to be employed.

(2)Notwithstanding subsection (1), every licensee, permittee or lessee shall send the written notice, as required by that subsection, at least 45 days prior to commencing exploratory work on an area that is wholly or partially covered by seacoast waters.

52 #

A licensee, permittee or lessee shall, upon request by the Oil Conservation Engineer, report the location of field parties and any change in the intended exploratory work.

53 #

(1)Every permittee shall, within 60 days after

(a)the third, sixth, ninth, twelfth and fourteenth anniversaries of the date of which the permit was issued, in the case of a permit referred to in subsection 36(1) or (3) or paragraph 36(4)(a),

(b)the fourth, seventh, tenth and twelfth anniversaries of the date on which the permit was issued, in the case of a permit referred to in subsection 36(2) or (3) or paragraph 36(4)(b), and

(c)the expiration, cancellation or surrender of the permit,

(d)copies of all aerial photographs taken by the permittee;

(e)a geological report of any area investigated including geological maps, cross-sections and stratigraphic data;

(f)a geophysical report of the area investigated; and

(g)reports of all surveys not referred to in paragraphs (d) to (f) that were conducted on the permit area.

forward to the Chief, in triplicate,

(2)The geophysical report referred to in paragraph (1)(f) shall include,

(a)where a gravity survey has been conducted, maps showing

(i)the location and ground elevation of each station,

(ii)the final corrected gravity value at each station,

(iii)the gravity contours drawn on the gravity values, and

(iv)the boundaries of the permit areas;

(b)where a seismic survey is conducted, maps on a scale of not less than 1 inch to 1 mile showing

(i)the location and ground elevation of each shot hole,

(ii)the corrected time value at each shot hole for all horizons determined during the course of the survey,

(iii)contours and isochrons drawn on the corrected values with a contour interval of not more than 100 feet or the equivalent in time, and

(iv)the boundaries of the permit areas; and

(c)where a magnetic survey is conducted, maps showing

(i)the location of the flight lines,

(ii)the magnetic contour lines at intervals of 10 gamma, and

(iii)the boundaries of the permit areas.

(3)Where the information referred to in this section has been sent by the permittee to the Chief pursuant to section 28 or 44, the permittee is not required to send that same information to the Chief pursuant to this section.

(4)The Chief may at any time request that a licensee, permittee or lessee supply factual information and data, or a copy thereof, that are necessary for the interpretation of any survey conducted for the purpose of searching for oil or gas and, without restricting the generality of the foregoing, may request factual information and data concerning

(a)seismograms and other recordings of seismic events together with all relevant data;

(b)magnetic profiles and other recordings of variations in the magnetic field of the earth; and

(c)any observations or readings obtained during the course of a survey that was conducted for the purpose of searching for oil or gas.

(5)No person shall destroy any of the factual information referred to in subsection (4) without the consent of the Chief, unless that information has been sent to the Department pursuant to these Regulations.

Oil and Gas Leases

Oil and Gas Lease upon Application

54 #

(1)On application to the Minister, a permittee, the holder of an exploration agreement or the holder of a special renewal permit shall be granted an oil and gas lease.

(2)An oil and gas lease shall not be granted under this section

(a)to a person unless the Minister is satisfied that he is a Canadian citizen over 21 years of age, and that he will be the beneficial owner of the interest to be granted;

(b)to a corporation incorporated outside Canada; or

(c)to a corporation unless the Minister is satisfied

(i)that at least 50 per cent of the issued shares of the corporation is beneficially owned by

(A)persons who are Canadian citizens,

(B)corporations that meet the qualifications set out in subparagraph (ii), or

(C)both such persons and corporations,

(ii)that the shares of the corporation are listed on a recognized Canadian stock exchange and that Canadians will have an opportunity of participating in the financing and ownership of the corporation, or

(iii)that the shares of the corporation are wholly owned, directly or indirectly, by a corporation that meets the qualifications outlined in subparagraph (i) or (ii).

55 #

(1)The land to be included in an oil and gas lease granted pursuant to section 54 shall be selected by the permittee from his permit area.

(2)The Minister shall not grant an oil and gas lease pursuant to section 54 for more than one-half of the number of sections in the permit area held by the applicant.

(3)An oil and gas lease granted pursuant to section 54 shall commence on the day the application is received by the Chief.

56 #

(1)Every application for an oil and gas lease shall be made on a form approved by the Chief and shall be accompanied by

(a)the fee set out in Schedule I;

(b)the rental required by section 78; and

(e)a diagram and description of the area for which the application is made.

(2)The application shall be delivered in person or be sent by registered mail to the office of the Chief in Ottawa.

(3)The Chief shall cause to be endorsed on each application the date and time that the application is received.

Other Leasing

57 #

(1)The Minister may grant an oil and gas lease or call tenders for the purchase of an oil and gas lease for Canada lands

(a)that have been held under a permit or oil and gas lease, which permit or oil and gas lease has expired, been cancelled or been surrendered;

(b)referred to in subsection 17(3); or

(c)that are a combination of the lands referred to in paragraphs (a) and (b) or either of them.

(2)All oil and gas lease granted pursuant to this section may be granted upon such terms and conditions as the Minister may order.

(3)A call for tenders under this section shall

(a)be advertised in the Canada Gazette and in such other manner as the Minister considers advisable at least 30 days before the date fixed for the closing of tenders; and

(b)state the terms and conditions upon which the tender is called and upon which the oil and gas lease is to be granted.

(4)Where tenders are called pursuant to this section and

(a)no tender is received, or

(b)a tender has been received and the Minister has refused to accept that tender,

the Minister may dispose of those lands by an oil and gas lease pursuant to this section in such manner and upon such terms as the Minister may determine.

Powers of Lessee

58 #

(1)A lessee who is the holder of a licence may

(a)carry out exploratory work and drill wells in the Canada lands included in his lease; and

(b)produce, mine, quarry or extract any oil or gas or any minerals or substances that are produced mined, quarried or extracted in association with any oil or gas from the Canada lands included in his lease.

(2)Where a lessee is authorized to carry out work or operations under these Regulations, that work or those operations may be performed by any person employed or hired by the lessee.

Lease Area

59 #

(1)Subject to subsection (2), a lease area shall be composed of quadrilateral blocks of sections not larger than five sections by three sections or four sections by four sections.

(2)Where leases are granted for not more than two-fifths of the number of sections in the permit area held by the applicant, the lease areas may be composed of quadrilateral blocks of sections not larger than six sections by three sections.

(3)The lease areas within a permit area shall

(a)corner one another;

(b)be separated from one another by at least one section; or

(c)be a combination of the blocks referred to in paragraphs (a) and (b).

(4)Except in the case of

(a)sections that are reduced pursuant to subsection 17(1), and

(b)Canada lands referred to in subsection 17(3),

no oil and gas lease shall be granted for less than one section.

(5)Except as provided in subsection (2), nothing in these Regulations shall be construed so as to prevent a permittee from leasing a total of one-half of the number of sections in the permit area.

(6)Subsections (1) and (3) do not apply to an oil and gas lease granted pursuant to section 57.

^note

60 #

(1)Subject to subsection (2), where an oil and gas lease is granted pursuant to section 54, the Canada land within the permit areas, but not included in the lease, shall be surrendered to Her Majesty.

(2)Where an oil and gas lease is granted pursuant to section 54, the Chief may allow the permittee to retain under permit those sections of the permit area that are not

(a)included in the oil and gas lease, or

(b)contiguous to the lease area.

Term of Lease

61 #

Subject to subsection 35(2), every oil and gas lease shall be granted for a term of 21 years.

62 #

An oil and gas lease shall, upon application by the lessee, be renewed for successive terms of 21 years if

(a)the area under the oil and gas lease is, in the opinion of the Minister, capable of producing oil or gas; and

(b)the lessee has complied with the terms of the oil and gas lease and with the provisions of these Regulations in force at the date on which the oil and gas lease was granted.

63 #

Where, during the term of an oil and gas lease, commercial exploitation begins and the lessee has complied with

(a)the terms of the oil and gas lease, and

(b)the provisions of these Regulations in force at the date on which the oil and gas lease was granted,

the Minister shall, at the request of the lessee, reissue the lease for a term of 21 years from the date of the commencement of commercial exploitation.

64 #

(1)Subject to subsection (2), an oil and gas lease renewed pursuant to section 62 or reissued pursuant to section 63 shall be renewed or reissued as the case may be upon the conditions that the Minister may order and shall be subject to the provisions of these Regulations in force at the date of the renewal.

(2)The royalty payable under an oil and gas lease reissued pursuant to section 63 shall be the same as the royalty required to be paid under the original oil and gas lease.

^note

Obligation to Lease

65 #

The Chief may at any time order that a well within a permit area contains oil or gas in commercial quantity.

66 #

(1)A copy of the order referred to in section 65 shall be sent by registered mail addressed to the permittee at his last known address.

(2)The permittee shall, within one year from the date of the mailing to him of the order made pursuant to section 65, apply for an oil and gas lease of the area within which the well is located.

67 #

(1)A permittee may, within 90 days from the date of mailing the order, serve on the Minister a notice of objection setting out the reason for the objection and all relevant facts.

(2)A notice of objection under this section shall be served by being sent by registered mail addressed to the Minister at Ottawa.

(3)Upon receipt of the notice of objection, the Minister shall consider the order and vacate, confirm or vary the order and the Minister shall thereupon notify the permittee of his decision by registered mail.

^note

68 #

Where an order has been made pursuant to section 65 and no application has been made pursuant to section 66, no person shall drill a well in that permit area within 4 1/2 miles of the well to which the order refers.

69 #

(1)Where an oil and gas lease is granted subsequent to an order made pursuant to section 65 or 67, all sections within the permit area contiguous to, but not cornering, the lease area shall be surrendered to Her Majesty.

(2)Where an oil and gas lease is granted subsequent to an order made under section 65 or 67, all that part of the permit area not included in the oil and gas lease and not surrendered pursuant to subsection (1) may be retained under permit by the permittee.

(3)Where part of the permit area is retained under permit pursuant to subsection (2), the permittee shall send the permit to the Chief for amendment.

Publication upon Surrender or Cancellation

70 #

(1)Where Canada lands have been held under a permit or an oil and gas lease, which permit or oil and gas lease or any part thereof has expired, been cancelled or been surrendered, the Minister shall publish in the Canada Gazette a notice of the expiration, cancellation or surrender of that permit or oil and gas lease.

(2)The notice referred to in subsection (1) shall state

(a)the number of the permit or oil and gas lease; and

(b)whether the permit or oil and gas lease has expired, been cancelled or been surrendered.

Transfer of Permit or Lease

71 #

No transfer of a permit or oil and gas lease shall pass any interest in the permit or oil and gas lease until the transfer is registered in accordance with these Regulations.

72 #

(1)No oil and gas lease shall be transferred to

(a)a person to whom the granting of an oil and gas lease is prohibited under subsection 54(2); or

(b)to a corporation unless the corporation satisfies the Minister that persons who are Canadian citizens will have an opportunity of participating in the beneficial ownership of the corporation.

(2)A transfer made contrary to the provisions of subsection (1) is void.

73 #

No transfer of a permit or oil and gas lease shall be registered without the approval of the Chief.

74 #

(1)Subject to subsection (2), where a transfer is executed in a manner satisfactory to the Chief and is accompanied by the transfer fee set out in Schedule I, the Chief may approve the transfer of

(a)the whole or any sections of a lease area;

(b)the whole or one-half of a permit area;

(c)a specified undivided interest in a permit or oil and gas lease to not more than five transferees; or

(d)a specified undivided interest in a permit or oil and gas lease to more than five transferees upon such terms and conditions as the Chief may require.

(2)The Chief shall not approve the transfer of

(a)a lease area smaller than one section; or

(b)a permit area of other than one grid area or one-half of a grid area.

(3)Paragraph (2)(a) does not apply to an oil and gas lease that has been granted for an area smaller than one section.

(4)Paragraph (2)(b) does not apply to a permit that has been issued for an area smaller than one grid area or one-half of a grid area.

75 #

(1)The Chief shall maintain a transfer register.

(2)Where the Chief has approved the transfer of a permit or oil and gas lease, he shall enter the transfer in the register.

(3)The Chief shall endorse on the transfer the date and time of registration.

76 #

Subject to section 72, as soon as registered, a transfer shall become operative according to its tenor and intent.

Surrender of Oil and Gas Lease

77 #

(1)A lessee may at any time surrender the whole or part of his oil and gas lease, but no lessee shall surrender a part thereof smaller than one section except in the case of an oil and gas lease that has been granted for an area smaller than one section.

(2)Where an oil and gas lease has been surrendered, no rental shall be refunded to the lessee.

Rental

78 #

(1)Subject to sections 79 to 84, a lessee shall pay to Her Majesty

(a)for the first year of the oil and gas lease a rental of $0.50 for each acre of land under lease; and

(b)for each year after the first year of the oil and gas lease a rental of $1 for each acre of land under lease.

(2)The rental required by subsection (1) shall be paid before the commencement of the year for which the rental is payable.

Reduction of Rental

79 #

(1)Subject to subsection (2), where, after the first year of an oil and gas lease, commercial exploitation has not begun but oil or gas has been found in commercial quantity, the Minister may order the reduction of the rental payable under that oil and gas lease.

(2)Notwithstanding subsection (1), the rental shall not be reduced pursuant to subsection (1) for any year following a year in which commercial exploitation begins.

80 #

Subject to sections 81 and 82, the rental shall be reduced by,

(a)in the case of an oil and gas lease issued pursuant to section 54, the amount of allowable expenditure made by the lessee prior to the date of the oil and gas lease, on the permit area within which the oil and gas lease is located, in excess of the deposits set out in Schedule II for the periods prior to the date of the oil and gas lease, and

(b)the amount of expenditure, as determined by the Chief, that has been made by the lessee for exploratory work on the lease area after the date of the oil and gas lease and before commercial exploitation begins,

but the rental for any particular year shall not be reduced pursuant to this section by more than one-half.

81 #

(1)In this section, expenditure means the amount referred to in paragraph 80(b).

(2)At the end of the first year of an oil and gas lease and at the end of each year of the oil and gas lease thereafter, the Chief shall determine the amount of expenditure made by the lessee that is to be credited to the rental of the oil and gas lease for the year next following.

(3)Every lessee shall, at least 30 days before the end of each year of his oil and gas lease, send to the Chief a statement, in triplicate, of the amount expended by the lessee for exploratory work on the lease area.

(4)Every statement referred to in subsection (3) shall be verified by a statutory declaration and shall include

(a)the items of expenditure;

(b)the number of the lease area on which the work was done;

(c)the specific purpose for which each item of expenditure was made; and

(d)three copies of all reports, photographs, maps and data referred to in section 53 concerning work for which expenditure is claimed.

^note

82 #

(1)Subject to subsection (2), where any part of the amount referred to in paragraph 80(a) or (b) is not or cannot be credited to the rental for the year next following, the rental for any subsequent year shall be reduced by the amount of that part.

(2)Notwithstanding subsection (1), the rental shall not be reduced pursuant to section 80 for any year following a year in which commercial exploitation has begun.

83 #

(1)Expenditure referred to in paragraph 80(a) or (b) that is made on any lease area that has been grouped pursuant to subsection 90(1) and that is made during the period of the grouping shall, at the request of the lessee, be applied to one or more of the lease areas within the group.

(2)Where an expenditure is applied to a lease area pursuant to subsection (1), that expenditure shall not be transferred to any other lease area.

^note

84 #

The rental payable for any year shall be reduced by the amount of the royalty paid under that oil and gas lease during the preceding year.

Royalty

85 #

(1)Subject to sections 86 and 87, a permittee or lessee shall pay to Her Majesty

(a)for each month

(i)prior to the end of the first five years of commercial exploitation, or

(ii)prior to the end of the first 36 months, in aggregate, during which oil or gas is produced,

(iii)the permit or lease area is located north of latitude 70°, or

(iv)the whole or greater part of the permit or lease area is, in the opinion of the Chief, covered by seacoast water;

whichever first occurs, a royalty of five per cent of the market value at the well head or extraction plant (after production thereat) of all oil and gas obtained during that month from the permit or lease area, where

(b)for each month prior to the end of the first three years of commercial exploitation, a royalty of five per cent of the market value at the well head or extraction plant (after production thereat) of all oil and gas obtained during that month from the permit or lease area, where the whole or greater part of the permit or lease area is located south of latitude 70° and is not included in paragraph (a); and

(c)for each month following the period for which a royalty is payable pursuant to paragraph (a) or (b), a royalty of 10 per cent of the market value at the well head or extraction plant (after production thereat) of all oil and gas obtained during that month from the permit or lease area.

(2)The royalty shall be paid on or before the 25th day of the month next following the month for which the royalty is payable.

86 #

No royalty is payable for oil or gas

(a)consumed by the permittee or lessee for drilling, producing, mining, quarrying, extracting or treating purposes in the permit or lease area; or

(b)returned to a formation or flared.

87 #

Where, in the opinion of the Governor in Council, a reduction in the royalty would enable a lessee to continue producing oil or gas for a longer period, the Governor in Council may reduce the royalty by such amount and for such period as he considers advisable.

Drilling

88 #

The Minister may at any time, except during the three years next following the issue of a lease, order the lessee to commence and continue the drilling of a well to the satisfaction of the Minister within 90 days from the date of the order.

89 #

Where a well has been

(a)abandoned, or

(b)completed and has not been declared capable of producing in a commercial quantity,

the Minister may at any time, except during the year following the date of the abandonment or completion, order the lessee to commence and continue the drilling of another well to the satisfaction of the Minister within 90 days from the date of the order.

Grouping of Leases

90 #

(1)For the purposes of sections 80, 88 and 89, a lessee may upon giving written notice in triplicate, in a form approved by the Chief, group lease areas that

(a)are within a circle having a radius of 24 miles; and

(b)cover an area of not more than 250,000 acres.

(2)The notice of grouping shall indicate the lease areas that are to be included in the group.

(3)Where a lessee complies with an order made pursuant to section 88 or 89 on one lease area in a group, he shall be deemed to have complied with all orders that have been or may be made pursuant to section 88 or 89 in respect of any lease area within that group for as long as that group remains in effect.

(4)A grouping shall commence on the day on which the notice of grouping is approved by the Chief and shall terminate upon the discovery of oil or gas in commercial quantity.

91 #

Where a group is terminated by the discovery of oil or gas, the oil and gas leases previously included in the group shall be subject to the provisions of sections 88 and 89.

92 #

A lessee may from time to time group or regroup any of his lease areas in accordance with section 90.

Development Drilling

93 #

Where a lessee is producing oil or gas in commercial quantity, the Chief may order the lessee to drill further wells on the lease area and to continue producing oil or gas so long as that area continues to yield oil or gas in commercial quantity.

Entry on Lands

94 #

Where the surface rights to the whole or any part of the Canada lands described in a permit or oil and gas lease have been disposed of by Her Majesty under a timber licence, grazing lease, coal mining lease, mining claim or other form of terminable grant, the permittee or lessee shall not enter upon such lands unless he has obtained

(a)the consent of the person holding the timber licence, grazing lease, coal mining lease, mining claim or other form of terminable grant;

(b)the consent of the occupier of the land; or

(c)an order for entry from the arbitrator.

Entry on Patented Lands

95 #

Where the surface rights to the whole or any part of the Canada lands described in a permit or oil and gas lease have been granted by Her Majesty under letters patent or sold under an agreement for sale, the permittee or lessee shall not enter upon the lands that have been so disposed of unless he has obtained

(a)the consent of the owner of the surface rights;

(b)the consent of the occupier of the lands; or

(c)an order for entry from the arbitrator.

Arbitration

96 #

(1)A licensee, permittee or lessee who has not been able to obtain the consent to enter referred to in section 26, 94 or 95 may apply to an arbitrator for an order permitting entry on to those lands and fixing the compensation therefor.

(2)Ten days notice of the application referred to in subsection (1) shall be given by the applicant to the owner, occupier or lessee as may be required by section 26, 94 or 95.

97 #

The magistrate of the district in which the lands mentioned in the application lie shall, upon receipt of the application referred to in section 96, become the arbitrator for determining the compensation and permitting entry on to the lands.

98 #

(1)The arbitrator shall fix a date for the hearing and may require the operator to give notice of the hearing in such manner and to such persons as the arbitrator may direct.

(2)The arbitrator shall determine the compensation to be paid or awarded and make such order as he deems fit, including the disposition of costs.

^note

99 #

Where an applicant posts with the arbitrator a bond, in an amount satisfactory to the arbitrator, the arbitrator shall thereupon make an interim order permitting the applicant to enter upon and use the lands.

Appeal From Arbitrator

100 #

Either party, within one month after the arbitrator has made an order pursuant to section 98, may appeal from the order on any question of the law or fact, or upon other ground of objection to the superior court for the district in which the land is located.

101 #

The superior court may set aside, confirm or vary the order or remit it to the arbitrator for reconsideration with such directions as it deems proper.

102 #

Upon such an appeal, the practice and proceedings shall be as nearly as possible the same as upon an appeal from the decision of an inferior court to the superior court, subject to any rules or orders from time to time made by the superior court in respect of such an appeal.

103 #

The order of the superior court is final and no appeal lies from any order made by the superior court.

Enforcement of Order

104 #

(1)Where any resistance or forcible opposition is made by any person to enforcement of any order or interim order made pursuant to section 98, 99 or 101, the magistrate or judge may issue his warrant to the sheriff of the district, or to a bailiff, to put down such resistance or opposition.

(2)Every licensee, permittee or lessee shall comply promptly with any order made pursuant to section 98 or 101.

Reports

105 #

(1)Every lessee shall, within 60 days after

(a)the third, sixth, ninth, twelfth, fifteenth and eighteenth anniversaries of the date on which the lease was granted or renewed, and

(b)the expiration, cancellation, surrender or renewal of the lease,

forward to the Chief, in triplicate, copies of all reports, photographs, maps and data referred to in section 53.

(2)When the information referred to in this section has been sent by the lessee to the Chief pursuant to section 28, 44 or 53, the lessee is not required to send that same information to the Chief pursuant to this section.

^note

Information to be Confidential

106 #

(1)Except as provided in this section, the information furnished under these Regulations shall not be released.

(2)Information furnished pursuant to paragraph 28(a) or (b) may be released at any time.

(3)Information submitted by a permittee or lessee concerning a development well may be released 30 days after the completion, suspension or abandonment of that well.

(4)Information submitted by a permittee or lessee concerning an exploratory well may be released two years after the completion, suspension or abandonment of that well.

(5)Information submitted by a permittee or lessee concerning a surface geological or photogeological survey and factual information obtained from a magnetometer, gravity, seismic or other survey may, in the discretion of the Minister, be released

(a)two years after the cancellation, surrender or expiry of

(i)the permit of the area on which the work was done, or

(ii)all oil and gas leases granted pursuant to section 54 within the permit area on which the work was done,

(b)two years after the cancellation, surrender or expiry of the oil and gas lease of the area on which the work was done.

whichever is the later; or

(6)Information submitted by a licensee, permittee or lessee may, in the discretion of the Minister, be released at any time with the consent of the licensee, permittee or lessee.

(7)General topographical information, legal surveys and elevations of well locations, the current depths of wells and the current status of wells may be released at any time.

Inspection

107 #

(1)The Minister, or a person authorized by him, may at any time enter upon a permit area or lease area and

(a)inspect all wells, technical records, plants and equipment;

(b)take samples and particulars; and

(c)carry out tests or examinations not detrimental to the operations of the permittee or lessee for determining the production of oil or gas that may be reasonable or proper.

(2)The permittee or lessee shall give the Minister or person authorized by him such assistance as may be necessary.

Enforcement

108 #

(1)Where a permittee fails to make a deposit required by section 40, the Chief shall, unless he is required to give notice to the permittee by subsection 38(3), give written notice to the permittee informing him that if he does not make the deposit required by section 40 within 90 days of the date of the notice his permit will be deemed to be cancelled without further notice.

(2)Where a permittee does not make a deposit in accordance with a notice given pursuant to subsection (1), his permit shall forthwith be deemed to be cancelled.

(3)Where a lessee does not pay the rental required by these Regulations within 30 days after the date on which the rental is to be paid, the Minister shall give written notice to the lessee specifying the default and unless the default is remedied within 30 days of the date of the notice, the lease may be cancelled by the Minister.

(4)Where a licensee, permittee or lessee violates any provision of these Regulations, other than those referred to in subsection (1) or (2), the Minister may give written notice to the licensee, permittee or lessee and unless the licensee, permittee or lessee remedies or prepares to remedy the violation, to the satisfaction of the Minister, within 90 days from the date of the notice the Minister may cancel the licence, permit or oil and gas lease.

Publication of Orders

109 #

Every order made pursuant to these Regulations shall be published in the Canada Gazette within 30 days after it is made.

Notice

110 #

For the purposes of sections 38 and 108, written notice shall be deemed to be given by the Chief or Minister, as the case may be, to a licensee, permittee or lessee when the notice is sent by registered mail to the licensee, permittee or lessee or his agent at his address on record with the Department.

Transitional

111 #

(1)In this section, prior permit means a permit that was issued under the Territorial Oil and Gas Regulations prior to and was subsisting on September 23, 1957.

(2)A prior permit shall continue in effect until the holder of the permit completes and files with the Chief a request in the form set out in Schedule III.

(3)The Territorial Oil and Gas Regulations as they existed on September 23, 1957, continue to apply in respect of prior permits.

(4)Upon the completion and filing of a request in the form set out in Schedule III, these Regulations shall, except as provided in section 112, apply to a prior permit.

112 #

(1)In this section, earlier permit means any permit issued before June 6, 1961, under the provisions of the Territorial Oil and Gas Regulations and includes a prior permit as defined in section 111 in respect of which a request has been completed and filed in accordance with section 111.

(2)Subsection 54(2) of these Regulations does not apply to an oil and gas lease granted pursuant to an earlier permit.

(3)Section 72 does not apply to the transfer of an oil and gas lease that

(a)is located within the area of an earlier permit; and

(b)either before or after June 6, 1961, has been or is granted to the holder of that earlier permit.

113 #

Subject to the provisions of sections 111 and 112 of these Regulations, all licences, permits and oil and gas leases issued or granted under the provisions of

(a)the Territorial Oil and Gas Regulations, or

(b)the Canada Oil and Gas Regulations,

and subsisting on June 6, 1961, shall be deemed to have been issued or granted under these Regulations.

Part II · Option

114 #

On August 3, 1977,

(a)any permittee whose permit is valid and subsisting and

(i)who has applied for an oil and gas lease pursuant to section 54 and has not withdrawn that application, or

(ii)whose permit has been renewed six times and does not, or has ceased to, qualify for an extension under section 39,

(b)any permittee whose permit has expired and who before the expiration thereof, applied for an oil and gas lease pursuant to section 54, and has not withdrawn that application, and

(c)any permittee whose permit was renewed prior to August 3, 1977, pursuant to section 40, as that section then read,

shall have the additional rights provided in sections 115 to 117 according as they apply to his case.

115 #

(1)Any person who on August 3, 1977, is a permittee described in subparagraph 114(a)(i) and has not been granted an oil or gas lease may, at his option instead of maintaining his application for a lease under section 54, within 90 days after the next anniversary date of his permit, withdraw his application for an oil and gas lease.

(2)Where a person withdraws his application for an oil and gas lease pursuant to subsection (1), he shall, after surrendering in writing his right to receive the oil and gas lease,

(a)be entitled to be repaid any sums he paid as rental and to revert to holding the land under his permit, at the point in the term thereof that would have been reached at that time if the original term had expired and any necessary renewals under section 38 had been applied for and issued; and

(b)during the first year after the anniversary date of his permit following August 3, 1977, not be required to meet work obligations exceeding $0.5O per acre.

116 #

(1)Any person who, on August 3, 1977, is a permittee described in paragraph 114(b) and has not been granted an oil and gas lease may, at his option, instead of maintaining his application for a lease under section 54, within 90 days after the day that would have been the next anniversary date of his permit if it had not expired, either

(a)withdraw his application for an oil and gas lease and surrender in writing his right to receive the oil and gas lease, whereupon he shall be entitled to be repaid any sums he paid as rental; or

(b)withdraw his application for an oil and gas lease and apply instead for a special renewal permit, whereupon he shall be entitled to be repaid any sums he paid as rental except that sum tendered with the lease application in respect of the first year thereof, and the Minister may grant to that person a special renewal permit for such term and subject to such conditions, including the payment of deposits, as the Minister may determine.

(2)Notwithstanding anything in this section, where a person who applies for a special renewal permit pursuant to paragraph (1)(b) and the Minister have not agreed on the terms and conditions for the special renewal permit within 30 days after the expiry of the period within which Petro-Canada Limited is required to give the notice specified in subsection 121(6) or within 30 days after Petro-Canada Limited gives any such notice, whichever occurs first, that person shall for 30 days thereafter have the right to reinstate his application for an oil and gas lease under section 54 as if it had not been withdrawn and he were still a permittee, whereupon he shall be entitled to be repaid any sums he paid as rental except that sum tendered with the lease application in respect of the first year thereof, and that sum shall be deemed to satisfy all rental obligations under that lease up to the first anniversary date thereof following August 3, 1977.

(3)Where a person referred to in subsection (2) fails to exercise his right to reinstate his application for an oil and gas lease under section 54, the lands that he held pursuant to the permit referred to in paragraph 114(b) shall be deemed to be surrendered and shall become Crown reserve lands.

117 #

(1)Any person who, on August 3, 1977, is a permittee described in subparagraph 114(a)(ii) or paragraph 114(c) may, at his option, instead of applying for a lease under section 54, apply for a special renewal permit, whereupon the Minister may grant to that person a special renewal permit for such term and subject to such conditions, including the payment of deposits, as the Minister may determine.

(2)Notwithstanding anything in this section, where a person who applies for a special renewal permit pursuant to subsection (1) and the Minister have not agreed on the terms and conditions for the special renewal permit within 30 days after the expiry of the period within which Petro-Canada Limited is required to give the notice specified in subsection 121(6) or within 30 days after Petro-Canada Limited gives any such notice, whichever occurs first, that person shall, for 30 days thereafter, have the right to apply for an oil and gas lease under section 54 as if he were still a permittee.

118 #

Unless the Minister otherwise specifies at the time a special renewal permit is granted pursuant to section 116 or 117, the provisions of these Regulations applicable to a permit shall apply to the special renewal permit so long as this Part is in force.

119 #

A person described in subparagraph 114(a)(i) or in paragraph 114(b) who decides not to exercise the options provided in section 115 or 116 and instead maintains his application for an oil and gas lease pursuant to section 54 shall be entitled, on the grant of any such lease, to be repaid any sums he paid as rental except that sum tendered with the lease application in respect of the first year thereof, and that sum shall be deemed to satisfy all rental obligations under that lease up to the first anniversary date thereof following August 3, 1977.

120 #

The term of any special renewal permit may be extended by the Minister on application therefor, so long as this Part is in force, by an additional period not exceeding one year, subject to such other conditions and deposits as the Minister may determine.

Petro-Canada Limited

121 #

(1)Where an application is made for a special renewal permit pursuant to section 116 or 117 for any Canada lands in respect of which no declaration of significant discovery is in force, Petro-Canada Limited shall, on giving notice under subsection (6) that it exercises its rights under this section, have the right to be granted

(a)where the Canadian participation rate of the applicant for the special renewal permit, determined pursuant to these Regulations is 25 per cent or more but not more than 35 per cent, a 10 per cent interest in the special renewal permit to be granted to the applicant; or

(b)where the Canadian participation rate of the applicant for the special renewal permit, determined pursuant to these Regulations, is less than 25 per cent, a 10 per cent interest in the permit plus an additional interest therein, not exceeding 15 per cent, of one per cent for every one per cent that the Canadian participation rate falls below 25 per cent.

(2)If, at the time an application is made for a special renewal permit, any well is being drilled on or adjacent to the Canada lands in respect of which the application is made, the application and the determination of the rights of Petro-Canada Limited under this section shall be held in abeyance until the results of the drilling of the well have been assessed by the Minister or a person designated by the Minister.

(3)For the purposes of subsection (1), any existing interest of Petro-Canada Limited, directly or indirectly, in the lands to be included in the special renewal permit referred to therein shall be included when determining the Canadian participation rate pursuant to these Regulations.

(4)On receipt of an application for a special renewal permit for Canada lands in respect of which no declaration of a significant discovery is in force, the Minister or a person designated by the Minister shall, in any case where the Canadian participation rate, determined pursuant to these Regulations, is 35 per cent or less, forthwith give notice in writing of the application to Petro-Canada Limited specifying the area to which the application relates and the identity of the applicant.

(5)The Minister or a person designated by the Minister shall, as soon as possible, give notice in writing to Petro-Canada Limited of the terms and conditions of the special renewal permit that have been agreed on.

(6)Within 60 days from the date of a notice given under subsection (5), Petro-Canada Limited shall give notice in writing to the Minister or a person designated by the Minister stating either that it exercises its rights under this section and, if so, to what extent, or that it chooses not to exercise those rights.

(7)Where Petro-Canada Limited fails to give the notice required under subsection (6) in the time provided therefor or gives notice under that subsection that it chooses not to exercise its rights under this section, those rights are terminated with respect to the lands for which the application for the special renewal permit was made.

(8)Subject to subsection (9), this section applies once only in respect of any lands that are the subject of an application for a special renewal permit.

(9)Where Petro-Canada Limited has no rights under this section with respect to a particular application for a special renewal permit under section 116 or 117 because a declaration of significant discovery is in force at the time the special renewal permit is about to be granted and where that declaration is subsequently revoked with respect to that special renewal permit, Petro-Canada Limited shall, notwithstanding anything in these Regulations, have the rights granted by this section at the first time after such revocation that an application is made for renewal of the special renewal permit if at the time the renewal is about to be granted no other applicable declaration of a significant discovery is in force.

122 #

Where Petro-Canada Limited is granted an interest in a special renewal permit under section 121,

(a)that interest shall be obtained by reducing the interest of each of the holders of the special renewal permit, including any existing Petro-Canada Limited interest, by a percentage of that interest equal to the product of that interest and the percentage interest granted to Petro-Canada Limited under that section;

(b)the special renewal permit shall be granted to give Petro-Canada Limited its interest under section 121 and the other holders their interests reduced in accordance with paragraph (a);

(c)Petro-Canada Limited shall not be liable to the other interest holders for any exploration expenses incurred by them prior to the granting of its interest; and

(d)Petro-Canada Limited shall not, without the prior approval in writing of the Minister, which may be given on application by any interested party, transfer, assign or in any other manner dispose of any interest or right therein otherwise than by way of charge or mortgage.

^note

Canadian Participation Rate

123 #

In determining the Canadian participation rate of an applicant for a special renewal permit for the purposes of sections 121 and 122, the following Rules shall apply:Rule 1 (1) If the applicant is(a) an individual who is a Canadian citizen ordinarily resident in Canada or a landed immigrant within the meaning of the Immigration and Refugee Protection Act who is ordinarily resident in Canada other than a landed immigrant who has been ordinarily resident in Canada for more than one year after the time at which he first became eligible to apply for Canadian citizenship, his Canadian participation rate is 100 per cent;(b) an individual other than an individual referred to in paragraph (a), his Canadian participation rate is 0 per cent;(c) a corporation that has been incorporated in Canada and is not a non-eligible person within the meaning of the Foreign Investment Review Act, its Canadian participation rate is 100 per cent;(d) an enterprise formed by a group of individuals, corporations or individuals and corporations in which each beneficial owner of an interest is an individual referred to in paragraph (a) or a corporation referred to in paragraph (c), its Canadian participation rate is 100 per cent; or(e) a corporation that is a non-eligible person within the meaning of the Foreign Investment Review Act, or is an enterprise formed by a group of individuals, corporations, or individuals and corporations, other than an enterprise referred to in paragraph (d), its Canadian participation rate shall be determined by the application of Rule 2.(2) Where the applicant would be the beneficial owner of the permit, if granted, this Rule shall apply to that applicant, but where the applicant would not be the beneficial owner of the permit, if granted, this Rule shall be applied to the person or enterprise that would be the beneficial owner of the permit as if that person or enterprise were the applicant and where in this manner a Canadian participation rate is determined for a beneficial owner, that Canadian participation rate shall be deemed to be the Canadian participation rate of the applicant for the purposes of section 121.Rule 2 Where the application is made by a corporation or enterprise referred to in paragraph (e) of subrule 1(1), the Canadian participation rate in the corporation or enterprise is a percentage equal to the sum of the products obtained by multiplying, for each beneficial owner of voting shares of the corporation or of an interest in the enterprise, the Canadian participation rate for that owner under Rule 3 or 4 by the percentage of the total number of voting shares of, or total interest in, the corporation or enterprise, beneficially owned by that owner.Rule 3 For the purposes of Rule 2, any beneficial owner of voting shares in the applicant corporation, or of an interest in the applicant enterprise, that falls within any of the following classes shall be regarded as having a Canadian participation rate of 100 per cent:(a) an individual referred to in paragraph (a) of subrule 1(1),(b) a corporation referred to in paragraph (c) of subrule 1(1),(c) an enterprise in which the majority interest is beneficially owned by individuals referred to in paragraph (a) or corporations referred to in paragraph (b) of this Rule or any combination of such individuals and corporations,and the Canadian participation rate for any beneficial owner not falling within any of the above classes is, except where Rule 4 applies, 0 per cent.Rule 4 For the purposes of Rule 2, any non-eligible person within the meaning of the Foreign Investment Review Act, or any enterprise other than one referred to in paragraph (c) of Rule 3, that is a beneficial owner of voting shares in the applicant corporation, or any beneficial owner of an interest in the applicant enterprise where that applicant enterprise includes any persons who are non-eligible persons within the meaning of the Foreign Investment Review Act, shall have its Canadian participation rate determined by treating it as if it were the applicant corporation or applicant enterprise under Rule 2 and applying Rule 3 in respect of any of its shareholders or interest owners falling within any of the classes set out in Rule 3, and this Rule in respect of any of its shareholders or interest owners not falling within any of those classes.Rule 5 (1) Where, under these Rules, the question arises whether or not a person is a non-eligible person within the meaning of the Foreign Investment Review Act, the Minister or a person designated by the Minister shall apply to the determination of that question the provisions of subsection 4(1) and the other relevant provisions of the Foreign Investment Review Act, subject to such modifications as the circumstances may require, as if the person were an applicant for a statement in writing under that subsection, and as if the Minister or the person designated by the Minister were the Minister referred to in that Act.(2) Any determination made by the Minister or the person designated by the Minister pursuant to subrule (1) is binding only on the person in respect of whom the determination was made, and on the Minister or the person designated by the Minister who made it, and only for the purposes of these Regulations.Rule 6 (1) In these Rules,enterprise means any group or combination of individuals, corporations or individuals and corporations and for greater certainty, but without restricting the generality of the foregoing, includes partnerships, joint ventures, trusts, syndicates or other associations; entreprisevoting shares means an issued and outstanding share of the capital stock of a corporation to which are attached voting rights ordinarily exercisable at meetings of shareholders. action comportant droit de vote(2) For the purposes of these Rules,(a) where any voting share carries the right to more than one vote, the share shall be deemed to be a number of shares equal to the number of votes that it carries;(b) the onus is on the applicant to demonstrate his Canadian participation rate to the satisfaction of the Minister or a person designated by the Minister but where he has not so demonstrated his Canadian participation rate within such reasonable time, but not less than 30 days, as the Minister may allow, the Minister may allocate to the applicant such Canadian participation rate as he deems reasonable in the circumstances, but, in the case of an application made before April 1, 1978, the applicant shall have a period of four months from the day of such allocation to discharge the onus imposed on him by this paragraph and, at the expiration of that period, the allocation is final if the onus has not been discharged, or shall be adjusted to conform to the Canadian participation rate so demonstrated if the onus has been discharged, and such final allocation or adjusted allocation shall constitute the determination of the Canadian participation rate of the applicant for the purposes of section 121;(c) the Canadian participation rate shall be determined as of the day on which any application under section 116 or 117 is made for a special renewal permit and shall be based on information that, in the opinion of the Minister or a person designated by the Minister, is current and accurate information, and such determination is, if all material facts have been disclosed to the Minister or the person designated by the Minister, binding for two years from the day as of which the determination was made, if throughout that period the material facts so disclosed remain substantially unchanged;(d) where it is made to appear to the Minister that any matter required to be determined under these Rules cannot reasonably be determined thereunder in any case or class of cases, he may make the determination, or authorize it to be made, in accordance with such criteria as he considers reasonable in the circumstances; and(e) where, in applying Rule 4, it is found that the applicant corporation or enterprise is one of the beneficial shareholders or interest owners of the corporation or enterprise that is, for the purposes of that Rule, being treated as if it were the applicant corporation or enterprise, the applicant corporation or enterprise shall be deemed not to own the shares or interest in question, and such shares or interest shall be regarded as not forming part of the issued shares of the corporation in question or of the interest in the enterprise in question, as the case may be.^note

Significant Discoveries

124 #

(1)Where the Minister or a person designated by the Minister is satisfied that a significant discovery has been made on any Canada lands in respect of which a permit or a special renewal permit has been granted or an exploration agreement has been entered into, he may make a declaration in writing that a significant discovery has been made on those lands and on any adjacent lands into or under which he has reasonable grounds to believe that the discovered deposit may extend and the declaration shall specify the grid area or areas overlying the lands on which the significant discovery was made and into or under which the discovered deposit extends.

(2)A person who has reason to believe that a significant discovery has been made on or adjacent to any Canada lands in respect of which he has entered into an exploration agreement or holds a permit or a special renewal permit may apply to the Minister or a person designated by the Minister for a declaration that a significant discovery has been made on those lands, and if the Minister or the person designated by the Minister is satisfied that a significant discovery has been made, he shall make a declaration thereof in writing, and the declaration shall specify the grid area or areas overlying the lands on which the significant discovery was made.

(3)Where, based on the results of further drilling, the Minister is satisfied that a discovery in respect of which a declaration has been made pursuant to subsection (1) or (2) is not a significant discovery in respect of the whole or any part of the area to which it relates, the Minister may revoke in writing the declaration in respect of the whole or such part of the area.

(4)A copy of a declaration of a significant discovery made under subsection (1) or (2) and of any revocation made under subsection (3) shall be published in the Canada Gazette and

(a)shall be sent by registered mail to each person who has entered into an exploration agreement or to whom a special renewal permit or permit has been issued in respect of lands to which the declaration relates;

(b)may be sent by registered mail to any person who has entered into an exploration agreement or to whom a special renewal permit or permit has been issued in respect of land adjacent to the land to which the declaration relates; and

(c)in the ease of a special renewal permit in respect of which Petro-Canada Limited might otherwise have had the right accorded to it by section 121, shall be sent by registered mail to Petro-Canada Limited.

(5)Before making any revocation under subsection (3), the Minister or a person designated by the Minister shall give notice in writing to the persons intended to be affected thereby of not less than 14 days or of such longer period as he considers appropriate in the circumstances, specifying the revocation proposed to be made.

(6)Within 14 days after a notice is given under subsection (5), any person receiving the notice may, in writing, request a hearing and on receipt of such request the Minister or a person designated by the Minister shall appoint a time and place for a hearing and give notice thereof of not less than 7 days to the person who requested the hearing.

(7)Any person to whom notice is required to be given under subsection (5) may make representations and introduce documents and witnesses at any hearing held under this section, whether or not such person has been given notice thereof and in making any revocation on which a hearing has been held, the Minister or a person designated by the Minister shall consider any representations made and evidence introduced at the hearing and shall make available on request by any such person the reasons for the revocation.

(8)Any declaration under subsection (1) or (2) is final and conclusive.

(9)Where a hearing is not requested within the 14-day period specified in subsection (6) or is held under this section, any revocation made under this section is final and conclusive.

(10)Where applications affecting the same Canada lands are pending at the same time under subsection (2) and under section 116 or 117, the application under subsection (2) shall be disposed of first and, if any delay arising from the operation of this subsection adversely affects the right of any person to apply or maintain an application for a special renewal permit or a lease under section 54, such right shall be deemed not to be so affected.

Drilling Orders

125 #

(1)Where a significant discovery has been declared on land in respect of which an exploration agreement has been entered into or a special renewal permit has been granted, the Minister may, at any time thereafter, order the drilling thereon of a well in relation to that significant discovery, subject to such specifications as may be included in the order, to commence within one year after the making of the order or such longer period specified in the order as the Minister considers appropriate in the circumstances.

(2)Where an order has been made under subsection (1), the Minister shall not make any further order for the drilling of a well in relation to the same significant discovery as long as work is actively progressing in compliance with the order that has been made.

Enforcement

126 #

(1)Where any person holding an exploration agreement or a special renewal permit does not comply with any term or condition therein, or with any order made under section 125, the Minister may give notice in writing to that person directing him to comply with the term, condition or order within 90 days of the date of the notice.

(2)Where a person notified under subsection (1) fails to comply with the notice within the 90-day period specified therein, the Minister may cancel the exploration agreement or special renewal permit or suspend it for any period on any conditions he considers appropriate in the circumstances.

127 #

No disposition of or other dealing in any land in respect of which Petro-Canada Limited has the rights granted by section 33 or 121 is vitiated by reason only of

(a)any failure to give Petro-Canada Limited any notice required by or under those sections; or

(b)an erroneous determination of any Canadian participation rate under these Regulations.

^note

Schedule I · (ss. 24, 56 and 74)

1 | Exploratory licence | $25.002 | Exploratory permit | 250.003 | Oil and Gas lease | 10.004 | Transfer of permit | 25.005 | Transfer of lease | 10.00

Schedule II · (ss. 40, 42 and 80)

| Column I | Column II | Period | Deposit1 | The first 18-month period of the original term in the case of a permit referred to in subsection 36(1), (2), (3) or (5) or paragraph 36(6)(b), | $0.05 for each acre to be included in the permit.2 | The first 36-month period of the original term in the case of a permit referred to in subsection 36(4) or paragraph 36(6)(a), | $0.05 for each acre to be included in the permit.3 | The second 18-month period of the original term in the case of a permit referred to in subsection 36(1), | $0.15 for each acre included in the permit.4 | The 30-month period of the original term next following the first 18-month period of the original term in the case of a permit referred to in subsection 36(2), (3) or (5) or paragraph 36(6)(b), | $0.15 for each acre included in the permit.5 | (a)The second 36-month period of the original term in the case of a permit referred to in subsection 36(4) or paragraph 36(6)(a), and(b)the first renewal period in the case of a permit referred to in subsection 36(4) or (6), | $0.15 for each acre included in the permit.6 | (a)The 24-month period of the original term next following the 30-month period referred to in item 4 in the case of a permit referred to in subsection 36(3) or (5) or paragraph 36(6)(b),(b)the first renewal period in the case of a permit referred to in subsection 36(3) or (5),(c)the 24-month period of the original term following the second 36-month period of the original term in the case of a permit referred to in paragraph 36(6)(a), and(d)the second renewal period in the case of a permit referred to in subsection 36(5) or (6), | $0.20 for each acre included in the permit.7 | The first renewal period of a permit referred to in subsection 36(1) or (2); and the second renewal period of a permit referred to in subsection 36(3) or (4), | $0.30 for each acre included in the permit.8 | (a)The second renewal period in the case of a permit referred to in subsection 36(1) or (2), and(b)the third renewal period in the case of a permit referred to in subsection 36(5) or (6), | $0.40 for each acre included in the permit.9 | The third renewal period, except for a permit referred to in subsection 36(5) or (6), | $0.50 for each acre included in the permit.10 | The fourth renewal period, | $0.50 for each acre included in the permit.11 | The fifth renewal period, | $0.50 for each acre included in the permit.12 | The sixth renewal period, | $0.50 for each acre included in the permit.13 | The period of an extension granted pursuant to section 39, | $0.10 for each acre included in the permit.

Schedule III · Request (s. 111)

I, , holder of Oil and Gas Permit No. issued pursuant to (insert the reference to the Regulations under which the permit was issued)and in effect on the 23rd day of September, 1957, hereby request from and after the day of filing of this Request with the Chief of the Resources Division, the said permit shall be subject to the Canada Oil and Gas Land Regulations.Dated at this day of , 19

Schedule IV · (s. 2)

1 #

That portion of the submerged lands lying south of the Province of Newfoundland between latitudes 44°00′0″ and 47°00′0″ North and between longitudes 55°00′0″ and 58°00′0″ West, excepting thereout the following lands;

(a)all lands within the territory of the St. Pierre and Miquelon Islands,

(b)all lands within the area described as follows:COMMENCING at a point 44°10′ North 58°00′ West; THENCE, north along the westerly boundaries of the grid areas whose westerly corners lie on longitude 58°00′ West to 45°20′ North 58°00′ West; THENCE, east along the northerly boundary of the grid area whose northerly corners lie on latitude 45°20′ North to 45°20′ North 57°45′ West; THENCE, south along the easterly boundary of the same grid area to 45°10′ North 57°45′ West; THENCE, east along the northerly boundary of the grid area whose northerly corners lie on latitude 45°10′ North to 45°10′ North 57°30′ West; THENCE, south along the easterly boundary of the same grid area to 45°00′ North 57°30′ West; THENCE, east along the northerly boundary of the half grid area whose northerly corners lie on latitude 45°00′ North to 45°00′ North 57°22′30″ West; THENCE, south along the easterly boundary of the same half grid area to 44°50′ North 57°22′30″ West; THENCE, east along the northerly boundary of the grid area whose northerly corners lie on latitude 44°50′ North to 44°50′ North 57°15′ West; THENCE, south along the easterly boundaries of the grid areas whose easterly corners lie on longitude 57°15′ West to 44°35′ North 57°15′ West; THENCE, east along the northerly boundary of the half grid area whose northerly corners lie on latitude 44°35′ North to 44°35′ North 57°00′ West; THENCE, south along the easterly boundaries of the grid areas whose easterly corners lie on longitude 57°00′ West to 44°00′ North 57°00′ West; THENCE, west to 44°00′ North 58°00′ West; THENCE, north to the point of commencement.

Schedule V · (s. 36)

1 #

The first 36-month period of the original term of each permit issued after June 30, 1964, but prior to July 1, 1967, is extended by 12 months.

2 #

The second 36-month period of the original term of each permit issued after June 30, 1961, but prior to July 1, 1964, is extended by 12 months.

3 #

The third 24-month period of the original term of each permit issued prior to July 1, 1961, is extended by 12 months.

Schedule VI · (ss. 2 and 36)

All that part of Canada north of a line following the 60th parallel north latitude from the boundary of Alaska to Hudson Bay, THENCE, along the low water mark of Hudson Bay to Cape Fullerton, THENCE, to Cape Kendall on Southampton lsland, THENCE, along the south shore of Southampton Island to Seahorse Point, THENCE, to Lloyd Point on Foxe Peninsula, THENCE, along the low water mark of the southern part of Baffin Island to the southeastern tip of Baffin Island (including the adjacent islands), THENCE, to the Savage Islands, THENCE, to the northwest corner of Resolution Island, THENCE, along the low water mark of the southern shore of Resolution Island to its southernmost point, and THENCE along parallel 61°18′ north latitude to the easternmost boundary of Canada.

Related provisions

— The Canada-Yukon Oil and Gas Accord Implementation Act, 1998, c. 5, s. 20, reads as follows:Every existing federal interest remains in effect on and after the transfer date until it expires or is cancelled, until it is surrendered by the holder of the interest or until otherwise agreed to by the holder of the interest and the territorial oil and gas minister.On and after the transfer date and subject to subsection (3), Yukon oil and gas laws apply in respect of every existing federal interest, except thatrights under an existing federal interest, within the meaning of subsection (4), may not be diminished; andthe term of an existing federal interest may not be reduced.An existing federal interest may be cancelled or rights under it suspended, in accordance with Yukon oil and gas laws, if the interest could have been cancelled or the rights suspended in like circumstances before the transfer date.For the purposes of subsection (2), rights under an existing federal interest are the following:in the case of a lease issued under the Canada Oil and Gas Land Regulations, C.R.C., c. 1518,the rights described in section 58 of those Regulations, as that section read on the transfer date, in respect of the lands described in the lease, anda right to the reissuance of the lease, as provided by section 63 of those Regulations, as that section read on the transfer date.Yukon oil and gas laws must include provisions corresponding to the provisions of this section for as long as any existing federal interest remains in effect.”

Federal laws of Canada reproduced under the Reproduction of Federal Law Order (SI/97-5); not the official version. Source: Justice Laws Website.