Indian Oil and Gas Regulations

Contents

Her Excellency the Governor General in Council, on the recommendation of the Minister of Indian Affairs and Northern Development, pursuant to section 4.1 and subsection 21(1) of the Indian Oil and Gas Act, makes the annexed Indian Oil and Gas Regulations.^note^note^note

Interpretation

1Definitions#

(1)The following definitions apply in these Regulations.

Act means the Indian Oil and Gas Act. (Loi)

actual selling price means

(a)in respect of oil, the price at which the oil is sold; and

(b)in respect of gas, the price or consideration payable that is specified in the gas sales contract, free of any fees or deductions other than transmission charges beyond the facility outlet. (prix de vente réel)

adjoining, in relation to two spacing units, means touching at a common point, without regard to any road allowances between the spacing units. (adjacentes)

bitumen means oil that does not flow to a well unless it is heated or diluted. (bitume)

exploration work includes mapping, surveying, examining geological, geophysical or geochemical data, test drilling and any other activities that are carried out by air, land or water and are related to the exploration for oil or gas. (travaux d’exploration)

external spacing unit, in relation to a First Nation, means any spacing unit that is not a First Nation spacing unit of that First Nation. (unité d’espacement externe)

First Nation spacing unit means a spacing unit in which 50% or more of the lands are First Nation lands of the same First Nation. (unité d’espacement d’une première nation)

horizontal section means the portion of a wellbore that has

(a)an angle of at least 80°, measured between the line extending from the initial point of penetration into the target zone to the end point of the wellbore in that zone and the line extending vertically downward from the initial point of penetration into that zone; and

(b)a minimum length of 100 m, measured from the initial point of penetration into the target zone to the end point of the wellbore in that zone. (tronçon horizontal)

horizontal well means a well that has been approved as a horizontal well by the provincial authority or a well with a horizontal section that has been approved by the provincial authority. (puits horizontal)

offset period means the period established in accordance with subsection 93(4). (délai de compensation)

offset well means a well that is located in a First Nation spacing unit adjoining an external spacing unit in which a triggering well is located and that is producing from the same zone as the triggering well. (puits de limite)

offset zone means the zone from which a triggering well is producing. (couche de compensation)

pool means a natural underground reservoir that contains or appears to contain an accumulation of oil or gas that is separate or appears to be separate from any other such accumulation. (bassin)

prescribed means prescribed by the Minister under subsection 5(1) of the Act. (Version anglaise seulement)

productive means producing or capable of producing oil or gas in a quantity that would warrant incurring

(a)the costs of completion, in the case of a well that has been drilled but not completed; or

(b)the costs of production, in the case of a well that has been completed. (productif)

provincial authority means the office, department or body that is authorized by law to make decisions, grant approvals, receive information or keep records respecting the exploration for, or the exploitation or conservation of, oil and gas in the province in which the relevant First Nation lands are located. (autorité provinciale)

service well means a well that is operated for observation or for the injection, storage or disposal of fluids. (puits de service)

spacing unit means an area in a zone that is designated as a spacing unit, a spacing area, a drainage unit or other similar unit by the provincial authority. (unité d’espacement)

subsurface contract means a permit or subsurface lease granted under the Act. (contrat relatif au sous-sol)

surface contract means a surface lease or right-of-way granted under the Act. (contrat relatif au sol)

surface rates means the amounts, referred to in subsections 73(2) and (3), that are to be paid by a surface contract holder. (droits de surface)

triggering well means a well that is producing from one or more external spacing units adjoining a First Nation spacing unit. (puits déclencheur)

unit agreement means an agreement that combines the rights or interests of all the holders of oil and gas rights or interests in all or part of a pool and that provides for the joint exploitation of the oil and gas and the payment of royalties based on an attribution of production rather than actual production, but does not include an agreement that attributes production from a well referred to in subsection 107(1). (accord de mise en commun)

well means a well that is used for the exploitation of oil or gas and includes a vertical well, a deviated well and a horizontal well. (puits)

zone means a stratum of lands identified as a zone in accordance with the log data set out in Schedule 3 or 4, as the case may be. (couche)

(2)A reference to a document that is incorporated by reference into these Regulations is a reference to the document as amended from time to time or, if the document no longer exists, to any successor to it that provides the same information.

General Rules

2Notice, document or information#

(1)Any notice, document or information that is sent or submitted under these Regulations must be in paper or electronic form or published on the website of Petrinex or any successor to Petrinex.

(2)A contract holder must, in the prescribed form, provide the Minister with their address for service and send him or her a notice of any change to that address.

(3)Any notice, document or information that the Minister sends to a holder in paper form at their address for service is deemed to have been received by the holder four days after the day on which it is sent.

(4)Any notice, document or information that the Minister sends to a holder in electronic form at their latest address for service or publishes on the website of Petrinex or any successor to Petrinex is deemed to have been received by the holder on the day on which it is sent or published.

(5)A person may apply to the Minister for a record search of non-confidential, contractual documentation that is in the Minister’s possession and stored in electronic form if the application is in the prescribed form and accompanied by the record search fee set out in Schedule 1.

3Information#

Despite any provision of these Regulations, a person is not obliged to submit information to the Minister that the Minister has stated is in his or her possession or is available to him or her from another source such as Petrinex.

4Form not prescribed#

When an application or other information is required by these Regulations to be submitted in a prescribed form but no form has been prescribed, the application or information may be submitted in any form.

5Alternative format#

When a notice, a document or information is required by these Regulations to be submitted in a specified format, the person required to submit it may use an alternative format if the Minister states that he or she has the capacity to read and use the information in that alternative format.

6Eligibility#

A person is eligible to be granted a contract if

(a)they are a corporation that is authorized by the laws of the relevant province to carry on business in that province or an individual who has reached the age of majority in that province;

(b)they are not in default under subsection 111(5); and

(c)in the case of a corporation, neither it nor any of its directors, officers or agents or mandataries has been convicted of an offence under subsection 18(2) of the Act within two years before the date of the bid, in the case of a grant by public tender, or the date of the application, in the case of a negotiated contract.

7Holder’s responsibility#

A contract holder must ensure that any requirement that is related to their contract and is imposed by these Regulations on a person other than the holder is satisfied.

8Liability — holders and persons with working interest#

(1)Every contract holder and person with a working interest in a contract is absolutely liable for any damage to the environment that is caused by operations carried out under the contract.

(2)Every operator, well licensee, pipeline licensee and facility licensee is absolutely liable for any damage to the environment that is caused by operations they carry out under the contract.

9Insurance required#

(1)A contract holder must obtain, and maintain during the term of the contract, an insurance policy that is adequate to cover all risks resulting from the operations to be carried out under the contract.

(2)The insurance policy must provide the following minimum coverage:

(a)comprehensive general liability insurance that covers the risks of damage caused by operations carried out under the contract with an inclusive bodily injury, death and property damage limit of at least $5,000,000 per occurrence, including occupier’s liability or liability for damage caused by immovables, employer’s liability, employer’s contingent liability, contractual liability, contractor’s protective liability, products liability, completed operations liability and contractor’s liability insurance;

(b)automobile liability insurance that covers all vehicles used in operations carried out under the contract with an inclusive bodily injury, death and property damage limit of at least $5,000,000 per occurrence; and

(c)if aircraft are to be used in operations carried out under the contract, aircraft liability insurance with an inclusive bodily injury, death and property damage limit of at least $10,000,000 per occurrence.

(3)Every insurance policy obtained by the holder must provide that the insurer’s right of subrogation is waived in favour of the Minister.

(4)The holder must send the Minister notice without delay if any coverage under their insurance policy is terminated and at least 30 days before the last day of coverage if the holder intends to cancel any of their coverage.

(5)The deductible of every insurance policy must not exceed 5% of the amount of insurance.

10Self-insurance#

A holder may satisfy the requirement imposed by subsection 9(1) by providing the Minister with a letter of self-insurance in the prescribed form in which the holder

(a)acknowledges liability for any damage caused by operations carried out under the contract; and

(b)declares that their financial resources are adequate to cover that liability.

11Contractor’s insurance#

A contract holder must ensure that any person that carries out operations under the contract, other than an employee, obtains and maintains an insurance policy that is adequate to cover all risks resulting from those operations.

12Contract area boundaries#

(1)The boundaries of a contract area must correspond to the boundaries of the legal land divisions of the relevant province if the lands in the contract area have been surveyed, or to the anticipated boundaries of those divisions if the lands have not been surveyed.

(2)If the lands in a contract area are surveyed during the term of the contract, the Minister must, after consulting with the holder and the council, amend the contract so that the description of the contract area complies with subsection (1).

(3)Subsections (1) and (2) do not apply if the lands in the contract area are First Nation lands whose configuration prevents compliance with those subsections.

13Survey plan#

(1)Every survey plan that is required under these Regulations must be

(a)plotted in accordance with the Canada Lands Surveys Act;

(b)approved by the Surveyor General of Canada; and

(c)recorded in the Canada Lands Survey Records.

(2)Subsection (1) does not apply to

(a)an exploration work survey plan; or

(b)a survey of lands under a treaty land entitlement agreement or a specific claim settlement agreement.

14Dispute#

If a dispute arises regarding the location of a well, facility or boundary referred to in a contract, the Minister may order the contract holder to have a survey carried out as soon as the circumstances permit.

15Annual meeting request#

(1)A council whose First Nation lands are subject to a contract may, no more than once a year, submit a request to the Minister in the prescribed form for a meeting with the contract holder for the purpose of discussing the operations that have been carried out, or are planned to be carried out, in the contract area.

(2)The Minister must send the holder notice of a meeting request.

(3)The holder must organize the meeting and ensure that it takes place within 90 days after the day on which the Minister’s notice is received. In the case of multiple holders, they may designate one of their number to attend as their representative.

(4)If the holder has more than one contract in the First Nation lands, operations carried out under all the contracts may be discussed at the same meeting.

(5)Any expense relating to the request for, preparation for or attendance at a meeting must be borne by the party that incurs the expense.

16Unforeseen incident#

An operator must, in the most expeditious manner possible, notify the Minister and the council of any unforeseen incident that occurs during operations carried out under a contract and that results, or could result, in bodily injury or death or in damage to First Nation lands or property. The operator must report the details of the incident, in the prescribed form, as soon as the circumstances permit.

17Person accompanying inspector#

For the purpose of monitoring compliance with the Act and these Regulations, a person may accompany an inspector who is inspecting a contract holder’s facilities and operations on First Nation lands if the person is authorized to do so by a written resolution of the council and the person has the certifications, and complies with the occupational health and safety requirements, required or imposed by the holder or by law.

18Payment of rent#

(1)The annual rent that is payable under a contract must be paid on or before the anniversary of the effective date of the contract.

(2)The rent that is payable for the year in which a contract ends must be paid and is not refundable. However, any rent that has been paid for a subsequent year must be refunded.

(3)Subsection (1) does not apply to a contract that provides otherwise and was granted before the day on which these Regulations came into force.

19Payment to Receiver General#

(1)All money that is owed to Her Majesty under these Regulations or a contract must be paid to the Receiver General for Canada.

(2)The money must be accompanied by a statement, in the prescribed form, indicating the purpose for which it is paid.

20Amendments#

(1)Any amendment to a contract or a bitumen recovery project requires the prior approval of the council and the Minister.

(2)The Minister must not approve an amendment unless

(a)an additional bonus is paid, if necessary, to reflect the fair value, determined in accordance with section 38, of the rights or interests granted by the amendment; and

(b)additional surface rates are paid, if necessary, in accordance with subsections 73(2) and (3).

(3)Subsection (1) does not apply to an amendment referred to in subsection 12(2) or to one that reduces the area of lands that are subject to a subsurface contract or a bitumen recovery project.

21Well data#

An operator that carries out operations in connection with a well must submit the following documents and information to the Minister and the council within the following time limits:

(a)before the day on which the well is spudded,

(i)a copy of the provincial licence authorizing the drilling of the well and a copy of the licence application,

(ii)the drilling and coring plan proposed for the well,

(iii)the geological prognosis,

(iv)any proposed horizontal drilling plan, and

(v)a copy of the surface lease survey plan;

(b)within 30 days after the day on which the well is rig-released,

(i)all daily drilling reports for the period beginning on the day on which the rig move begins and ending on the day of rig-release,

(ii)a copy of each wireline log prepared,

(iii)the results of any drill-stem test conducted,

(iv)a copy of the final downhole well drilling survey, if one is required by the provincial authority,

(v)any description, test or analysis resulting from an identification of any well sections that were cored, and

(vi)a copy of the geological report, if one is required by the provincial authority;

(c)within 30 days after the day on which the well is completed,

(i)all daily completion reports and the final downhole well schematic,

(ii)a copy of each wireline log prepared,

(iii)any core and fluid analyses prepared,

(iv)any swab reports prepared,

(v)the results of any pressure or flow tests conducted, including the results of any surface casing vent flow test,

(vi)a hydraulic fracturing fluid component information disclosure report, and

(vii)a detailed report of any downhole well intervention or stimulation;

(d)within 30 days after the day on which any recompletion or workover of the well is completed,

(i)all daily recompletion or workover reports,

(ii)a copy of each wireline log prepared,

(iii)any core and fluid analyses prepared,

(iv)any swab reports prepared,

(v)the results of any pressure or flow tests conducted, including the results of any surface casing vent flow test,

(vi)a hydraulic fracturing fluid component information disclosure report,

(vii)a detailed report of any downhole well intervention or stimulation, and

(viii)the final downhole well schematic;

(e)within 30 days after the day on which the well is downhole-abandoned, all daily operation reports relating to the downhole abandonment; and

(f)within 30 days after the day on which the well is surface-abandoned, all daily operations reports of the cut and cap operation and a copy of the final abandonment report submitted to the provincial authority.

22Additional information#

The operator must submit to the Minister and the council any additional technical information about the well that is necessary to determine its productivity.

23Confidential information#

(1)Any information that is submitted to the Minister or a council under the Act must be kept confidential until the end of the period in which such information must be kept confidential under the laws of the relevant province, unless the person that submitted it consents in writing to its disclosure.

(2)Despite subsection (1), seismic data submitted by an exploration licence holder under paragraph 33(3)(a) may be disclosed by the Minister or the council on the earlier of

(a)if the holder also holds a subsurface lease or permit in lands in the licence area, the day on which the lease expires or is continued, the initial term of the permit expires or, in the case of a permit issued under the Indian Oil and Gas Regulations, 1995, the permit is converted to one or more leases, and

(b)the fifth anniversary of the day on which the exploration work is completed.

(3)Any interpretation of seismic data, including maps, that is submitted to the Minister or a council under the Act may be disclosed only if the person that submitted it consents in writing to its disclosure.

(4)Despite subsections (1) to (3), the Minister may at any time disclose

(a)confidential information to a council if required to do so by the Act, any regulations made under the Act or a contract; and

(b)the results of an environmental review referred to in subsection 29(3), 57(2) or 75(2) to a council or the public.

24Incorrect information#

A person that submits information to the Minister and becomes aware that it is incorrect must submit the correct information to the Minister as soon as the circumstances permit.

25Approval of assignment#

(1)Any assignment of any of the rights or interests conferred by a contract must be approved by the Minister.

(2)Before the application for approval is submitted to the Minister, the assignee must meet with the council unless the council waives the meeting. The meeting must be face to face, unless the parties agree to another mode of meeting.

(3)Any expense relating to the request for, preparation for or attendance at a meeting must be borne by the party that incurs the expense.

(4)The application for approval must be in the prescribed form and include a statement by the assignee that a meeting with the council took place or that the council waived the meeting. The application must be accompanied by the assignment approval application fee set out in Schedule 1.

(5)The applicant must send the council a copy of the application for approval on or before the day on which the application is submitted to the Minister.

(6)The Minister must not approve the assignment if

(a)it is conditional;

(b)it would result in more than five persons having a right or interest in the contract;

(c)it assigns an undivided right or interest in the contract that is less than 1%;

(d)it divides the oil and gas rights or interests conferred by the contract;

(e)the assignee is not eligible under section 6;

(f)the assignment was not signed by the assignor and assignee; or

(g)the assignee fails to establish that they have the financial ability to fulfill the assignor’s obligations under the Act with respect to remediation and reclamation.

(7)If the Minister approves the assignment and signs it, he or she must send a copy to the assignor and assignee and a notice of the approval to the council.

(8)The assignment takes effect on the day on which the Minister approves it unless it provides for a different effective day.

26Liability#

(1)If the assignment is approved, the assignor and assignee are jointly and severally, or solidarily, liable for any obligation owing and any liability arising under the contract before the day on which the assignment is approved, even if the contract is subsequently assigned.

(2)Subsection (1) does not apply to an assignment that is approved before the coming into force of these Regulations.

Terms and Conditions To Be Included in Every Contract

27Compliance with laws#

(1)Every contract granted by the Minister under these Regulations includes the holder’s undertaking to comply with

(a)the Indian Act, and any orders made under that Act, as amended from time to time;

(b)the Act, and any regulations or orders made under the Act, as amended from time to time; and

(c)the laws of the relevant province, as amended from time to time, that relate to the environment or to the exploration for, or the exploitation, treatment, processing or conservation of, oil and gas, including equitable production, if those laws are not in conflict with the Act or any regulations or orders made under the Act.

(2)The provisions of any Act, regulation or order referred to in subsection (1) prevail over any terms and conditions of the contract, except for any terms and conditions respecting royalties that are the subject of a special agreement under subsection 4(2) of the Act, to the extent of any inconsistency. The provisions of any Act of Parliament, or any regulation or order made under an Act of Parliament, referred to in subsection (1) prevail over the laws of the province referred to in subsection (1), to the extent of any inconsistency.

(3)For the purposes of this section, provisions — whether legislative or contractual — are not inconsistent unless it is impossible for the holder to comply with both.

Exploration

Authorization

28Authorization to explore#

A person may carry out exploration work on First Nation lands if they

(a)hold an exploration licence;

(b)have obtained from the provincial authority any approval that is required to carry out exploration work in the province; and

(c)are in compliance with the terms and conditions of the licence and the approval.

Application for Exploration Licence

29Preliminary negotiation#

(1)Before applying for an exploration licence, an applicant and the council must agree on the location of the proposed seismic lines and on the seismic rates, if those rates have not already been fixed in a related subsurface contract.

(2)The application must be submitted to the Minister in the prescribed form and include

(a)the terms and conditions negotiated with the council;

(b)if the approval of the provincial authority is required to carry out exploration work, a statement that the approval has been received;

(c)a description of the proposed exploration program, including the licence area, the exploration work to be carried out, the equipment to be used, the name of the geophysical contractor to be engaged and the anticipated duration of the work;

(d)the results of an environmental review of the proposed exploration program that has been conducted by a qualified environmental professional who deals with the applicant at arm’s length; and

(e)the exploration licence application fee set out in Schedule 1.

(3)The results of the environmental review must be submitted in the prescribed form and include

(a)a site evaluation that is based on the site’s topography, soils, vegetation, wildlife, sources of water, existing structures, archeological and cultural resources, traditional ecological knowledge, current land uses and any other feature of the site that could be affected by the proposed exploration program;

(b)a description of the operations to be carried out during the proposed exploration program, the duration of each and its location on the site;

(c)a description of the short-term and long-term effects that each operation could have on the environment of the site and on any surrounding areas;

(d)a description of the proposed mitigation measures, the potential residual effects after mitigation and the significance of those effects; and

(e)a description of the consultations undertaken with the council and the First Nation members.

(4)If the exploration program can be carried out without causing irremediable damage to the First Nation lands, the Minister must send the application to the applicant and the council, along with a letter that sets out the environmental protection measures that must be implemented to permit the licence holder to carry out their exploration program.

(5)To obtain the exploration licence, the applicant must, within 90 days after the day on which the reviewed application is received, submit to the Minister three copies of the environmental protection measures letter and three original copies of the application signed by the applicant, along with a written resolution of the council approving the licence.

(6)If the requirements set out in this section are met, the Minister must grant the exploration licence for a period of one year. The terms and conditions of the licence are those set out in the application and the environmental protection measures letter. The licence takes effect on the day on which it is signed by the Minister.

Operations Under Exploration Licence

30Exercise of rights conferred by licence#

An exploration licence holder may exercise the rights conferred by the licence in a subsurface contract area, but in doing so must not interfere with any operations carried out under the subsurface contract.

31Priority#

Every exploration licence is subject to

(a)any surface rights or interests granted under an Act of Parliament; and

(b)any rights or interests related to the exploration or exploitation of minerals other than oil or gas in the licence area.

32Maximum drilling depth#

(1)An exploration licence holder must not drill to a depth of more than 50 m, unless authorized to do so by their licence.

(2)The holder must

(a)ensure that all environmental protection measures included in the licence are implemented and complied with;

(b)identify and mark the location of every test hole and shot hole that is drilled under the licence;

(c)repair and recondition any roads or road allowances that are damaged as a result of the exploration work as soon as the circumstances permit after the damage occurs;

(d)as soon as the circumstances permit, plug any hole that is drilled under the licence and that, during or after completion of the exploration work, collapses or emits gas, water or another substance;

(e)within 90 days after the day on which the exploration work is completed, pay compensation for the exploration work that was carried out, based on the rates specified in the licence or a related subsurface contract; and

(f)within 90 days after the day on which the exploration work is completed, submit to the Minister and the council

(i)a mylar sepia copy and a legible paper copy of a map, on a scale of not less than 1:50 000, that shows the location and ground elevation of every vibrating equipment station, test hole and shot hole,

(ii)summaries of any geologist’s and driller’s logs, indicating the depth and thickness of formations bearing water, sand, gravel, coal and other minerals of possible economic value, and

(iii)all technical information obtained from the drilling of each test hole.

33Exploration report#

(1)An exploration licence holder must submit an exploration report to the Minister within 90 days after the day on which the exploration work is completed.

(2)The report must comply with any exploration reporting requirements of the relevant province and must include, in addition to the documents and information referred to in paragraph 32(2)(f),

(a)a copy of every aerial photograph taken during the period of exploration;

(b)two copies of a geological report on the explored area, including stratigraphic data and structural and isopach maps on a scale of not less than 1:50 000; and

(c)a geophysical report on the explored area.

(3)The geophysical report must include

(a)if seismic work has been carried out,

(i)a mylar sepia copy and two legible paper copies of a map, on a scale of not less than 1:50 000, that shows contour lines drawn on the corrected time value at each source point for all significant reflecting horizons explored, with a contour line interval of not more than 10 m,

(ii)a mylar sepia copy and two prefolded paper copies of each stacked seismic cross-section, including migrated displays if that process has been carried out, with all significant reflecting horizons clearly labelled at both ends on one of the copies, and

(iii)two microfilm copies of all basic recorded data, including survey notes, chaining notes and observer reports;

(b)if a gravity survey has been carried out, two legible copies of a map, on a scale of not less than 1:50 000, that shows the location and ground elevation of each station, the final corrected gravity value at each station and gravity contour lines drawn on that value, with a contour line interval of not more than 2.5 µm/s²; and

(c)if a magnetic survey has been carried out, two legible copies of a map of the explored area, on a scale of not less than 1:50 000, that shows the location of the flight lines or grid stations and magnetic contour lines, with a contour line interval of not more than 5 nT.

(4)The holder may include maps at contour line intervals or scales other than those specified in subsections (2) and (3) if the alternative intervals or scales would enhance the interpretability of the maps.

(5)The Minister must make the information submitted under subsections (2) to (4) available to the council.

(6)In addition to the information submitted under this section, the holder must keep any information that was obtained as a result of the exploration work carried out in the contract area, including any printout, or magnetic digital display, of raw seismic data or interpreted seismic data, and must make it available for review by the Minister at the holder’s office during business hours after the later of

(a)if the holder also holds a subsurface lease or permit in lands in the licence area, 90 days after the day on which the lease expires or is continued, the initial term of the permit expires or, in the case of a permit issued under the Indian Oil and Gas Regulations, 1995, the permit is converted to one or more leases, and

(b)one year after the day on which the exploration work is completed.

34Remediation and reclamation#

When exploration work under an exploration licence is no longer being carried out, whether or not the licence has ended, the licence holder must ensure that all the lands on which the work was carried out are remediated and reclaimed.

Subsurface Rights or Interests

Grants of Subsurface Rights or Interests

General Rules

35Subsurface contracts#

(1)Oil and gas rights or interests in First Nation lands may be granted by the Minister under one of the following subsurface contracts:

(a)an oil and gas permit;

(b)an oil and gas lease.

(2)A subsurface contract must be granted in accordance with the public tender process set out in sections 39 to 42 or the negotiation process set out in sections 44 to 46, as chosen by the council. The negotiation process may be preceded by a call for proposals in accordance with section 43.

(3)When granting a subsurface contract, the Minister must grant all the rights to the oil and gas in each zone included in the contract area.

36Priority#

A subsurface contract holder’s rights or interests are subject to the right of an exploration licence holder to carry out exploration work in, and the right of any other subsurface contract holder to work through, the subsurface contract area.

37Multiple holders#

(1)A subsurface contract may be granted to no more than five persons, each having an undivided right or interest in the contract of at least 1%. The right or interest must be expressed in decimal form to no more than seven decimal places.

(2)If two or more persons have an undivided right or interest in a subsurface contract, they are jointly and severally, or solidarily, liable for all obligations under the contract, the Act and these Regulations.

38Fair value#

In determining the fair value of the rights or interests to be granted under a subsurface contract, the Minister must, in consultation with the council, consider the bonuses paid for grants of oil and gas rights or interests in other lands, which may be adjusted to take into account the following factors:

(a)the size of the other lands and their proximity to the First Nation lands;

(b)the time when the rights or interests in the other lands were granted;

(c)current oil and gas prices and the prices when the rights or interests were granted;

(d)the results of recent drilling operations in the vicinity of the other lands;

(e)similarities and differences in the geological features of the other lands and the First Nation lands; and

(f)any other factors that could affect the fair value of the rights or interests.

Public Tender Process

39Public tender#

The Minister may grant the oil and gas rights or interests in First Nation lands by way of public tender only if the council requests or consents to that process.

40Minister’s duties#

(1)When oil and gas rights or interests are to be granted by way of public tender, the Minister must, after consulting with the council, prepare a notice of tender.

(2)The notice of tender must include the following information:

(a)the type of subsurface contract to be granted;

(b)the terms and conditions of the contract, other than those set out in these Regulations, or the address of a website where the terms and conditions are set out, including

(i)a description of the lands to be included in the contract area and the oil and gas rights or interests to be granted,

(ii)the surface rates and seismic rates,

(iii)the initial and intermediate terms of the permit or the term of the lease, as the case may be,

(iv)in the case of a permit, the earning provisions for the initial term, including the drilling commitment and deadline for completion, the target zone or depth to which each earning well must be drilled and a description of the lands to be earned by each, and

(v)the royalty to be paid, if it differs from the royalty provided for in these Regulations;

(c)the instructions for submitting a bid, including any information to be provided by bidders, the place where a bid may be submitted and the deadline for submission; and

(d)a statement indicating that the bidder acknowledges that they have reviewed and understood the terms and conditions of the contract to be granted and will be bound by those terms and conditions if theirs is the winning bid.

(3)The Minister must submit a copy of the proposed notice of tender to the council before publishing it and, if it is approved, must publish it

(a)in a publication known to the industry, such as the Daily Oil Bulletin published by JuneWarren-Nickle’s Energy Group; or

(b)on a website on which the Minister publishes information about oil and gas in First Nation lands.

41Submission of bids#

(1)All bids must be submitted in accordance with the instructions set out in the notice of tender, be sealed and include

(a)the subsurface contract application fee set out in Schedule 1;

(b)the rent for the first year of the contract;

(c)the bonus; and

(d)the name and address for service of each proposed contract holder and the percentage share of each.

(2)The fee, rent and bonus must be paid in certified funds unless the notice of tender specifies a different form of payment.

42Opening of bids#

(1)After the tender closes, the Minister must without delay open the bids, exclude any bids that do not meet the requirements of section 41, identify the bid with the highest bonus and send the council notice of that bid.

(2)The council or a person designated by the council may be present when the Minister opens the bids.

(3)If the highest bonus is included in more than one bid, the Minister must republish the notice of tender.

(4)The council may, within 15 days after the day on which the tender closes, notify the Minister by written resolution that it rejects the bid with the highest bonus. If such a notice is received, all bids must be rejected.

(5)If a council notifies the Minister that it approves the bid with the highest bonus, that bid cannot later be rejected under subsection (4).

(6)If a notice rejecting the bid is not received, the Minister must accept it and send the winning bidder a notice of acceptance. The contract takes effect on the day on which the tender closes.

(7)The Minister must publish the name of the winner and the winning bonus amount or, if no bid was accepted, a notice to that effect, in the publication or on the website where the notice of tender was published.

(8)Except for the name of the winning bidder and bonus amount, the information in bids must be kept confidential.

(9)The Minister must prepare the subsurface contract and send a copy to the council and the winning bidder.

(10)The Minister must return the fee, rent and bonus included in each unsuccessful bid to the person that submitted it.

Call for Proposals Process

43Call for proposals#

For the purpose of soliciting interest in rights or interests in First Nation lands, either the council, or the Minister jointly with the council, may make a call for proposals. The call may be made by public notice or by other means and must include the following information:

(a)the type of subsurface contract to be granted;

(b)a description of the lands to be included in the contract area and the oil and gas rights or interests to be granted;

(c)the terms and conditions of the contract, other than those set out in these Regulations;

(d)the elements that will be considered in evaluating the proposals;

(e)a statement that the proposals that are received will form the basis for negotiations with the council and the Minister; and

(f)a statement that, in addition to the terms and conditions negotiated, the contract will include the terms and conditions set out in these Regulations.

Negotiation Process

44Application for subsurface contract#

(1)A person may apply to the Minister for a subsurface contract that confers oil and gas rights or interests in one or more zones in First Nation lands.

(2)Before applying for a subsurface contract, an applicant and the council must agree on the following terms and conditions:

(a)the type of subsurface contract to be applied for;

(b)a description of the lands to be included in the contract area and the oil and gas rights or interests to be granted;

(c)the amount of the bonus to be paid;

(d)the initial and intermediate terms of the permit or the term of the lease, as the case may be;

(e)in the case of a permit, the earning provisions for the initial term, including the drilling commitment and deadline for completion, the target zone or depth to which each earning well must be drilled and a description of the lands to be earned by each; and

(f)the royalty to be paid, if it differs from the royalty provided for in these Regulations.

(3)The application to the Minister must be in the prescribed form, set out the terms and conditions negotiated by the applicant and the council and be accompanied by the subsurface contract application fee set out in Schedule 1.

(4)Any information that is disclosed during the negotiations referred to in subsection (2) or in an application referred to in subsection (3) must be kept confidential.

45Conditions of approval#

(1)The Minister must not approve the application unless

(a)the lands and oil and gas rights or interests described in the application have been surrendered or designated under section 38 of the Indian Act; and

(b)the proposed bonus reflects the fair value of the rights or interests to be granted, determined in accordance with section 38 of these Regulations.

(2)If the application is approved, the Minister must prepare the subsurface contract and send a copy to the applicant and the council. The Minister must fix and include in the contract the surface rates to be paid under any related surface contract and the seismic rates to be paid under any related exploration licence.

(3)The surface rates must be fixed in accordance with subsections 73(2) and (3). The seismic rates must be comparable to seismic rates for exploration on lands, excluding provincial Crown lands, that are similar in size, character and use.

(4)If the application is not approved, the Minister must send the applicant and the council a notice of refusal that sets out the reasons for the refusal.

46Granting of contract#

(1)The Minister must grant the contract if he or she receives the following within 90 days after the day on which a copy of the contract has been received by both the applicant and the council:

(a)a written resolution of the council approving the terms and conditions of the contract and stating that the council has chosen to have the rights or interests described in the contract granted by way of negotiation rather than public tender;

(b)the bonus and first year’s rent; and

(c)two original copies of the contract — as well as an original copy for each future contract holder — all of which are signed by each of them.

(2)The contract takes effect on the day on which it is granted, unless it provides otherwise.

Terms and Conditions of Subsurface Contracts

47Rights conferred by contract#

A subsurface contract holder has the exclusive right to exploit the oil and gas in the lands in the contract area, to treat that oil, to process that gas and to dispose of that oil and gas.

48Initial term of permit#

(1)If the lands in a permit area are located in a province set out in column 1 of the table to Schedule 2 and in a region set out in column 2, the initial term of the permit is the term set out in column 3. Otherwise, the initial term is five years.

(2)If the lands in a permit area are located in more than one region set out in column 2 of the table to Schedule 2, the initial term is the term for the region in which the greatest portion of the lands is located. If the portion of lands in each region is the same, the initial term is the longer of the terms set out in column 3.

(3)The intermediate term of a permit is three years.

49Term of lease#

The term of an oil and gas lease is three years.

50Term — exception#

(1)Despite subsections 48(1) and (2) and section 49, with the consent of the applicant and the council, the Minister may fix the initial term of a permit or the term of a lease at a number of years that is greater than the number established by those provisions, to a maximum of five years.

(2)With the consent of the holder, the term of a subsurface contract may be amended, in accordance with subsection 20(1), to a maximum of five years.

51Annual rent#

The annual rent for a subsurface contract is $5 per hectare or $100, whichever is greater.

Selection of Lands for Intermediate Term of Permit

52Lands earned#

(1)A permit holder earns lands, and may select from those lands for the intermediate term of the permit, if, during the initial term, they have, in accordance with the earning provisions of their permit,

(a)drilled a new well in the permit area; or

(b)re-entered an existing well in the permit area and drilled at least 150 m of new wellbore.

(2)If a holder fails to meet a deadline set out in an earning provision of their permit, the permit terminates on the day of the deadline with respect to all lands that have not been earned on or before that day.

(3)A holder that has earned lands may select from those lands down to the base of the deepest zone into which they have drilled, as identified in accordance with Schedule 3.

(4)The lands selected under subsection (3) must

(a)be contiguous, if their configuration permits; and

(b)include the entire spacing unit in which the earning well is located.

53Area less than 75%#

(1)A permit holder that has drilled a well in a spacing unit whose area is composed of less than 75% First Nation lands may select only lands in the section in which the well is located, down to the base of the deepest zone into which they have drilled.

(2)A holder that has drilled a new well, but has not drilled to the extent required by the earning provisions of their permit, may select only lands in the section in which the well is located, down to the base of the deepest zone into which they have drilled.

(3)A holder that has re-entered and completed a well, but has not drilled to the extent referred to in paragraph 52(1)(b) and the earning provisions of their permit, may select only lands in the spacing unit in which the well is completed.

54Application for approval#

(1)A holder that wants a grant of oil and gas rights or interests for the intermediate term of their permit must apply to the Minister for approval of their selection of lands before the day on which the initial term of the permit expires or

(a)if the permit has terminated under subsection 52(2), within 15 days after the day referred to in that subsection; or

(b)if the deadline for applying has been extended under subsection 62(2), before the extension expires.

(2)A holder that fails to apply within the relevant deadline referred to in subsection (1) may apply for approval if the application is submitted within 15 days after the deadline and is accompanied by a late application fee of $5,000.

(3)The application must be in the prescribed form and include

(a)an identification and description of each well that has been drilled and each well that has been re-entered and completed;

(b)a description of the lands, including the zones, selected for the intermediate term of the permit; and

(c)the rent for the first year of the intermediate term.

(4)Information about a well that is drilled, or re-entered and completed, within 30 days before the relevant deadline may be submitted up to 15 days after that deadline, unless the holder has received an extension under subsection 62(2).

(5)On receiving an application, the Minister must

(a)approve the selection of lands if the requirements of section 52 are met; and

(b)grant the holder the oil and gas rights or interests in the selected lands for the intermediate term of the permit if the holder has complied with the requirements of the Act, these Regulations and their permit.

(6)If the selection is approved and the oil and gas rights or interests are granted, the Minister must send the holder and the council a notice of the approval and a description of the lands, including the zones, selected for the intermediate term of the permit. If the selection is not approved, the Minister must send the holder a notice of refusal that sets out the reasons for the refusal.

55Transitional provision#

Sections 47 to 54 do not apply to a contract that was granted under the Indian Oil and Gas Regulations, 1995.

Bitumen Recovery Project Approval

56Application for approval#

(1)A subsurface contract holder may apply to the Minister for approval of a bitumen recovery project if they have achieved the minimum level of evaluation and have applied to the provincial authority for approval of the project.

(2)The minimum level of evaluation is achieved when

(a)one well is drilled on each section of the lands that are subject to the contract — if the section is in the proposed bitumen recovery project area — and at least 25% of those wells are cored; or

(b)one well is drilled on at least 60% of the sections of the lands that are subject to the contract — if the sections are in the proposed bitumen recovery project area — at least 25% of those wells are cored and seismic data are obtained over at least 3.2 km in each undrilled section.

57Content of application#

(1)An application for approval of a bitumen recovery project must be in the prescribed form and include

(a)a description of the lands to be included in the project;

(b)evidence that the minimum level of evaluation has been achieved;

(c)a statement that the subsurface contract holder has applied for or received the provincial authority’s approval of the project;

(d)the results of an environmental review of the project that has been conducted by a qualified environmental professional who deals with the holder at arm’s length;

(e)the terms and conditions respecting the royalty to be paid for the oil and gas recovered from lands in the project area;

(f)the reporting requirements for the project;

(g)a detailed description of the project, including its location, size and scope, the operations to be carried out, the schedule of pre-construction, construction and start-up operations and the reasons for selecting that schedule;

(h)a map indicating all the rights and interests in the lands in the project area and in any area that is likely to be affected by project operations;

(i)an aerial photographic mosaic of the project area at a scale that is adequate to show the location of the project components, including wells, facilities, tanks, access roads, railways, pipelines, public utility corridors, tailings ponds and waste storage sites;

(j)a detailed description of storage and transportation facilities for the oil and gas, including the size of any pipeline that may be used and the name of the entity that owns it;

(k)the anticipated rate of production of the oil and gas for the period for which approval is sought;

(l)the year and month in which the annual minimum level of production of bitumen will be achieved;

(m)a description of the energy sources to be used and their anticipated quantity and cost, along with a comparison to alternative sources; and

(n)the term of the approval sought, along with the anticipated starting and completion dates of the project.

(2)The results of the environmental review of the bitumen recovery project must be submitted in the prescribed form and include

(b)a description of the operations to be carried out during the project, the duration of each and its location on the site;

(c)a description of the short-term and long-term effects that each operation could have on the environment of the site and on any surrounding areas;

(d)a description of the proposed mitigation measures, the potential residual effects after mitigation and the significance of those effects; and

(e)a description of the consultations undertaken with the council and the First Nation members.

(3)After reviewing the application, the Minister must send the applicant and the council a letter that sets out the environmental protection measures that must be implemented to permit the subsurface contract holder to carry out operations under the project.

58Approval#

(1)The Minister must approve the bitumen recovery project if

(a)the applicant has achieved the minimum level of evaluation of the lands in the project area;

(b)a written resolution of the council approving the project has been submitted;

(c)the application meets the requirements of subsections 57(1) and (2);

(d)the project has been approved by the provincial authority; and

(e)the project can be carried out without causing irremediable damage to the First Nation lands.

(2)The approval may include any terms and conditions that are necessary to permit the Minister to verify the progress of operations carried out under the project, payment of the approved royalty and implementation and compliance with the environmental protection measures.

59Surface contract required#

(1)The operations under a bitumen recovery project must not begin until the subsurface contract holder has obtained the surface contracts required by these Regulations.

(2)The holder must ensure that all environmental protection measures included in the approval are implemented and complied with.

60Minimum level of production#

(1)The annual minimum level of production of bitumen from the lands that are subject to a bitumen recovery project is equal to an average of 2 400 m³ per section in the project area.

(2)If the annual minimum level of production of bitumen from the lands that are subject to the bitumen recovery project is not achieved in any year following the month in which that level was to be achieved, the subsurface contract holder must pay compensation equal to 25% of the difference between the value of the minimum level of production and the value of the actual level of production.

(3)For the purpose of calculating the compensation, the price of bitumen is deemed to be the monthly Bitumen Floor Price published by the Alberta provincial authority for the relevant time period.

(4)This section does not apply if the lands that are subject to the bitumen recovery project are the subject of an authorization under section 42 of the Indian Oil and Gas Regulations, 1995.

61Additional lands, wells or facilities#

Once a bitumen recovery project has been approved, the subsurface contract holder must obtain the approval of the Minister and the council before adding lands, wells or facilities to the project.

Drilling Over Expiry

62Application for extension#

(1)A subsurface contract holder may apply to the Minister, in the prescribed form, for an extension of the deadline for applying for approval of a selection of lands under subsection 54(1) or for continuation under section 64 if

(a)the holder has spudded or re-entered a well for the purpose of deepening it or completing a new zone, but cannot finish the operation before the relevant term expires;

(b)the application is submitted before the relevant term expires;

(c)the application identifies the well and indicates when it was spudded or re-entered; and

(d)the application includes the rent for the following year.

(2)If an application is submitted in accordance with subsection (1), the Minister must extend the deadline for applying for approval of a selection of lands or for continuation to the 30th day after the day on which the spudded or re-entered well is rig-released. The Minister must send the council a notice of the extension.

(3)During an extension, the holder may continue to produce from any wells in the contract area that are already producing, but must not spud or re-enter any other wells in that area.

(4)This section applies to a permit or lease granted under the Indian Oil and Gas Regulations, 1995.

Continuation of Subsurface Contracts

63Qualifying lands#

(1)A subsurface contract may be continued with respect to the zones, identified in accordance with Schedule 4, that are in a spacing unit

(a)that contains a productive well;

(b)that is subject, in whole or in part, to a unit agreement that includes lands in which a productive well is located, or to an oil or gas storage agreement that has been approved by the provincial authority;

(c)that is subject to a bitumen recovery project that has been approved by the Minister;

(d)that is subject to a project, other than a bitumen recovery project, that has been approved by the provincial authority and includes lands in which a productive well is located;

(e)in respect of which an offset notice has been received in the six months before the day on which the application for continuation is submitted or in respect of which a compensatory royalty is being paid;

(f)that is not producing but is shown by mapping to be capable of producing from the same pool from which a well on an adjoining spacing unit is productive; or

(g)that is potentially productive.

(2)For the purposes of subsection (1), each spacing unit from which a horizontal well or deviated well is productive is deemed to contain a productive well.

(3)For the purpose of paragraph (1)(g), a spacing unit is potentially productive if

(a)it contains a well that is in a mapped pool, is neither productive nor abandoned and

(i)was previously producing, or

(ii)contains evidence of the presence of hydrocarbons whose potential productivity has not been conclusively determined;

(b)it contains an abandoned well and any zone penetrated by the well has remaining oil or gas reserves; or

(c)it has not been drilled, there is evidence that it may be part of a productive pool and it is within a quarter-section in the case of oil — or a section in the case of gas — that adjoins any spacing unit referred to in paragraphs (1)(a) to (e).

64Application for continuation#

(1)An application for the continuation of a subsurface contract may be made to the Minister before the day on which the lease or the intermediate term of the permit expires.

(2)The application must be in the prescribed form and include

(a)a description of the lands, including the zones, with respect to which continuation is sought;

(b)an indication of the basis for continuation under subsection 63(1) along with evidence of that basis; and

(c)the rent for the first year of the continuation.

65Determination#

(1)On receiving an application for continuation, the Minister must determine which lands described in the application are in a spacing unit referred to in any of paragraphs 63(1)(a) to (e) and must continue the contract with respect to those lands.

(2)If the Minister determines that lands described in the application are in a spacing unit referred to in paragraph 63(1)(f) or (g), he or she must send the holder an offer to continue the contract with respect to those lands.

(3)The Minister must continue the contract with respect to lands in a spacing unit referred to in paragraph 63(1)(f) or (g) if, within 30 days after the day on which the offer of continuation is received, the holder pays the Minister a bonus equal to the greater of

(a)$2,000, and

(b)$400 for each full or partial legal subdivision or, if the lands have not been divided into legal subdivisions, $400 for each unit of land equivalent to 16 hectares, rounded up to the nearest whole number of units.

(4)The Minister must send the holder and the council a notice of his or her determination and — if the contract is continued — a description of the lands, including the zones, with respect to which it is continued as well as the basis for continuation.

(5)Before notice of the Minister’s determination is received, the holder may continue to produce from any wells in the contract area that are already producing, but must not spud or re-enter any other wells in that area.

(6)If the contract is not continued, the Minister must refund the rent submitted with the application. If the contract is continued only in part, the Minister must refund the rent for the lands with respect to which the contract is not continued.

66Continuation requested by council#

(1)The Minister may continue, for a maximum period of five years, a contract in respect of lands for which continuation was not granted under subsection 65(1) or lands for which continuation was granted under subsection 65(3) if

(a)the council requests the Minister to do so in a written resolution sent to the Minister that describes the lands, including the zones, to which the request relates and the requested period of continuation;

(b)a request for continuation under this subsection has not previously been made in respect of those lands;

(c)the written consent of the holder is sent to the Minister;

(d)the resolution and consent are sent

(i)in the case of a contract in respect of lands for which continuation was not granted under subsection 65(1), within 30 days after the day on which the notice referred to in subsection 65(4) is received, and

(ii)in the case of a contract in respect of lands for which continuation was granted under subsection 65(3), within 30 days after the day on which the continuation expires; and

(e)the holder has paid the rent for the first year of the continuation.

(2)If the Minister determines that an additional bonus must be paid to reflect the fair value, determined in accordance with section 38, of the rights or interests to be continued, the Minister must not continue the contract unless that additional bonus is paid.

67Failure to apply for continuation#

(1)If a holder has not applied for continuation before the deadline referred to in subsection 64(1), the Minister must determine, as soon as the circumstances permit and on the basis of the information in his or her possession, whether their contract is eligible for continuation under any of paragraphs 63(1)(a) to (e).

(2)If the contract is eligible for continuation, the Minister must send the holder a notice that includes the following information:

(a)a description of the lands, including the zones, with respect to which the contract is eligible for continuation;

(b)the basis for continuation; and

(c)the requirements for an application for continuation, as well as the deadline for submission.

(3)A holder that has received a notice of eligibility may, within 30 days after the day on which the notice is received, apply to the Minister, in the prescribed form, for continuation of the contract with respect to any of the lands described in the notice.

(4)The application must include a description of the lands, including the zones, with respect to which continuation is sought, the rent for the first year of the continuation and a late application fee of $5,000.

(5)If the holder pays the required rent and fee, the Minister must continue the contract with respect to the lands described in the application and send the holder and the council a notice of the continuation that describes the lands, including the zones, with respect to which it is continued as well as the basis for continuation.

68Indefinite continuation#

(1)A contract that is continued on the basis of any of paragraphs 63(1)(a) to (e) continues so long as the lands that are subject to the contract continue to be eligible on that basis or until the contract is surrendered or cancelled.

(2)A contract that is continued under subsection 65(3) continues for a period of one year after the day on which the contract would have expired had it not been continued.

69Non-productivity — oil and gas#

(1)If a contract that is continued in respect of lands on the basis of paragraph 63(1)(a), (b), (d) or (e) ceases to be eligible for continuation on that basis, the Minister must send the holder a notice of non-productivity that describes those lands and indicates the basis on which the contract has ceased to be eligible.

(2)A contract referred to in subsection (1) expires with respect to the lands described in the notice of non-productivity one year after the day on which the notice is received.

(3)Before the expiry of a contract with respect to lands described in a non-productivity notice, the holder may apply under section 64 to have the contract continued with respect to those lands on the basis of any of paragraphs 63(1)(a) to (e) other than the basis mentioned in the notice.

(4)Before the expiry of a contract continued under subsection 65(3) or section 66, the holder may apply under section 64 to have the contract continued on the basis of any of paragraphs 63(1)(a) to (e).

70Inadequate productivity — bitumen#

(1)In the case of a contract continued under paragraph 63(1)(c), if the annual minimum level of production of bitumen from the lands that are subject to the bitumen recovery project is not achieved in any three years, whether or not the years are consecutive, the Minister must send the holder a notice of inadequate productivity with respect to those lands.

(2)If the annual minimum level of production of bitumen from the lands that are subject to the bitumen recovery project is not achieved in any year following the day on which the notice of inadequate productivity is received,

(a)the project terminates on the final day of that year; and

(b)the contract expires on the final day of that year, unless it is continued under subsection (3).

(3)When the Minister becomes aware that the annual minimum level of production of bitumen from the lands that are subject to a bitumen recovery project will not be achieved in a year and the contract may expire under paragraph (2)(b), he or she must determine, as soon as the circumstances permit and on the basis of the information in his or her possession, whether the contract is eligible for continuation under any of paragraphs 63(1)(a), (b), (d) or (e) and, if so, must continue the contract on that basis.

71Transitional provision — continuation#

(1)Sections 63 to 68 apply to the continuation of any subsurface lease that was granted under the Indian Act or the Act before these Regulations came into force.

(2)Section 69 applies to a subsurface lease that was continued under the Indian Act or the Act before these Regulations came into force if the lands in the lease area cease to be eligible for continuation on the basis on which the lease was continued.

(3)Section 70 does not apply if the lands that are subject to the bitumen recovery project are the subject of an authorization under section 42 of the Indian Oil and Gas Regulations, 1995.

Surface Rights or Interests

72Authorization#

(1)A person may carry out surface operations on First Nation lands for the purpose of exploiting oil and gas if

(a)in the case of operations that require crossing over or going through First Nation lands, they hold a right-of-way in those lands; and

(b)in the case of operations that require the exclusive occupation and use of the surface of First Nation lands, they hold a surface lease in respect of those lands.

(2)A person that intends to apply for a surface contract in respect of First Nation lands to carry out operations referred to in subsection (1) may, with the authorization of the council and any First Nation member in lawful possession of those lands, enter on the lands to determine the location of proposed facilities, conduct surveys and carry out any operation necessary to submit an application under section 75.

73Preliminary negotiation#

(1)Before applying for a surface contract, the applicant must provide the council, and any First Nation member in lawful possession of lands in the proposed contract area, with a survey sketch of that area and must reach an agreement with them on the following:

(a)the lands to be included in the contract area;

(b)the operations that will be carried out on those lands;

(c)the surface rates, if they have not already been fixed by the Minister in a related subsurface contract; and

(d)if a service well is to be drilled or an existing well is to be used as a service well, the permitted uses of the well and the amount of compensation to be paid in respect of the well.

(2)In the case of a right-of-way, the surface rates consist of

(a)a right-of-entry charge of $1,250 per hectare, subject to a minimum charge of $500 and a maximum charge of $5,000; and

(b)initial compensation based on the fair value of lands that are similar in size, character and use.

(3)In the case of a surface lease, the surface rates consist of

(a)the right-of-entry charge referred to in paragraph (2)(a);

(b)initial compensation based on the fair value of lands that are similar in size, character and use, the loss of use of the lands, adverse effects and general disturbance; and

(c)the annual rent for subsequent years, based on the loss of use of the lands and adverse effects.

74Negotiation breakdown#

If an agreement cannot be reached on the amount of the initial compensation or annual rent to be paid, the Minister must, at the request of the applicant, the council or a First Nation member in lawful possession of lands in the contract area, determine the amount in accordance with subsection 73(2) or (3).

75Application for surface contract#

(1)The application for a surface contract must be submitted to the Minister in the prescribed form and include

(a)the terms and conditions negotiated with the council and any First Nation member in lawful possession of lands in the contract area;

(b)a survey plan of the lands to be included in the contract area;

(c)the results of an environmental review of the operations to be carried out in the contract area that has been conducted by a qualified environmental professional who deals with the applicant at arm’s length; and

(d)the surface lease or right-of-way application fee set out in Schedule 1.

(2)The results of the environmental review must be submitted in the prescribed form and include

(b)a description of the operations to be carried out on the lands, the duration of each and its location on the site;

(c)a description of the short-term and long-term effects that each operation could have on the environment of the site and on any surrounding areas;

(d)a description of the proposed mitigation measures, the potential residual effects after mitigation and the significance of those effects; and

(e)a description of the consultations undertaken with the council and the First Nation members.

(3)If the application meets the requirements of subsection (1) and the proposed operations can be carried out without causing irremediable damage to the First Nation lands, the Minister must send the applicant and the First Nation a copy of the contract that includes

(a)the terms and conditions negotiated with the council and any First Nation member in lawful possession of lands in the contract area; and

(b)the environmental protection measures that must be implemented to permit the holder to carry out operations under the contract.

(4)The Minister must grant the contract if he or she receives the following:

(a)four original copies of the contract, signed by the applicant;

(b)a written resolution of the council approving the contract and the written consent of any First Nation member in lawful possession of lands in the contract area; and

(c)the right-of-entry charge and initial compensation owed under the contract.

(5)The holder must ensure that all environmental protection measures included in the contract are implemented and complied with.

76Term#

A surface contract ends on the day on which its surrender has been approved by the Minister, unless the contract provides otherwise.

77Renegotiation of rent#

(1)Unless a surface lease provides otherwise, the holder must renegotiate the amount of the rent with the Minister, the council and any First Nation member in lawful possession of lands in the lease area at the end of the shorter of

(a)every five-year period, and

(b)any period fixed by the laws of the relevant province for the renegotiation of surface leases in lands that are not First Nation lands.

(2)The Minister must amend the lease to reflect the rent renegotiated under subsection (1) if

(a)a written resolution of the council approving the renegotiated rent is submitted along with the written consent of any First Nation member in lawful possession of lands in the lease area; and

(b)the Minister determines that the renegotiated rent is fair on the basis of the criteria referred to in paragraph 73(3)(c).

(3)If an agreement cannot be reached in renegotiating the rent, the Minister must, at the request of the holder, the council or any First Nation member in lawful possession of lands in the lease area, determine the rent on the basis of the criteria referred to in paragraph 73(3)(c) and amend the lease accordingly.

78Abandonment, remediation and reclamation#

If the lands in a surface contract area are no longer used for the uses for which the contract was granted, the holder must abandon any well and facilities in the area and remediate and reclaim those lands.

Royalties

79Payment of royalty#

(1)Except as otherwise provided in a special agreement entered into under subsection 4(2) of the Act, a subsurface contract holder must pay a royalty, in an amount calculated in accordance with Schedule 5, on the oil and gas recovered from, or attributed to, lands in the subsurface contract area.

(2)If a special agreement entered into under subsection 4(2) of the Act provides that the royalty on oil or gas is to be calculated using a monthly index price or corporate pool price rather than the actual selling price, the holder must, in the prescribed form, provide the Minister with the index price or corporate pool price for each month in which the oil or gas is produced.

80Deadline for payment#

The royalty must be paid on or before the 25th day of the third month after the month in which the oil or gas is produced.

81Royalty — every sale#

(1)Subject to subsection (2), every sale of oil or gas that is recovered from, or attributed to, lands in a subsurface contract area must include the sale, on behalf of Her Majesty in right of Canada, of any oil or gas that constitutes the royalty payable under the Act.

(2)After giving the contract holder notice, and having regard to any obligations that the holder may have in respect of the sale of oil or gas, the Minister may, with the prior approval of the council, direct the holder to pay all or part of the royalty in kind for a specified period or until the Minister directs otherwise.

82Keeping of information#

(1)Any person that produces, sells, acquires or stores oil or gas that has been recovered from First Nation lands, or acquires a right to such oil or gas, must keep, for a period of 10 years, all information that may be used to calculate the royalty owing in respect of that oil and gas, including any information required by this section.

(2)Any person referred to in subsection (1) must submit the following information to the Minister in the prescribed form as soon as it becomes available:

(a)the volume and quality of the oil or gas produced, sold, acquired or stored, or to which a right was acquired, by that person during the month in which the oil or gas was produced;

(b)the value for which the oil or gas, or a right to the oil or gas, was sold or acquired;

(c)any costs and allowances to be taken into account in determining the royalty payable on the oil or gas; and

(d)any other information that is required to calculate or verify the royalty payable.

(3)The Minister may require a person referred to in subsection (1) to submit information for the purpose of determining whether the parties to a transaction are related parties.

(4)For the purpose of subsection (3), persons are related parties if they are related persons, affiliated persons or associated corporations within the meaning of subsection 251(2), section 251.1 and subsection 256(1), respectively, of the Income Tax Act.

83Order to submit plan or diagram#

(1)For the purpose of verifying the royalty payable under a contract, the Minister may order an operator to submit a plan or diagram, drawn to a specified scale, of any facility that is used by the operator in exploiting oil or gas.

(2)An operator that receives an order must submit the requested plan or diagram within 30 days after the day on which the order is received.

84Notice to submit documents#

(1)For the purpose of verifying the royalty payable under a contract, the Minister may send a notice requiring any person that has sold, purchased or swapped oil or gas recovered from First Nation lands to provide any of the following documents:

(a)a signed copy of any written sales contract or, if the contract was unwritten, a document that sets out its terms and conditions;

(b)a transaction statement, invoice or other document that sets out the details of the transaction;

(c)any agreement between persons respecting the costs and allowances to be taken into account in determining the royalty payable on the oil or gas.

(2)A person that receives a notice sent under subsection (1) must submit the requested documents within 14 days after the day on which the notice is received.

First Nation Audits and Examinations

General Rules

85Agreement required#

(1)A First Nation may conduct an audit or examination for the purpose of verifying the royalties payable on oil or gas recovered from its lands if

(a)its council has entered into an audit or examination agreement with the Minister; and

(b)the audit or examination is conducted in accordance with the agreement and these Regulations.

(2)A council that has obtained preliminary approval of an audit or examination under section 89 may request that the Minister enter into an audit or examination agreement under section 90.

86Qualifications#

(1)A person who conducts an audit or examination under the Act must have the credentials and experience required to carry out their role in the audit or examination in accordance with generally accepted auditing standards.

(2)A person who conducts an audit or examination under the Act, or accompanies an auditor or examiner,

(a)must not be employed by, be affiliated with or represent the oil or gas company that is the subject of the audit or examination;

(b)must have the certifications and comply with the occupational health and safety requirements required or imposed by the contract holder or by law; and

(c)must keep confidential any documents or information they obtain in connection with the audit or examination and must comply with the security requirements imposed by the contract holder or by law.

87Confidentiality — First Nation#

(1)A First Nation that conducts an audit or examination must keep confidential any documents or information it obtains in connection with the audit or examination and must comply with the security requirements imposed by the contract holder or by law.

(2)Despite subsection (1), the council must provide the Minister with a copy of all audit or examination reports and working papers within 30 days after the day on which the audit or examination is completed.

Preliminary Approval

88Application for preliminary approval#

To obtain preliminary approval of an audit or examination, a council must apply to the Minister in the prescribed form. The application must include

(a)the name of the person whose documents and information are to be audited or examined;

(b)the name and location of each facility in which the audit or examination will be conducted and the name of the facility’s operator;

(c)the type of audit or examination to be conducted;

(d)the period to be covered by the audit or examination;

(e)the anticipated dates for starting and completing the audit or examination;

(f)the reasons that the council believes that the audit or examination is necessary; and

(g)a statement indicating whether the council is prepared to cover the costs of the audit or examination.

89Decision#

(1)The Minister must give preliminary approval if the requirements of section 88 are met, except in the following circumstances:

(a)the reasons provided by the council for conducting the audit or examination do not establish the existence of a risk that warrants an audit or examination;

(b)within the three years before the date of the application, the requested type of audit or examination has been conducted under the Act in respect of the same contract for the same period and the holder was found to be in compliance with the contract, these Regulations and the Act;

(c)the audit or examination is not on the Minister’s list of priority audits or examinations and the council is not prepared to cover its costs; or

(d)the Minister and the council do not agree on the type of audit or examination to be conducted, the period to be covered or the dates for starting and completion.

(2)The Minister must send the council notice of his or her decision and, if preliminary approval is refused, the reasons for the refusal.

Request for Agreement

90Request for agreement#

A council’s request for an audit or examination agreement must be made to the Minister in the prescribed form within 180 days after the day on which the notice of preliminary approval is received and must include

(a)the name of the proposed auditor or examiner;

(b)a detailed audit or examination plan;

(c)the dates for starting and completing the audit or examination;

(d)the name of any person who will accompany the proposed auditor or examiner and a description of their role in the audit or examination; and

(e)evidence that the proposed auditor or examiner has the credentials and experience referred to in subsection 86(1).

91Refusal#

The Minister may refuse the request only if

(a)the information required by section 90 has not been provided;

(b)a requirement referred to in section 86 has not been complied with; or

(c)one or more circumstances that justified the preliminary approval of the audit or examination have changed.

92Agreement#

If the request is approved, the Minister must enter into an agreement with the council that includes the information referred to in paragraphs 88(a) to (d) and 90(a) to (d).

Equitable Production of Oil and Gas

Holder’s Obligations

93Compensatory royalty#

(1)A subsurface contract holder is obliged to pay Her Majesty in right of Canada, in trust for the relevant First Nation, a compensatory royalty in respect of each triggering well located in an external spacing unit that adjoins a First Nation spacing unit that is in their contract area.

(2)A compensatory royalty must be paid in respect of each First Nation spacing unit in the contract area that adjoins the spacing unit in which the triggering well is located.

(3)The obligation to pay the compensatory royalty begins on the first day of the month that follows the day on which the offset period ends.

(4)The offset period begins on the day on which an offset notice is received and ends on the 180th day after that day or

(a)if the offset notice is not sent until after confidential information about the well is made public, the 90th day after that day; or

(b)if the offset period has been extended under paragraph 5(1)(d) of the Act, the day on which the extension expires.

Offset Notice

94Offset notice#

(1)If the Minister becomes aware of the existence of a triggering well, the Minister must send an offset notice to every subsurface contract holder that is obliged to pay a compensatory royalty under section 93.

(2)If any lands in a First Nation spacing unit that adjoins a spacing unit in which a triggering well is located are not subject to a subsurface contract, the Minister must

(a)send the council a notice of the existence of the triggering well;

(b)send an offset notice to any person that becomes a subsurface lease holder in respect of those lands; and

(c)send an offset notice to any person that becomes a permit holder in respect of those lands one year after the effective date of the permit.

(3)If, on the day on which an offset notice is required to be sent, any information about a triggering well is confidential under the laws of the relevant province, the Minister

(a)must send, to every contract holder to which the offset notice will be sent, a notice of the existence of the triggering well and the information set out in paragraphs 95(1)(a) and (c) in respect of that well; and

(b)must not send the offset notice until the Minister becomes aware that the confidential information has been made public.

95Information included in notice#

(1)The offset notice must include the following information:

(a)the name of the subsurface contract holder, the contract number and the holder’s percentage share in the contract;

(b)a description of the lands in the contract area that are subject to the notice;

(c)the unique well identifier of the triggering well;

(d)the area of the First Nation lands in the spacing unit in which the triggering well is located, expressed as a percentage of the area of that spacing unit;

(e)a description of the external spacing unit in which the triggering well is located and the offset zone;

(f)in the case of a horizontal or multilateral triggering well, the total length of the well, the total length of the horizontal section of the well and the length of the section of the well that is producing from the external spacing unit;

(g)in the case of a deviated well that is producing from more than one spacing unit, the total length of the well and the length of the section of the well that is producing from the external spacing unit;

(h)the offset period; and

(i)statements indicating that

(i)the spacing unit in which the triggering well is located adjoins the First Nation spacing unit in the contract area described in paragraph (b),

(ii)the obligation to pay a compensatory royalty begins on the first day of the month that follows the day on which the offset period ends,

(iii)the compensatory royalty must be paid on or before the 25th day of the third month after the month in which the obligation to pay it begins and, subsequently, on or before the 25th day of each subsequent month, and

(iv)the obligation to pay the compensatory royalty ends in any of the circumstances set out in subsection 100(1).

(2)The Minister must send the council a copy of the offset notice and, when the offset period ends, a notice indicating that the holder’s obligation to pay a compensatory royalty has begun.

96No obligation#

(1)The obligation to pay a compensatory royalty does not begin if, during the offset period, the subsurface contract holder submits to the Minister information that establishes any of the following circumstances:

(a)the triggering well is not draining from the offset zone referred to in the offset notice;

(b)the offset zone of the triggering well has been abandoned, as shown in the records of the provincial authority;

(c)an offset well is producing from the offset zone;

(d)the spacing unit in which the triggering well is located no longer adjoins the First Nation spacing unit referred to in the offset notice;

(e)the offset zone in the First Nation spacing unit is subject to a unit agreement under which oil or gas is being or is deemed to be produced;

(f)the triggering well is subject to a storage agreement that has been approved by the provincial authority.

(2)After determining whether a circumstance set out in subsection (1) has been established, the Minister must send the holder a notice of his or her determination.

(3)A holder is not obliged to pay a compensatory royalty if, during the offset period, they surrender their rights or interests down to the base of the offset zone in the spacing unit to which the offset notice applies, except for any rights or interests in a zone from which a well is productive or that is subject to a unit agreement or to a storage agreement that has been approved by the provincial authority.

(4)If the holder has established a circumstance set out in subsection (1) or has surrendered their rights or interests under subsection (3), the Minister must send the council a notice indicating that the holder’s obligation to pay a compensatory royalty is relieved and the reasons that it is relieved.

Calculation and Payment of Compensatory Royalty

97Compensatory royalty#

(1)The monthly compensatory royalty that is payable by a subsurface contract holder is

(a)in the case of a vertical triggering well or deviated triggering well that is producing from a single spacing unit, an amount equal to the amount that would have been payable by the holder as a royalty for that month if the triggering well were producing from the adjoining First Nation spacing unit that is in their contract area; and

(b)in the case of a horizontal triggering well, multilateral triggering well or deviated triggering well that is producing from more than one spacing unit, an amount equal to the percentage, calculated in accordance with the following formula, of the amount referred to in paragraph (a):

(2)If the triggering well is located in an external spacing unit that contains First Nation lands, the monthly compensatory royalty that is payable is an amount calculated in accordance with the formula

(3)For the purpose of calculating the monthly compensatory royalty,

(a)the volume of oil, gas or condensate to be used in the royalty formula is the volume of oil, raw gas or condensate that was produced in the month by the triggering well, as shown by the records of the provincial authority; and

(b)the price to be used, in respect of that month, is

(i)in the case of oil, in Saskatchewan, the price indicated in the Monthly Crude Oil Royalty/Tax Factor History, published by the Ministry of Energy and Resources, and, in the other provinces, the monthly par price for light, medium, heavy or ultra heavy oil, as the case may be, published by Alberta’s Department of Energy,

(ii)in the case of gas, in Saskatchewan, the price indicated in the Monthly Natural Gas Royalty/Tax Factor History, published by the Ministry of Energy and Resources, and, in the other provinces, the Gas Reference Price in the monthly information letter Natural Gas Royalty Prices and Allowances, published by Alberta’s Department of Energy, and

(iii)in the case of condensate, the Pentanes Plus Reference Price in the monthly information letter Natural Gas Royalty Prices and Allowances, published by Alberta’s Department of Energy.

(4)In the case of an offset notice sent under paragraph 94(3)(b), the month referred to in paragraph (3)(a) for the first monthly compensatory royalty is the month whose first day follows the period that begins on the day on which the information sent under paragraph 94(3)(a) is received and ends on the 180th day after that day. For each subsequent monthly compensatory royalty, the month is each subsequent month.

(5)If the royalty calculation requires the conversion of a price in dollars per gigajoule (GJ) into a price in dollars per 1000 m³, the heating value is 37.7 GJ/1000 m³.

(6)No deduction for costs or allowances is to be made in the calculation of the compensatory royalty.

(7)This section does not apply to a compensatory royalty owing under the Indian Oil and Gas Regulations, 1995.

98Calculation and payment of compensatory royalty#

On or before the 25th day of the third month after the month in which the obligation to pay the compensatory royalty begins, and on or before the 25th day of each subsequent month, the subsurface contract holder must pay the Minister the monthly compensatory royalty and, in the prescribed form, provide the information that is required to verify its calculation.

99Amended spacing unit#

The obligation to pay a compensatory royalty continues despite any change in the size of the First Nation spacing unit or the external spacing unit in which the triggering well is located if the two spacing units remain adjoined.

100End of obligation to pay#

(1)The obligation to pay a compensatory royalty ends if the subsurface contract holder

(a)establishes any of the circumstances set out in subsection 96(1); or

(b)surrenders their rights or interests down to the base of the offset zone in the spacing unit to which the offset notice applies, except for any rights or interests in a zone from which a well is productive or that is subject to a unit agreement or to a storage agreement that has been approved by the provincial authority.

(2)After determining whether a circumstance set out in subsection 96(1) has been established, the Minister must send the holder a notice informing them of his or her determination and, if the obligation ends, the day on which it ends.

(3)The obligation to pay a compensatory royalty ends

(a)if the holder sends the Minister a notice establishing a circumstance set out in subsection 96(1), on the first day of the month in which the Minister receives the notice; or

(b)if the holder has surrendered their rights or interests, on the first day of the month that follows the month in which the Minister receives a notice of the surrender.

(4)If the obligation to pay a compensatory royalty ends, the Minister must send the council a notice indicating that it has ended and the reasons that it has ended.

101Exception#

Subject to subsection 97(7), sections 93 to 100 and 111 apply to any subsurface contract that was granted under the Indian Act or the Act.

Offset Wells

102Failure to produce#

(1)If an offset well fails to produce any oil or gas for three consecutive months after the offset period has ended, the subsurface contract holder must pay a compensatory royalty in respect of the triggering well whose production was to be offset.

(2)The obligation to pay the compensatory royalty begins on the first day of the month that follows the three-month period.

(3)The Minister must send the council a notice indicating that the holder’s obligation to pay a compensatory royalty has begun.

Service Wells

103Prior approval#

(1)A well must not be used as a service well without the prior approval of the Minister.

(2)The application for approval must be in the prescribed form, be accompanied by a copy of the provincial authority’s approval of the service well and include the following information:

(a)a description of the well;

(b)a detailed description of the proposed uses of the well and the proposed uses of any related facilities; and

(c)the bonus and the annual compensation to be paid for any disposal rights.

(3)The Minister must approve the proposed uses of the service well if

(a)the application is made in accordance with subsection (2);

(b)the approval of the council has been obtained; and

(c)the approval will benefit the relevant First Nation.

(4)The contract holder must send the Minister notice of any changes in the provincial authority’s approval referred to in subsection (2).

104Exception#

Section 103 does not apply to a service well that is part of a project that has been approved by the provincial authority or a bitumen recovery project that has been approved by the Minister.

105Exception#

Section 103 does not apply to a disposal rights agreement that was entered into before these Regulations came into force.

Pooling, Production Allocation and Unit Agreements

106Single spacing unit production#

(1)If a well is producing from First Nation lands, the Minister must determine the percentage of production from the well to be allocated to each contract in the spacing unit from which the well is producing, based on the area of the First Nation lands that are subject to each contract, in proportion to the area of the spacing unit.

(2)The Minister must send each holder and the council a notice indicating the percentage of the production that is allocated to each contract.

107Multiple spacing unit production#

(1)If a well is producing from more than one spacing unit and the lands from which it is producing are not entirely First Nation lands or are not subject to a single contract, the Minister must determine the percentage of production from the well to be allocated to the First Nation lands and to each contract, based on the criteria used by the provincial authority in making such allocations.

(2)The Minister must send each holder and the council a notice indicating the percentage of the production that is allocated to the First Nation lands and to each contract.

108Unit agreement#

(1)The Minister may, with the prior approval of the council, enter into a unit agreement.

(2)The calculation of royalties payable under a contract that is subject to a unit agreement must be based on the production allocated to each tract as specified in the agreement.

Surrender, Default and Cancellation

109Surrender of subsurface rights or interests#

(1)A subsurface contract holder may surrender their rights or interests under the contract, in whole or in part, by sending the Minister a notice of surrender in the prescribed form.

(2)In a partial surrender of subsurface rights or interests,

(a)all the rights and interests in a spacing unit must be surrendered; and

(b)the rent for subsequent years is reduced in proportion to the reduction of the lands that are subject to the contract, to a minimum of $100.

(3)When rights or interests under a subsurface contract are surrendered, the Minister must send the council a copy of the notice of surrender and, in the case of a partial surrender, a copy of the amended contract.

110Surrender of surface rights or interests#

(1)A surface contract holder may surrender their rights or interests under the contract, in whole or in part, by applying in the prescribed form for the Minister’s approval.

(2)The Minister must send the council a copy of the application.

(3)The Minister must approve the surrender if

(a)the holder is not in default under the contract, these Regulations or an order given under the Act;

(b)the Minister and the council have inspected the contract area to be surrendered and the Minister has confirmed that the remediation and reclamation of the surface in that area are satisfactory; and

(c)in the case of a partial surrender, the boundaries of the remaining contract area continue to meet the requirements of these Regulations and the partial surrender approval application fee set out in Schedule 1 has been paid.

(4)If the surrender of rights or interests under a surface contract is partial, the rent for subsequent years is reduced in proportion to the reduction of the lands that are subject to the contract. However, the rent must be no less than the rent payable for 1.6 hectares.

(5)If the surrender of rights or interests under a surface contract is approved, the Minister must send the council a notice to that effect and, in the case of a partial surrender, a copy of the amended contract.

111Non-compliance notice#

(1)If a holder fails to comply with their contract, the Act or these Regulations, the Minister may send them a notice that identifies the non-compliance and warns that the contract will be cancelled if the holder is in default.

(2)Within 30 days after the day on which the notice is received, the holder must remedy the non-compliance identified in the notice or, if the non-compliance does not relate to money owed under the Act, submit to the Minister a plan that shows how and when it will be remedied and why the proposed deadline is justified in the circumstances. Subsequently, the holder must remedy the non-compliance in accordance with the plan.

(3)If the plan does not meet the requirements of subsection (2), the Minister must send the holder a notice to that effect that identifies its deficiencies.

(4)A holder that receives a notice sent under subsection (3) must

(a)within 30 days after the day on which the notice is received, submit to the Minister an amended plan that corrects the deficiencies identified in the notice; and

(b)remedy the non-compliance identified in the notice sent under subsection (1) in accordance with that plan.

(5)A holder that receives a notice sent under subsection (1) is in default if they do not comply with the requirements of subsection (2) or, if applicable, subsection (4).

(6)The Minister must cancel the contract of a holder that is in default.

(7)If a contract is to be cancelled for non-payment of a compensatory royalty, the Minister must cancel the rights or interests conferred by the contract down to the base of the offset zone in the spacing unit to which the offset notice applies, except for any rights or interests in a spacing unit referred to in any of paragraphs 63(1)(a) to (e).

(8)When a contract is cancelled, the Minister must send the holder a notice indicating that their contract is cancelled, the reason for the cancellation and its effective date.

(9)The Minister must send the council a copy of every notice sent under this section.

112Continuing liability#

When a contract ends, any liabilities for outstanding amounts that are owed under the contract, any liabilities for damages caused by operations carried out under the contract and any obligations respecting abandonment, remediation or reclamation survive the end of the contract.

Administrative Monetary Penalties

113Designated provisions#

The provisions set out in Schedule 6 are designated as provisions whose contravention is a violation that may be proceeded with under sections 22 to 28 of the Act.

Transitional Provisions

114Executive Director#

The powers, duties and functions of the Executive Director under the Indian Oil and Gas Regulations, 1995 are to be exercised or performed by the Minister and any reference to the Executive Director in a contract granted under those Regulations is deemed to be a reference to the Minister.

115Permits#

Sections 15, 16 and 18 to 21 of the Indian Oil and Gas Regulations, 1995 continue to apply to permits granted under those Regulations.

Repeal

116 #

The Indian Oil and Gas Regulations, 1995 are repealed.

Coming into Force

*117S.C. 2009, c. 7#

These Regulations come into force on the day on which An Act to amend the Indian Oil and Gas Act comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

Schedule 1 · (Subsections 2(5) and 25(4), paragraphs 29(2)(e) and 41(1)(a), subsection 44(3) and paragraphs 75(1)(d) and 110(3)(c))

Item | Column 1 | Column 2Service | Fee ($)1 | Subsurface contract application | 2502 | Surface lease application | 503 | Right-of-way application | 504 | Exploration licence application | 255 | Assignment approval application | 506 | Partial surrender approval application | 257 | Record search | 25

Schedule 2 · Initial Term of Permits (Subsections 48(1) and (2))

1Definitions#

The following definitions apply in this Schedule.

Area 1 means the lands in Area 1 as set out in Schedule 2 to the Petroleum and Natural Gas Drilling Licence and Lease Regulation, B.C. Reg. 10/82. (Zone 1)

Area 2 means the lands in Area 2 as set out in Schedule 2 to the Petroleum and Natural Gas Drilling Licence and Lease Regulation, B.C. Reg. 10/82. (Zone 2)

Area 3 means the lands in Area 3 as set out in Schedule 2 to the Petroleum and Natural Gas Drilling Licence and Lease Regulation, B.C. Reg. 10/82. (Zone 3)

Foothills Region means the lands in the Foothills Region as set out in Schedule 1 to the Petroleum and Natural Gas Tenure Regulation, AR 263/1997. (région des contreforts)

Northern Region means the lands in the Northern Region as set out in Schedule 1 to the Petroleum and Natural Gas Tenure Regulation, AR 263/1997. (région du Nord)

Plains Region means the lands in the Plains Region as set out in Schedule 1 to the Petroleum and Natural Gas Tenure Regulation, AR 263/1997. (région des plaines)

township means a township laid out in accordance with sections 55 to 61 of The Land Surveys Regulations, R.S.S. c. L-4.1 Reg 1. (canton)

Schedule 3 · Zones — Intermediate Term (Subsections 1(1) and 52(3))

1Definitions#

The following definitions apply in this Schedule.

ILND means the internal limit of a zone, whether upper or lower, that is not defined. (LIND)

KB means kelly bushing, which serves as the point on the rotary drilling table from which downhole well log depths are measured. (FE)

NDE means not deep enough and, in relation to a reference well, means that the well was not drilled to a depth that was sufficient to penetrate the upper or lower limit of a particular zone. (FI)

NP means not present and, in relation to a zone, means that the zone is not present at the location where the reference well was drilled. (NP)

TVD means true vertical depth. (PVR)

2Zones#

(1)For each of the First Nation lands set out in this Schedule, the lands that may be selected are the zones set out in column 1 of the table that correspond to the well log data set out in column 2 that match the well log data for the well that was drilled or re-entered by the subsurface contract holder.

(2)If there is more than one set of well log data set out in column 2 for a zone, the set derived from the reference well that is nearest to the earning well must be used to determine the zones.

3Unidentified zone#

If a well is drilled into a zone that is not identified in a table to this Schedule, the Minister must determine the upper and lower limits of the deepest zone penetrated by the well, based on a review of the well log data that relate to other wells in the vicinity and on any well log data that are available and relate to lands in the vicinity.

Schedule 4 · Zones — Continuation (Subsections 1(1) and 63(1))

1Definitions#

The following definitions apply in this Schedule.

ILND means the internal limit of a zone, whether upper or lower, that is not defined. (LIND)

KB means kelly bushing, which serves as the point on the rotary drilling table from which downhole well log depths are measured. (FE)

NDE means not deep enough and, in relation to a reference well, means that the well was not drilled to a depth that was sufficient to penetrate the upper or lower limit of a particular zone. (FI)

NP means not present and, in relation to a zone, means that the zone is not present at the location where the reference well was drilled. (NP)

TVD means true vertical depth. (PVR)

2Zones#

(1)In the case of a contract that is continued on the basis of any of paragraphs 63(1)(a) to (g) or under section 66 of these Regulations, for each of the First Nation lands set out in this Schedule, the zones with respect to which continuation may be sought are the zones set out in column 1 of the table that correspond to the well log data set out in column 2.

(2)If there is more than one set of well log data set out in column 2 for a zone, the set derived from the reference well that is nearest to the relevant spacing unit must be used to determine the zones that may be continued.

3Unidentified zone#

If the zone with respect to which the contract may be continued is not identified in a table to this Schedule, the Minister must determine the upper and lower limits of the relevant zone, based on a review of well log data that relate to wells in the vicinity of the relevant spacing unit and on any other well log data that are available and relate to lands in the vicinity.

Schedule 5 · Royalties (Subsection 79(1))

1Definition of marketable gas#

In this Schedule, marketable gas means gas, consisting mainly of methane, that meets industry or utility specifications for use as a domestic, commercial or industrial fuel or as an industrial raw material.

2Highest value#

(1)For the purposes of this Schedule, if the Minister determines that the actual selling price of oil or gas is less than the fair value of that oil or gas at the time and place of production, the actual selling price is deemed to be that fair value. In that case, the Minister must send the contract holder notice of the royalties payable and, within 30 days after the day on which the notice is received, the holder must pay the royalties payable in accordance with that notice.

(2)In determining the fair value of oil or gas, the Minister, in consultation with the council, must take into account the following factors:

(a)any applicable reference price;

(b)in the case of gas, transportation cost, volume of fuel gas and heat value;

(c)in the case of oil, transportation cost, quality adjustment for sulphur content and density;

(d)whether the parties to the transaction are related parties within the meaning of subsection 82(4) of these Regulations;

(e)the Bank of Canada’s daily exchange rate for converting U.S. dollars to Canadian dollars; and

(f)the factor of 6.2898 to convert barrels of oil to cubic metres of oil.

3Calculation of royalty — oil#

(1)The royalty on oil that is recovered from, or attributed to, lands in a contract area consists of the basic royalty determined in accordance with subsection (2) or (3) and the supplementary royalty determined in accordance with subsection (5). All amounts are to be calculated at the time and place of production.

(2)During the five-year period beginning on the day on which production of oil from the contract area begins, the basic royalty for each month of that period is equal to the actual selling price multiplied by the monthly royalty determined in accordance with column 2 of the table to this subsection, based on the monthly production, referred to in column 1, of oil that is recovered from, or attributed to, each well.Item | Column 1 | Column 2Monthly Production (m3) | Monthly Royalty (m3)1 | 80 or less | 10% of the number of cubic metres2 | More than 80 but not more than 160 | 8 m3 plus 20% of the number of cubic metres in excess of 803 | More than 160 | 24 m3 plus 26% of the number of cubic metres in excess of 160

(3)Beginning immediately after the period referred to in subsection (2), the basic royalty for each subsequent month is equal to the actual selling price multiplied by the monthly royalty determined in accordance with column 2 of the table to this subsection, based on the monthly production, referred to in column 1, of oil that is recovered from, or attributed to, each well.Item | Column 1 | Column 2Monthly Production (m3) | Monthly Royalty (m3)1 | 80 or less | 10% of the number of cubic metres2 | More than 80 but not more than 160 | 8 m3 plus 20% of the number of cubic metres in excess of 803 | More than 160 but not more than 795 | 24 m3 plus 26% of the number of cubic metres in excess of 1604 | More than 795 | 189 m3 plus 40% of the number of cubic metres in excess of 795

(4)The Minister must send the council notice of the date on which the production referred to in subsection (2) begins.

(5)The supplementary royalty is

(a)in respect of oil to which subsection (2) applies, the amount determined by the formula

(b)in respect of oil to which subsection (3) applies, the amount determined by the formula

4Calculation of royalty — gas#

(1)When gas that is recovered from, or attributed to, lands in a contract area is sold, the royalty payable is the gross royalty value of the gas, determined in accordance with subsection (2), less the portion of the cost of gathering, dehydrating, compressing and processing the gas that is equal to its gross royalty value divided by its total value.

(2)The gross royalty value of gas that is recovered from, or attributed to, lands in the contract area is the basic gross royalty value of 25% of the quantity of that gas multiplied by the actual selling price plus the supplementary gross royalty value determined in accordance with subsection (3). All amounts are to be calculated at the time and place of production.

(3)The supplementary gross royalty value of gas, individually determined for each gas component produced, is equal to the sum of the products obtained by multiplying 75% of the quantity of each gas component by

(a)in the case of marketable gas,

(i)if the actual selling price exceeds $10.65/1000 m³ but does not exceed $24.85/1000 m³, 30% of the difference between the actual selling price per 1000 m³ and $10.65/1000 m³, or

(ii)if the actual selling price exceeds $24.85/1000 m³, $4.26/1000 m³ plus 55% of the portion of the actual selling price in excess of $24.85/1000 m³;

(b)in the case of pentanes plus, if the actual selling price exceeds $27.68/m³, 50% of the portion of the actual selling price in excess of $27.68/m³;

(c)in the case of sulphur, if the actual selling price exceeds $39.37/t, 50% of the portion of the actual selling price in excess of $39.37/t;

(d)in the case of other components from a source that produces marketable gas, an amount equal to the product obtained by multiplying the actual selling price of each of those components by the percentage by which the overall royalty rate for marketable gas, taking both basic and supplementary gross royalty values into account, exceeds 25%; and

(e)in the case of other components from a source that does not produce marketable gas, the lesser of one third of the actual selling price of that component and the amount determined under any special agreement entered into under subsection 4(2) of the Act.

(4)For the purposes of this section, volumes referred to are volumes measured at standard conditions of 101.325 kPa and 15°C.

(5)The Minister must send the council notice of any costs that are deducted under subsection (1) for gathering, dehydrating, compressing and processing.

5No royalty payable#

(1)Despite sections 2 to 4, the royalty payable on oil or gas recovered from, or attributed to, lands in a contract area is nil if the oil or gas is consumed in drilling for, producing or processing oil or gas that is recovered from, or attributed to, those lands.

(2)However, subsection (1) does not apply to oil or gas that is consumed in the production or processing of crude bitumen.

Schedule 6 · Administrative Monetary Penalties (Section 113)

Item | Column 1 | Column 2Provision | Penalty ($)1 | 5(1)(a)(i) | 10,0002 | 5(1)(a)(ii) | 10,0003 | 16 | 10,0004 | 17(2) | 10,000Item | Column 1 | Column 2Provision | Penalty ($)1 | 16 | 10,0002 | 19(2) | 1,0003 | 21(a)(i) | 1,0004 | 21(a)(ii) | 1,0005 | 21(a)(iii) | 1,0006 | 21(a)(iv) | 1,0007 | 21(a)(v) | 1,0008 | 21(b)(i) | 1,0009 | 21(b)(ii) | 1,00010 | 21(b)(iii) | 1,00011 | 21(b)(iv) | 1,00012 | 21(b)(v) | 1,00013 | 21(b)(vi) | 1,00014 | 21(c)(i) | 1,00015 | 21(c)(ii) | 1,00016 | 21(c)(iii) | 1,00017 | 21(c)(iv) | 1,00018 | 21(c)(v) | 1,00019 | 21(c)(vi) | 1,00020 | 21(c)(vii) | 1,00021 | 21(d)(i) | 1,00022 | 21(d)(ii) | 1,00023 | 21(d)(iii) | 1,00024 | 21(d)(iv) | 1,00025 | 21(d)(v) | 1,00026 | 21(d)(vi) | 1,00027 | 21(d)(vii) | 1,00028 | 21(d)(viii) | 1,00029 | 21(e) | 1,00030 | 21(f) | 1,00031 | 32(1) | 2,50032 | 32(2)(a) | 10,00033 | 32(2)(b) | 2,500 (per hole)34 | 32(2)(c) | 2,50035 | 32(2)(d) | 10,00036 | 32(2)(f) | 1,50037 | 33(1) | 10,00038 | 34 | 10,00039 | 59(2) | 10,00040 | 75(5) | 10,00041 | 78 | 10,00042 | 82(2)(a) | 1,00043 | 82(2)(b) | 1,00044 | 82(2)(d) | 1,00045 | 83(2) | 2,00046 | 98 | 1,000

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