Canada Oil and Gas Land Regulations (C.R.C., c. 1518)

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

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

  • (a) for each month

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

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

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

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

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

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

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

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

86. No royalty is payable for oil or gas

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

• (b) returned to a formation or flared.

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

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

89. Where a well has been

• (a) abandoned, or

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

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