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

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

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

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

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

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

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

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

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

Exploration Agreements

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

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

  • (a) payment and disposition of deposits,

  • (b) work programs and drilling requirements,

  • (c) reporting and disclosure of information,

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

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

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

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

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

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

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

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

  • (d) any requirements for

    • (i) Canadian equity participation,

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

    • (iii) employment of Canadian goods and services; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Petro-Canada Limited

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

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

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

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

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

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

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

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

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

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

Permittees

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

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

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

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

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

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

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

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

Term of Permit

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

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

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

• (4) Where a permit area is located

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

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

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

• (5) Where a permit area is located

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

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

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

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

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

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

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

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

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

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

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