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

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

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

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

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

Expenditures

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

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

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

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

  • (a) the items of expenditure;

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

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

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

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

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

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

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

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

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

Grouping

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

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

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

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

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

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

Reports

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

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

  • (b) the purpose and nature of the work;

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

  • (d) the equipment he intends to use;

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

  • (f) the number of persons to be employed.

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

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

• 53 (1) Every permittee shall, within 60 days after

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

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

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

  forward to the Chief, in triplicate,

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

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

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

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

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

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

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

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

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

    • (iv) the boundaries of the permit areas;

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

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

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

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

    • (iv) the boundaries of the permit areas; and

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

    • (i) the location of the flight lines,

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

    • (iii) the boundaries of the permit areas.

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

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

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

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

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

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

Oil and Gas Leases

Oil and Gas Lease upon Application

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

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

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

  • (b) to a corporation incorporated outside Canada; or

  • (c) to a corporation unless the Minister is satisfied

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

      • (A) persons who are Canadian citizens,

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

      • (C) both such persons and corporations,

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

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

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

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

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

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

  • (a) the fee set out in Schedule I;

  • (b) the rental required by section 78; and

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

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

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

Other Leasing

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

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

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

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

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

• (3) A call for tenders under this section shall

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

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

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

  • (a) no tender is received, or

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

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

Powers of Lessee

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

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

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

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

Lease Area

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

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

• (3) The lease areas within a permit area shall

  • (a) corner one another;

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

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

• (4) Except in the case of

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

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

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

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

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

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

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

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

  • (b) contiguous to the lease area.