Subsurface Rights or Interests (continued)
Grants of Subsurface Rights or Interests (continued)
Negotiation Process (continued)
Marginal note:Conditions of approval
45 (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.
Marginal note:Approval of application
(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.
Marginal note:Criteria — rates
(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.
Marginal note:Refusal of application
(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.
Marginal note:Granting of contract
46 (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.
Marginal note:Effective date
(2) The contract takes effect on the day on which it is granted, unless it provides otherwise.
Terms and Conditions of Subsurface Contracts
Marginal note:Rights conferred by contract
47 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.
Marginal note:Initial term of permit
48 (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.
Marginal note:More than one region
(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.
Marginal note:Intermediate term of permit
(3) The intermediate term of a permit is three years.
Marginal note:Term of lease
49 The term of an oil and gas lease is three years.
Marginal note:Term — exception
50 (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.
Marginal note:Amended term
(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.
Marginal note:Annual rent
51 The annual rent for a subsurface contract is $5 per hectare or $100, whichever is greater.
Selection of Lands for Intermediate Term of Permit
Marginal note:Lands earned
52 (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.
Marginal note:Failure to comply with earning provisions
(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.
Marginal note:Selection of lands
(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.
Marginal note:Constraints on selection
(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.
Marginal note:Area less than 75%
53 (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.
Marginal note:Reduced earnings — new well
(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.
Marginal note:Reduced earnings — re-entered well
(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.
Marginal note:Application for approval
54 (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.
Marginal note:Late application
(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.
Marginal note:Content of application
(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.
Marginal note:Additional information
(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.
Marginal note:Notice to holder and council
(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.
Marginal note:Transitional provision
Bitumen Recovery Project Approval
Marginal note:Application for approval
56 (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.
Marginal note:Minimum level of evaluation
(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.
Marginal note:Content of application
57 (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.
Marginal note:Environmental review
(2) The results of the environmental review of the bitumen recovery project 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 project;
(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.
Marginal note:Environmental protection measures letter
(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.
58 (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.
Marginal note:Terms and conditions of approval
(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.
Marginal note:Surface contract required
59 (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.
Marginal note:Compliance with measures
(2) The holder must ensure that all environmental protection measures included in the approval are implemented and complied with.
Marginal note:Minimum level of production
60 (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.
Marginal note:Compensation — bitumen
(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.
Marginal note:Deemed price
(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.
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