Indian Oil and Gas Regulations (SOR/2019-196)

Marginal note:Priority

36 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.

Marginal note:Multiple holders

• 37 (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.

• Marginal note:Liability

  (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.

Marginal note:Fair value

38 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

Marginal note:Public tender

39 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.

Marginal note:Minister’s duties

• 40 (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.

• Marginal note: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.

• Marginal note:Publication of notice of tender

  (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.

Marginal note:Submission of bids

• 41 (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.

• Marginal note:Certified funds

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

Marginal note:Opening of bids

• 42 (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.

• Marginal note:Presence at opening

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

• Marginal note:Tied bid

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

• Marginal note:Council’s decision

  (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.

• Marginal note:Irrevocable decision

  (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).

• Marginal note:Acceptance of highest bid

  (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.

• Marginal note:Publication of tender results

  (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.

• Marginal note:Confidentiality

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

• Marginal note:Contract granted

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

• Marginal note:Unsuccessful bids

  (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

Marginal note:Call for proposals

43 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

Marginal note:Application for subsurface contract

• 44 (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.

• Marginal note:Preliminary negotiation

  (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.

• Marginal note:Content of application

  (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.

• Marginal note:Confidentiality

  (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.

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.