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

Marginal note:Notice to submit documents

• 84 (1) For the purpose of verifying the royalty payable under a contract, the Minister may send a notice requiring any person that has sold, purchased or swapped oil or gas recovered from First Nation lands to provide any of the following documents:

  • (a) a signed copy of any written sales contract or, if the contract was unwritten, a document that sets out its terms and conditions;

  • (b) a transaction statement, invoice or other document that sets out the details of the transaction;

  • (c) any agreement between persons respecting the costs and allowances to be taken into account in determining the royalty payable on the oil or gas.

• Marginal note:Deadline

  (2) A person that receives a notice sent under subsection (1) must submit the requested documents within 14 days after the day on which the notice is received.

First Nation Audits and Examinations

General Rules

Marginal note:Agreement required

• 85 (1) A First Nation may conduct an audit or examination for the purpose of verifying the royalties payable on oil or gas recovered from its lands if

  • (a) its council has entered into an audit or examination agreement with the Minister; and

  • (b) the audit or examination is conducted in accordance with the agreement and these Regulations.

• Marginal note:Procedure to obtain agreement

  (2) A council that has obtained preliminary approval of an audit or examination under section 89 may request that the Minister enter into an audit or examination agreement under section 90.

Marginal note:Qualifications

• 86 (1) A person who conducts an audit or examination under the Act must have the credentials and experience required to carry out their role in the audit or examination in accordance with generally accepted auditing standards.

• Marginal note:Requirements

  (2) A person who conducts an audit or examination under the Act, or accompanies an auditor or examiner,

  • (a) must not be employed by, be affiliated with or represent the oil or gas company that is the subject of the audit or examination;

  • (b) must have the certifications and comply with the occupational health and safety requirements required or imposed by the contract holder or by law; and

  • (c) must keep confidential any documents or information they obtain in connection with the audit or examination and must comply with the security requirements imposed by the contract holder or by law.

Marginal note:Confidentiality — First Nation

• 87 (1) A First Nation that conducts an audit or examination must keep confidential any documents or information it obtains in connection with the audit or examination and must comply with the security requirements imposed by the contract holder or by law.

• Marginal note:Exception

  (2) Despite subsection (1), the council must provide the Minister with a copy of all audit or examination reports and working papers within 30 days after the day on which the audit or examination is completed.

Preliminary Approval

Marginal note:Application for preliminary approval

88 To obtain preliminary approval of an audit or examination, a council must apply to the Minister in the prescribed form. The application must include

• (a) the name of the person whose documents and information are to be audited or examined;

• (b) the name and location of each facility in which the audit or examination will be conducted and the name of the facility’s operator;

• (c) the type of audit or examination to be conducted;

• (d) the period to be covered by the audit or examination;

• (e) the anticipated dates for starting and completing the audit or examination;

• (f) the reasons that the council believes that the audit or examination is necessary; and

• (g) a statement indicating whether the council is prepared to cover the costs of the audit or examination.

Marginal note:Decision

• 89 (1) The Minister must give preliminary approval if the requirements of section 88 are met, except in the following circumstances:

  • (a) the reasons provided by the council for conducting the audit or examination do not establish the existence of a risk that warrants an audit or examination;

  • (b) within the three years before the date of the application, the requested type of audit or examination has been conducted under the Act in respect of the same contract for the same period and the holder was found to be in compliance with the contract, these Regulations and the Act;

  • (c) the audit or examination is not on the Minister’s list of priority audits or examinations and the council is not prepared to cover its costs; or

  • (d) the Minister and the council do not agree on the type of audit or examination to be conducted, the period to be covered or the dates for starting and completion.

• Marginal note:Notice of decision

  (2) The Minister must send the council notice of his or her decision and, if preliminary approval is refused, the reasons for the refusal.

Request for Agreement

Marginal note:Request for agreement

90 A council’s request for an audit or examination agreement must be made to the Minister in the prescribed form within 180 days after the day on which the notice of preliminary approval is received and must include

• (a) the name of the proposed auditor or examiner;

• (b) a detailed audit or examination plan;

• (c) the dates for starting and completing the audit or examination;

• (d) the name of any person who will accompany the proposed auditor or examiner and a description of their role in the audit or examination; and

• (e) evidence that the proposed auditor or examiner has the credentials and experience referred to in subsection 86(1).

Marginal note:Refusal

91 The Minister may refuse the request only if

• (a) the information required by section 90 has not been provided;

• (b) a requirement referred to in section 86 has not been complied with; or

• (c) one or more circumstances that justified the preliminary approval of the audit or examination have changed.

Marginal note:Agreement

92 If the request is approved, the Minister must enter into an agreement with the council that includes the information referred to in paragraphs 88(a) to (d) and 90(a) to (d).

Equitable Production of Oil and Gas

Holder’s Obligations

Marginal note:Compensatory royalty

• 93 (1) A subsurface contract holder is obliged to pay Her Majesty in right of Canada, in trust for the relevant First Nation, a compensatory royalty in respect of each triggering well located in an external spacing unit that adjoins a First Nation spacing unit that is in their contract area.

• Marginal note:Royalty for each spacing unit

  (2) A compensatory royalty must be paid in respect of each First Nation spacing unit in the contract area that adjoins the spacing unit in which the triggering well is located.

• Marginal note:Beginning of obligation

  (3) The obligation to pay the compensatory royalty begins on the first day of the month that follows the day on which the offset period ends.

• Marginal note:Offset period

  (4) The offset period begins on the day on which an offset notice is received and ends on the 180th day after that day or

  • (a) if the offset notice is not sent until after confidential information about the well is made public, the 90th day after that day; or

  • (b) if the offset period has been extended under paragraph 5(1)(d) of the Act, the day on which the extension expires.

Offset Notice

Marginal note:Offset notice

• 94 (1) If the Minister becomes aware of the existence of a triggering well, the Minister must send an offset notice to every subsurface contract holder that is obliged to pay a compensatory royalty under section 93.

• Marginal note:Absence of contract

  (2) If any lands in a First Nation spacing unit that adjoins a spacing unit in which a triggering well is located are not subject to a subsurface contract, the Minister must

  • (a) send the council a notice of the existence of the triggering well;

  • (b) send an offset notice to any person that becomes a subsurface lease holder in respect of those lands; and

  • (c) send an offset notice to any person that becomes a permit holder in respect of those lands one year after the effective date of the permit.

• Marginal note:Confidential information

  (3) If, on the day on which an offset notice is required to be sent, any information about a triggering well is confidential under the laws of the relevant province, the Minister

  • (a) must send, to every contract holder to which the offset notice will be sent, a notice of the existence of the triggering well and the information set out in paragraphs 95(1)(a) and (c) in respect of that well; and

  • (b) must not send the offset notice until the Minister becomes aware that the confidential information has been made public.

Marginal note:Information included in notice

• 95 (1) The offset notice must include the following information:

  • (a) the name of the subsurface contract holder, the contract number and the holder’s percentage share in the contract;

  • (b) a description of the lands in the contract area that are subject to the notice;

  • (c) the unique well identifier of the triggering well;

  • (d) the area of the First Nation lands in the spacing unit in which the triggering well is located, expressed as a percentage of the area of that spacing unit;

  • (e) a description of the external spacing unit in which the triggering well is located and the offset zone;

  • (f) in the case of a horizontal or multilateral triggering well, the total length of the well, the total length of the horizontal section of the well and the length of the section of the well that is producing from the external spacing unit;

  • (g) in the case of a deviated well that is producing from more than one spacing unit, the total length of the well and the length of the section of the well that is producing from the external spacing unit;

  • (h) the offset period; and

  • (i) statements indicating that

    • (i) the spacing unit in which the triggering well is located adjoins the First Nation spacing unit in the contract area described in paragraph (b),

    • (ii) the obligation to pay a compensatory royalty begins on the first day of the month that follows the day on which the offset period ends,

    • (iii) the compensatory royalty must be paid on or before the 25th day of the third month after the month in which the obligation to pay it begins and, subsequently, on or before the 25th day of each subsequent month, and

    • (iv) the obligation to pay the compensatory royalty ends in any of the circumstances set out in subsection 100(1).

• Marginal note:Notice to council

  (2) The Minister must send the council a copy of the offset notice and, when the offset period ends, a notice indicating that the holder’s obligation to pay a compensatory royalty has begun.

Marginal note:No obligation

• 96 (1) The obligation to pay a compensatory royalty does not begin if, during the offset period, the subsurface contract holder submits to the Minister information that establishes any of the following circumstances:

  • (a) the triggering well is not draining from the offset zone referred to in the offset notice;

  • (b) the offset zone of the triggering well has been abandoned, as shown in the records of the provincial authority;

  • (c) an offset well is producing from the offset zone;

  • (d) the spacing unit in which the triggering well is located no longer adjoins the First Nation spacing unit referred to in the offset notice;

  • (e) the offset zone in the First Nation spacing unit is subject to a unit agreement under which oil or gas is being or is deemed to be produced;

  • (f) the triggering well is subject to a storage agreement that has been approved by the provincial authority.

• Marginal note:Notice to holder

  (2) After determining whether a circumstance set out in subsection (1) has been established, the Minister must send the holder a notice of his or her determination.

• Marginal note:Surrender

  (3) A holder is not obliged to pay a compensatory royalty if, during the offset period, they surrender their rights or interests down to the base of the offset zone in the spacing unit to which the offset notice applies, except for any rights or interests in a zone from which a well is productive or that is subject to a unit agreement or to a storage agreement that has been approved by the provincial authority.

• Marginal note:Notice to council

  (4) If the holder has established a circumstance set out in subsection (1) or has surrendered their rights or interests under subsection (3), the Minister must send the council a notice indicating that the holder’s obligation to pay a compensatory royalty is relieved and the reasons that it is relieved.