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

Regulations are current to 2019-06-20

Oil and Gas Leases (continued)

Transfer of Permit or Lease (continued)

  •  (1) The Chief shall maintain a transfer register.

  • (2) Where the Chief has approved the transfer of a permit or oil and gas lease, he shall enter the transfer in the register.

  • (3) The Chief shall endorse on the transfer the date and time of registration.

 Subject to section 72, as soon as registered, a transfer shall become operative according to its tenor and intent.

Surrender of Oil and Gas Lease

  •  (1) A lessee may at any time surrender the whole or part of his oil and gas lease, but no lessee shall surrender a part thereof smaller than one section except in the case of an oil and gas lease that has been granted for an area smaller than one section.

  • (2) Where an oil and gas lease has been surrendered, no rental shall be refunded to the lessee.

Rental

  •  (1) Subject to sections 79 to 84, a lessee shall pay to Her Majesty

    • (a) for the first year of the oil and gas lease a rental of $0.50 for each acre of land under lease; and

    • (b) for each year after the first year of the oil and gas lease a rental of $1 for each acre of land under lease.

  • (2) The rental required by subsection (1) shall be paid before the commencement of the year for which the rental is payable.

Reduction of Rental

  •  (1) Subject to subsection (2), where, after the first year of an oil and gas lease, commercial exploitation has not begun but oil or gas has been found in commercial quantity, the Minister may order the reduction of the rental payable under that oil and gas lease.

  • (2) Notwithstanding subsection (1), the rental shall not be reduced pursuant to subsection (1) for any year following a year in which commercial exploitation begins.

 Subject to sections 81 and 82, the rental shall be reduced by,

  • (a) in the case of an oil and gas lease issued pursuant to section 54, the amount of allowable expenditure made by the lessee prior to the date of the oil and gas lease, on the permit area within which the oil and gas lease is located, in excess of the deposits set out in Schedule II for the periods prior to the date of the oil and gas lease, and

  • (b) the amount of expenditure, as determined by the Chief, that has been made by the lessee for exploratory work on the lease area after the date of the oil and gas lease and before commercial exploitation begins,

but the rental for any particular year shall not be reduced pursuant to this section by more than one-half.

  •  (1) In this section, expenditure means the amount referred to in paragraph 80(b).

  • (2) At the end of the first year of an oil and gas lease and at the end of each year of the oil and gas lease thereafter, the Chief shall determine the amount of expenditure made by the lessee that is to be credited to the rental of the oil and gas lease for the year next following.

  • (3) Every lessee shall, at least 30 days before the end of each year of his oil and gas lease, send to the Chief a statement, in triplicate, of the amount expended by the lessee for exploratory work on the lease area.

  • (4) Every statement referred to in subsection (3) shall be verified by a statutory declaration and shall include

    • (a) the items of expenditure;

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

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

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

  •  (1) Subject to subsection (2), where any part of the amount referred to in paragraph 80(a) or (b) is not or cannot be credited to the rental for the year next following, the rental for any subsequent year shall be reduced by the amount of that part.

  • (2) Notwithstanding subsection (1), the rental shall not be reduced pursuant to section 80 for any year following a year in which commercial exploitation has begun.

  •  (1) Expenditure referred to in paragraph 80(a) or (b) that is made on any lease area that has been grouped pursuant to subsection 90(1) and that is made during the period of the grouping shall, at the request of the lessee, be applied to one or more of the lease areas within the group.

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

 The rental payable for any year shall be reduced by the amount of the royalty paid under that oil and gas lease during the preceding year.

Royalty

  •  (1) Subject to sections 86 and 87, a permittee or lessee shall pay to Her Majesty

    • (a) for each month

      • (i) prior to the end of the first five years of commercial exploitation, or

      • (ii) prior to the end of the first 36 months, in aggregate, during which oil or gas is produced,

      whichever first occurs, a royalty of five per cent of the market value at the well head or extraction plant (after production thereat) of all oil and gas obtained during that month from the permit or lease area, where

      • (iii) the permit or lease area is located north of latitude 70°, or

      • (iv) the whole or greater part of the permit or lease area is, in the opinion of the Chief, covered by seacoast water;

    • (b) for each month prior to the end of the first three years of commercial exploitation, a royalty of five per cent of the market value at the well head or extraction plant (after production thereat) of all oil and gas obtained during that month from the permit or lease area, where the whole or greater part of the permit or lease area is located south of latitude 70° and is not included in paragraph (a); and

    • (c) for each month following the period for which a royalty is payable pursuant to paragraph (a) or (b), a royalty of 10 per cent of the market value at the well head or extraction plant (after production thereat) of all oil and gas obtained during that month from the permit or lease area.

  • (2) The royalty shall be paid on or before the 25th day of the month next following the month for which the royalty is payable.

 No royalty is payable for oil or gas

  • (a) consumed by the permittee or lessee for drilling, producing, mining, quarrying, extracting or treating purposes in the permit or lease area; or

  • (b) returned to a formation or flared.

 Where, in the opinion of the Governor in Council, a reduction in the royalty would enable a lessee to continue producing oil or gas for a longer period, the Governor in Council may reduce the royalty by such amount and for such period as he considers advisable.

Drilling

 The Minister may at any time, except during the three years next following the issue of a lease, order the lessee to commence and continue the drilling of a well to the satisfaction of the Minister within 90 days from the date of the order.

 Where a well has been

  • (a) abandoned, or

  • (b) completed and has not been declared capable of producing in a commercial quantity,

the Minister may at any time, except during the year following the date of the abandonment or completion, order the lessee to commence and continue the drilling of another well to the satisfaction of the Minister within 90 days from the date of the order.

Grouping of Leases

  •  (1) For the purposes of sections 80, 88 and 89, a lessee may upon giving written notice in triplicate, in a form approved by the Chief, group lease areas that

    • (a) are within a circle having a radius of 24 miles; and

    • (b) cover an area of not more than 250,000 acres.

  • (2) The notice of grouping shall indicate the lease areas that are to be included in the group.

  • (3) Where a lessee complies with an order made pursuant to section 88 or 89 on one lease area in a group, he shall be deemed to have complied with all orders that have been or may be made pursuant to section 88 or 89 in respect of any lease area within that group for as long as that group remains in effect.

  • (4) A grouping shall commence on the day on which the notice of grouping is approved by the Chief and shall terminate upon the discovery of oil or gas in commercial quantity.

 
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