R.R.O. 1990, Reg. 765: EXPLORATORY LICENCES AND LEASES FOR OIL AND NATURAL GAS NORTH OF THE FIFTY-FIRST PARALLEL OF LATITUDE

Mining Act
Loi sur les mines

REGULATION 765

Amended to O. Reg. 263/02

EXPLORATORY LICENCES AND LEASES FOR OIL AND NATURAL GAS NORTH OF THE FIFTY-FIRST PARALLEL OF LATITUDE

Note: This Regulation was revoked on September 11, 2002. See: O. Reg. 263/02, s. 31 (1).

This Regulation is made in English only.

1. (1) For the purpose of this Regulation, that part of Ontario lying north of the fifty-first parallel of latitude is divided into oil and gas exploration grid areas.

(2) An oil and gas exploration grid area shall be bounded on the east and west sides by successive meridians of longitude of the series 80º 00´ 00˝, 80º 15´ 00˝, 80º 30´ 00˝, which series may be extended as required, and on the north and south sides by straight lines joining the points of intersection of the east and west boundaries with successive parallels of latitude of the series 51º 00´ 00˝, 51º 10´ 00˝, 51º 20´ 00˝, which series may be extended as required.

(3) Every oil and gas exploration grid area shall be referred to by the latitude and longitude of the northeast corner of that grid area.

(4) Every oil and gas exploration grid area shall be divided into sections.

(5) A section shall be bounded on the east and west sides by meridians spaced at one-tenth of the interval between the east and west boundaries of the oil and gas exploration grid area and on the north and south by straight lines drawn parallel to the north and south boundaries of the oil and gas exploration grid area and spaced at intervals of one-tenth of the interval between the north and south boundaries of the oil and gas exploration grid area.

(6) A section shall be identified by the number to which it corresponds.

(7) Sections in an oil and gas exploration grid area shall be numbered from 1 to 100, both inclusive, with the eastern ten sections being numbered from 1 to 10 commencing at the south section, as illustrated in the following example:

	N
	100	90	80	70	60	50	40	30	20	10
	99	89	79	69	59	49	39	29	19	9
	98	88	78	68	58	48	38	28	18	8
	97	87	77	67	57	47	37	27	17	7
	96	86	76	66	56	46	36	26	16	6
W	95	85	75	65	55	45	35	25	15	5	E
	94	84	74	64	54	44	34	24	14	4
	93	83	73	63	53	43	33	23	13	3
	92	82	72	62	52	42	32	22	12	2
	91	81	71	61	51	41	31	21	11	1
	S

(8) The boundary between,

(a) the north and south halves of an oil and gas exploration grid area is the north boundary of sections 5, 15, 25, 35, 45, 55, 65, 75, 85 and 95; and

(b) the east and west halves of an oil and gas exploration grid area is the west boundary of sections 41 to 50.

(9) Where an oil and gas exploration grid area is broken or incomplete for any reason, the provisions of subsections (6), (7) and (8) may be modified by the Minister. R.R.O. 1990, Reg. 765, s. 1.

2. (1) In this section and in sections 3 to 15,

“petroleum products” includes,

(a) related hydrocarbons other than coal, and

(b) all gases and minerals and substances,

(i) whether liquid or solid, and

(ii) whether or not hydrocarbons, produced in association with natural gas and petroleum or found in any water contained in any oil or gas reservoir.

(2) Any licence to explore and any lease issued under this Regulation shall be for natural gas and petroleum and petroleum products and shall exclude all other minerals.

(3) A licence to explore for natural gas and petroleum and petroleum products in, upon or under an oil and gas exploration grid area may be granted upon the terms and conditions provided in this Regulation. R.R.O. 1990, Reg. 765, s. 2.

3. (1) The Minister may issue a licence in Form 1 to an applicant to enter upon and explore for natural gas and petroleum on an oil and gas exploration grid area.

(2) The licence shall be issued only upon application in writing to the Minister.

(3) The application shall be accompanied by,

(a) a sketch and description of the oil and gas exploration grid area for which application is made;

(b) a statement or other evidence showing the financial ability of the applicant to undertake the exploratory work required by this Regulation; and

(c) the fee for the first year of the term of the licence.

(4) The Minister may,

(a) consider applications from more than one applicant with respect to a specific oil and gas exploration grid area or specific oil and gas exploration grid areas and may request each applicant to submit a detailed plan of proposed development; and

(b) issue a licence or licences to the applicant who, in the Minister’s opinion, will develop the oil and gas exploration grid area or oil and gas exploration grid areas most advantageously.

(5) The Minister may offer for sale by tender the right to obtain a licence or licences for a specific oil and gas exploration grid area or for specific oil and gas exploration grid areas and shall give public notice of the sale, specifying the lands and the manner of tendering.

(6) A licence,

(a) shall be for an oil and gas exploration grid area; or

(b) may, in circumstances satisfactory to the Minister, be for half of an oil and gas exploration grid area.

(7) Where adjoining oil and gas exploration grid areas are not of full size, the Minister may consent to the adjoining oil and gas exploration grid areas being combined in an application.

(8) A licence shall be for a term of three years.

(9) The fee for a licence is $250 payable annually in advance during the term of the licence. R.R.O. 1990, Reg. 765, s. 3.

4. (1) The licensee shall expend,

(a) during the first year of the term of the licence, a sum averaging at least five cents an acre;

(b) during the second year of the term of the licence, a sum averaging at least five cents an acre; and

(c) during the third year of the term of the licence, a sum averaging at least ten cents an acre,

in geophysical, geological or other exploratory work of a kind acceptable to the Minister, or in drilling, on the oil and gas exploration grid area specified in the licence.

(2) Where, during any year of the term of a licence or a renewal, the licensee expends an amount greater than the amount required under subsection (1) for that year, the licensee may apply the excess amount against the amount required to be expended in any other year or years of the original term or of a renewal.

(3) Where a licensee who is the holder of more than one licence expends an amount greater than the amount required under subsection (1) on an oil and gas exploration grid area specified in one licence, the licensee may apply the excess amount to one or more of the oil and gas exploration grid areas specified in the licensee’s other licences, so long as the oil and gas exploration grid area or areas are located within a radius of one hundred miles of the oil and gas exploration grid area on which the licensee has expended the excess amount and provided the total of the area of the exploration grid area or areas on which amounts have been expended and the area of the exploration grid area or areas to which the excess is applied does not exceed 2,000,000 acres.

(4) Where an excess amount is applied to an oil and gas exploration grid area under subsection (3), the excess amount must be applied to work performed during the term, or renewal term, of the licence for the oil and gas exploration grid area.

(5) Where holders of licences for separate but contiguous oil and gas exploration grid areas carry out geophysical exploration jointly on their oil and gas exploration grid areas, each licensee may apply the amount actually expended by the licensee, in the joint geophysical exploration, on the licensee’s oil and gas exploration grid area.

(6) Where holders of licences for separate but contiguous oil and gas exploration grid areas jointly engage in drilling a well within ten miles of their common boundary, each licensee may apply the amount actually expended by the licensee, in drilling the well, on the licensee’s oil and gas exploration grid area.

(7) Where during the first year of the term of a licence or during any subsequent year, or during the term of any renewal, except the last renewal permitted under section 5, the amount expended by the licensee is less than the amount required under this section, the licensee shall deposit with the Minister an amount equal to the difference between the amount expended and the amount required to be expended. R.R.O. 1990, Reg. 765, s. 4 (1-7).

(8) An amount deposited under subsection (7) shall be deposited within thirty days of the commencement of the next year of the term or of the commencement of the renewal, as the case may be, and shall be in cash or in,

(a) bearer bonds of,

(i) the Province of Ontario,

(ii) Ontario Electricity Financial Corporation, or

(iii) the Government of Canada; or

(b) the form of a promissory note guaranteed by a bank listed in Schedule I or II to the Bank Act (Canada). R.R.O. 1990, Reg. 765, s. 4 (8); O. Reg. 156/99, s. 1.

(9) A deposit under subsection (7) is compliance with respect to expenditure requirements for the purpose of section 5.

(10) Subject to subsection (11), where a licensee expends the minimum required for a year in which an amount has been deposited under subsection (7), the amount shall be refunded upon proof of the expenditure by means of the statement required by section 6.

(11) Any sum expended,

(a) after an amount has been deposited under subsection (7);

(b) in respect of the lands described in a licence during the remaining term of the licence or of any renewal,

shall be applied to the first year, second year and third year of the term of the licence and to the term of the first renewal, second renewal, third renewal, fourth renewal, fifth renewal and sixth renewal, in that order.

(12) Where an amount has been deposited with the Minister with respect to the lands described in a licence and the licensee,

(a) fails to deposit any further amount in the amount required by this section;

(b) fails to expend the minimum sum required within the term, or a renewal term, of the licence; or

(c) fails to obtain a renewal of the licence,

that part of the amount deposited that equals the difference between the minimum required to be expended in the year or years for which the deposit was made and the amount expended for that year or those years is forfeit to the Crown in right of Ontario.

(13) Where part of an amount that has been deposited is forfeited, the balance shall be refunded to the licensee within thirty days after the forfeiture.

(14) Upon forfeiture of an amount deposited under subsection (7), the licence in respect of which the deposit was made is terminated. R.R.O. 1990, Reg. 765, s. 4 (9-14).

5. (1) Where, during the term of a licence,

(a) the licensee has complied with the terms and conditions of the licence and with the Act and this Regulation;

(b) there has been no discovery of natural gas or petroleum in commercial quantities on the lands described in the licence;

(c) the licensee applies to the Minister before the expiry of the licence,

the Minister may renew the licence for a term of one year in Form 2.

(2) Where, during the term of a renewal,

(a) the licensee has complied with the terms and conditions of the licence and with the Act and this Regulation;

(b) there has been no discovery of natural gas or petroleum in commercial quantities on the lands described in the licence; and

(c) the licensee applies to the Minister before the expiry of the renewal,

the Minister may issue a further renewal for one year, but not more than six renewals shall issue with respect to any licence.

(3) The fee for each renewal is $500, payable in advance.

(4) The minimum sums required to be expended for each acre of land in the lands described in a renewal of a licence are,

(a) thirty cents for a first renewal;

(b) forty cents for a second renewal;

(c) fifty cents for a third renewal;

(d) fifty cents for a fourth renewal;

(e) fifty cents for a fifth renewal; and

(f) fifty cents for a sixth renewal,

and the expenditures shall be for work as prescribed in section 4.

(5) A licensee may surrender a licence or renewal at any time upon giving written notice thereof to the Minister at least thirty days before the surrender is to take effect.

(6) A licensee may, with the consent of the Minister, surrender half of the oil and gas exploration grid area specified in a licence or renewal, if the part being retained complies with subsection 1 (8).

(7) Where a surrender is made and accepted under subsection (6), the expenditure for the year of the term in which the surrender is made shall be that required for the lands described in the licence prior to the surrender, but the expenditure for any subsequent year or years of the term shall be based on the remaining lands. R.R.O. 1990, Reg. 765, s. 5.

6. (1) Within thirty days after each anniversary date of the issue of a licence or a renewal, the licensee shall submit a sworn statement to the Minister,

(a) detailing the amount and manner of all expenditures made by the licensee in geophysical, geological or other exploratory work as prescribed in section 4; and

(b) giving full particulars of the work and operations carried on by the licensee,

during the previous twelve-month period on the lands described in the licence or renewal.

(2) Where the Minister is not satisfied by the sworn statement of the licensee that the licensee has expended the sums required by sections 4 and 5 for which the statement has been submitted, the Minister may send a notice by registered mail to the licensee at the licensee’s latest address recorded in the Ministry, requiring the licensee to submit such further details as are in the opinion of the Minister necessary to prove that the expenditure complies with the requirements of sections 4 and 5 and, if the licensee is still unable to satisfy the Minister that the expenditures have been in compliance with the requirements of sections 4 and 5, the Minister may disallow the expenditures or any part of them.

(3) No expenditures other than those detailed in the sworn statement referred to in subsection (1) and allowed by the Minister shall be credited to the minimum required to be expended under sections 4 and 5. R.R.O. 1990, Reg. 765, s. 6.

7. While a licence is in force, the licensee has the sole and exclusive right to drill for natural gas and petroleum on the lands described in the licence. R.R.O. 1990, Reg. 765, s. 7.

8. (1) Upon application to the Minister, a licensee shall be granted a lease to produce natural gas and petroleum if the Minister is satisfied that a well drilled on the lands described in the licence, or in a licence for a contiguous area held by the same licensee, has indicated the presence of natural gas or petroleum in commercial quantities.

(2) The lands to be included in a lease shall be selected by the licensee from the lands described in the licensee’s licence and shall not be for more than one-half of the number of sections in the oil and gas exploration grid area specified in the licence.

(3) Every application for a lease shall be accompanied by,

(a) the rent for the first year of the term; and

(b) a diagram and description of the lands to be included in the lease.

(4) The lands to be included in a lease shall be composed of quadrilateral blocks of sections not larger than five sections by three sections or four sections by four sections.

(5) Where more than one block is included in an application, each block shall corner another block or be separated from another block by at least one section.

(6) No lease shall be granted for less than one section.

(7) A lease shall be in Form 3 and shall be for a term of twenty-one years.

(8) Where commercial production of natural gas or petroleum is obtained and where at any time before the expiry of the lease the Minister is satisfied that the productive life of the lease is longer than the term thereof, the Minister may renew the lease for successive periods of not more than twenty-one years each.

(9) The annual rental for a lease is $1 an acre or $1,000, whichever is the greater, payable in advance.

(10) Royalty is payable to the Minister of Finance on natural gas, petroleum and petroleum products,

(a) on all natural gas produced, of 10 per cent of the prevailing field price for natural gas; and

(b) on all petroleum and petroleum products, of 10 per cent of the actual value at the wellhead,

but no royalty is payable on natural gas, petroleum or petroleum products used on the premises for drilling or exploration purposes.

(11) The amount of royalty payable in any year shall be reduced by the amount of rent paid on the lease for that year.

(12) Where production of natural gas, petroleum or petroleum products is restricted or limited under the Energy Act, the regulations thereunder or any order of the Ontario Energy Board, the Minister may reduce or suspend the rental payable by the lessee in such manner and to such extent as the Minister considers expedient.

(13) The lessee shall,

(a) keep a record of all natural gas, petroleum and petroleum products produced, sold or otherwise disposed of each year under each lease held by the lessee; and

(b) within thirty days after each anniversary date of the lease, submit to the Minister a sworn statement showing the quantity and actual value at the well-head of all natural gas, petroleum and petroleum products produced during the previous twelve-month period, together with a remittance for any royalty payable for that period.

(14) Where a lease is issued for any part of the lands described in a licence, the licence is terminated.

(15) A lessee may, on thirty days prior written notice to the Minister, surrender any part of the lands included in a lease so long as the part being retained complies with subsections (4), (5) and (6).

(16) Where a surrender has been made under subsection (15), the annual rent for the year in which the surrender is made shall be based on the lands included in the lease at the commencement of that year, but the annual rent for ensuing years shall be based on the lands being retained. R.R.O. 1990, Reg. 765, s. 8.

9. Despite section 3, where a licence is terminated under subsection 8 (14) or under section 10, the Minister may offer for sale by tender the right to obtain a licence or licences or a lease or leases for a specific parcel or specific parcels and shall give public notice of the sale, specifying the lands and the method of tendering. R.R.O. 1990, Reg. 765, s. 9.

10. If default is made,

(a) in the performance or observance of the terms and conditions of a licence, or of the Act or this Regulation; or

(b) by a lessee in payment of rent or royalties, or both, or in the performance or observance of the terms and conditions of the lease or of the Act, or this Regulation respecting his lease,

and the default is not remedied within thirty days after notice has been delivered or sent by registered mail to the holder of the licence or the lessee, as the case may be, at the licensee’s or lessee’s latest address recorded with the Ministry, setting forth the default and calling upon the licensee or lessee to remedy the default,

(c) in the case of a licence, the Minister may forthwith cancel the licence; or

(d) in the case of a lease, the Minister may forthwith declare the lease forfeit and void. R.R.O. 1990, Reg. 765, s. 10.

11. The licensee or lessee, as the case may be, shall carry out all drilling and exploratory work in accordance with the Mining Act, the Petroleum Resources Act and all other applicable Acts and the regulations thereunder. R.R.O. 1990, Reg. 765, s. 11.

12. A licence or a lease, issued under this Regulation, or any interest therein shall not be transferred or assigned without the written consent of the Minister. R.R.O. 1990, Reg. 765, s. 12.

13. (1) The licensee or lessee, as the case may be, shall submit to the Minister reports, maps, photographs and drilling logs in duplicate, covering all geological and geophysical examinations, drilling, prospecting or other exploratory or development work, within sixty days of completion.

(2) Except with the consent of the licensee or lessee, as the case may be, material submitted under subsection (1) shall not be made public for one year from the date of submission or for such longer period as the Minister, at his or her discretion, directs. R.R.O. 1990, Reg. 765, s. 13.

14. (1) Where any uncertainty or dispute arises respecting the position of any boundary, the Minister may require the licensee or lessee, as the case may be, to file a cadastral survey showing the boundary in respect of which the uncertainty or dispute has arisen.

(2) The licensee shall supply any necessary cadastral surveys of the lands selected under section 8 in accordance with instructions issued by the Minister and in a form acceptable under the Land Titles Act and the regulations thereunder. R.R.O. 1990, Reg. 765, s. 14.

15. (1) Where an exploratory licence for natural gas and petroleum has been issued under subsection 176 (3) of the Act, and the terms of the licence provide for conversion to licences or permits under regulations in force at the time of conversion, this Regulation applies, subject to any special conditions contained in the licence.

(2) Where there has been an over-expenditure on exploration on land described in a licence referred to in subsection (1) and there is a provision in the licence for a limited carry-over of over-expenditures to be applied against licences issued under this Regulation, the Minister, at his or her discretion, may increase the limit of the amount that may be applied if the over-expenditure is the result of the drilling of a well or wells.

(3) Where, in an exploratory licence described in subsection (1), the lands described in the licence are described as rectangular areas, bounded by meridians of longitude and parallels of latitude with the northeast co-ordinate for each rectangular area given, the lands described in the licence shall be deemed for the purpose of this Regulation to be comprised of oil and gas exploration grid areas, and the limits of the lands described in the licence shall be deemed to be in conformity with the oil and gas exploration grid area limits, and where all or part of the lands described in the licence do not comprise an entire oil and gas exploration grid area the lands shall be deemed to comprise a part of an oil and gas exploration grid area as described in section 1, the limits of which part shall be in conformity with the limits of the sections, or with straight lines of sight, established proportionally between the section lines. R.R.O. 1990, Reg. 765, s. 15.

FORM 1

Mining Act

EXPLORATORY LICENCE OF OCCUPATION

R.R.O. 1990, Reg. 765, Form 1.

FORM 2

Mining Act

RENEWAL OF EXPLORATORY LICENCE OF OCCUPATION

R.R.O. 1990, Reg. 765, Form 2.

FORM 3

Mining Act

R.R.O. 1990, Reg. 765, Form 3.