O. Reg. 116/97: EXPLORATION LICENCES AND PRODUCTION LEASES FOR OIL AND GAS IN ONTARIO
under Mining Act, R.S.O. 1990, c. M.14
Skip to content| revoked or spent September 11, 2002 |
Mining Act
Loi sur les mines
ONTARIO REGULATION 116/97
Amended to: O. Reg. 263/02
EXPLORATION LICENCES AND PRODUCTION LEASES FOR OIL AND GAS IN ONTARIO
Note: This Regulation was revoked on September 11, 2002. See: O. Reg. 263/02, s. 31 (2).
This Regulation is made in English only.
Interpretation
1. In this Regulation,
“gas” means a mixture containing hydrocarbons that is located in or recovered from an underground reservoir and that is gaseous at the temperature and pressure under which its volume is measured or estimated;
“oil” means a mixture containing hydrocarbons that is located in or recovered from an underground reservoir, or recovered in processing, and that is liquid at the temperature and pressure under which its volume is measured or estimated. O. Reg. 116/97, s. 1.
Exploration Licences
2. (1) The Minister may issue an exploration licence authorizing the licensee to explore for oil or gas, or both, on Crown lands lying south and east of the Mattawa River, Lake Nipissing and the French River.
(2) The Minister may offer for sale by tender the right to obtain a licence. O. Reg. 116/97, s. 2.
3. An applicant for a licence shall provide the Minister with,
(a) a description of the area to be covered by the licence; and
(b) the application fee for a licence as set out in the Schedule. O. Reg. 116/97, s. 3.
4. (1) Subject to subsection (2), applications for licences received during each of the following quarterly periods are considered after the end of each quarter:
1. January 1 to March 31.
2. April 1 to June 30.
3. July 1 to September 30.
4. October 1 to December 31.
(2) The Minister may, at any time, offer for sale by tender the right to obtain a licence if the Minister receives a written request to have an application for a licence considered other than in accordance with subsection (1) or if he or she considers it appropriate to do so. O. Reg. 116/97, s. 4.
5. (1) A licence shall be for a term of not more than five years and the anniversary date of every licence shall be deemed to be January 1 in each year.
(2) The Minister may extend the term of a licence for a period not exceeding 12 months if weather, water or other conditions prevent the licensee from carrying out exploration or drilling during the final year of the term of the licence and the licensee applies in writing to the Minister for the extension at least 30 days prior to its expiration and pays the fee for an extension set out in the Schedule.
(3) Any extension granted under subsection (2) is considered part of the final year of the term of the licence. O. Reg. 116/97, s. 5.
6. (1) A licensee has the sole and exclusive right to drill for oil or gas, or both, in the area described in the licence during the term of the licence.
(2) Drilling for oil by means of wells located in water covered areas and production of oil from such wells is prohibited despite any rights granted under a licence. O. Reg. 116/97, s. 6.
7. (1) A licence shall describe the area covered by the licence in accordance with the grid system, as shown on a plan filed in the Archives of Ontario at Toronto as No. 1495 or, if no grid system applies to the area, by description prepared under the instructions of the Minister.
(2) If the area to be covered by a licence is a water-covered area of Lake Erie, the minimum size of the area shall be one tract and the maximum size of the area shall be one block.
(3) If the area to be covered is an area other than a water-covered area of Lake Erie, the Minister shall specify the minimum and maximum size of an area to be covered by a licence on application or tendering.
(4) In this section,
“tract” and “block” have the same meanings as they have with respect to Crown land descriptions as shown on Plan No. 1495 filed in the Archives of Ontario at Toronto. O. Reg. 116/97, s. 7.
8. (1) Subject to subsection (2), a licensee shall pay in advance the annual rental for a licence set out in the Schedule and, for the purpose of calculating the rental payable, one tract is equal to 255 hectares.
(2) If the first year of the term of a licence is less than 12 months, the rental for the first year shall be determined on a proportionate basis. O. Reg. 116/97, s. 8.
9. (1) A licensee who is in compliance with the Petroleum Resources Act and the regulations made under it may, with the Minister’s consent, surrender a licence in whole or in part at any time upon giving written notice to the Minister at least 30 days before the surrender is proposed to take effect and paying the fee for a surrender set out in the Schedule.
(2) Despite subsection (1), if a licensee gives notice to the Minister for the surrender of a licence under that subsection within three months after the coming into force of this Regulation and the Minister consents to the surrender, the effective date of the surrender shall be deemed to be December 31, 1996.
(3) If a surrender is accepted, the annual rental for the year of the term in which the surrender is made shall be that required for the area described in the licence prior to the surrender, but the annual rental for any subsequent year or years of the term shall be based on the remaining area described in the revised licence. O. Reg. 116/97, s. 9.
10. The Minister may reduce the rental payable for a licence in any year in which the licensee is prevented from carrying out exploration or drilling if a public authority having jurisdiction in the area in which the licensee was carrying out exploration or drilling directs the licensee to suspend such work or if weather, water or other conditions prevent such work from being carried out. O. Reg. 116/97, s. 10.
11. (1) A licensee who encounters oil while drilling for gas in a water-covered area shall surrender the licence with respect to the area that has been proven to reasonably contain oil.
(2) The licensee who surrenders a water-covered area under subsection (1) has a right of first refusal with respect to obtaining a lease to produce oil from the surrendered area if,
(a) a lease to produce oil is granted; and
(b) the licensee pays in advance an annual fee of $1 per hectare per year to maintain that right.
(3) Despite subsection (1), a licensee who surrenders a water-covered area in the circumstances described in that subsection may, with the Minister’s consent, retain the area for the purpose of exploring for gas at a shallower or deeper depth than that at which oil was discovered. O. Reg. 116/97, s. 11.
Production Leases
12. (1) A licensee who applies to the Minister for a lease shall be granted a lease for an area that formed all or part of the area described in the licence if the licensee demonstrates to the Minister’s satisfaction that the area to be covered by the lease contains economically producible oil or gas.
(2) If the Minister is not satisfied that the licensee has demonstrated that the area to be covered in the lease contains economically producible oil or gas, the Minister may,
(a) amend the application with respect to the area applied for and grant the lease; or
(b) refuse to grant the lease.
(3) If the Minister offers for sale by tender the right to obtain a licence, the Minister may grant a lease to the successful purchaser of that right without first issuing a licence.
(4) The area to be covered by a lease shall conform to the size requirements of subsections 7 (2) and (3).
(5) An application for a lease for an area described by a grid system shall be accompanied by,
(a) a description of the area in accordance with the grid system shown on a plan filed in the Archives of Ontario at Toronto as No. 1495 or any subsequently established grid system;
(b) a summary of the technical data supporting and quantifying the discovery of economically producible oil or gas; and
(c) the rent for the first year of the term of the lease.
(6) An application for a lease for an area that is not described by a grid system shall be accompanied by,
(a) a Crown land reference plan prepared under the instructions of the Minister or any other description approved by the Minister;
(b) a summary of the technical data supporting and quantifying the discovery of economically producible oil or gas; and
(c) the rent for the first year of the term of the lease. O. Reg. 116/97, s. 12.
13. Drilling for oil by means of wells located in water-covered areas and production of oil from such wells is prohibited despite any rights granted under a lease. O. Reg. 116/97, s. 13.
14. (1) A lease shall be for a term of not more than ten years and the anniversary date of every lease shall be deemed to be January 1st in each year.
(2) If oil or gas is produced under a lease and production continues beyond the term of the lease, the Minister shall renew the lease, for successive periods of not more than ten years, with respect to those areas covered by the lease that remain productive. O. Reg. 116/97, s. 14.
15. (1) A lessee who is in compliance with the requirements of the Petroleum Resources Act and the regulations made under it may, with the Minister’s consent, surrender a lease in whole or in part at any time upon giving written notice to the Minister at least 30 days before the surrender is proposed to take effect.
(2) If a surrender is accepted under subsection (1), the annual rental for the year of the term in which the surrender is made shall be that required for the area described in the lease prior to the surrender, but the annual rental for any subsequent year or years of the term shall be based on the remaining area described in the revised lease. O. Reg. 116/97, s. 15.
16. (1) A lessee shall pay in advance the annual rental for a lease set out in the Schedule.
(2) If the first year of the term of a lease is less than 12 months, the rental for the first year shall be determined on a proportionate basis. O. Reg. 116/97, s. 16.
17. (1) A lessee shall pay a royalty on the oil or gas produced from the area covered by the lease based on the full sale price of the oil or gas received by the lessee at the point at which the lessee transfers custody of the oil or gas to the purchaser, without any deduction for any of the lessee’s or purchaser’s costs.
(2) The lessee shall pay a royalty on oil at a rate of 12.5 per cent of the full sale price of the oil referred to in subsection (1).
(3) The lessee shall pay a royalty on gas at the percentage rate, as set out in the Schedule, of the full sale price of the gas referred to in subsection (1).
(4) Despite subsection (3), no royalty is payable in respect of any gas produced from the area covered by the lease that the lessee reasonably required and used as fuel for the production of oil or gas from the area.
(5) The royalty on oil or gas produced in a month is payable on or before the end of the month following the month in which the oil or gas is produced, unless otherwise directed by the Minister.
(6) On making a royalty payment, the lessee shall submit evidence of the full sale price of the oil or gas to which the royalty payment relates.
(7) The Minister may recalculate any royalty payment if the Minister determines that the full sale price of the oil or gas does not reflect its fair market value on the day of the sale, in which case the lessee shall pay a royalty based on the fair market value of the oil or gas on that day and not on the full sale price. O. Reg. 116/97, s. 17.
18. (1) In this section,
“pool” means an underground accumulation of oil or gas, or both, separated or appearing to be separated from any other underground accumulation;
“spacing unit” has the same meaning as in section 1 of the Petroleum Resources Act;
“unitization agreement” means an agreement providing for the combining of separately owned oil or gas interests in a pool, formation or field to permit the efficient and economical drilling for or production of oil, gas or other unitized substances.
(2) If the Crown’s interest in oil or gas is within a spacing unit and all of the interests in the oil and gas in the spacing unit are combined under a pooling agreement, the Crown’s percentage share of the production of oil or gas from the spacing unit,
(a) is the Crown’s percentage share as set out in the agreement; or
(b) is equal to the percentage share by area of the Crown’s interest in the oil and gas in the spacing unit in any other case.
(3) If the Crown’s interest in oil or gas relates to land that is subject to a unitization agreement, the Crown’s percentage share of the production of oil or gas from the land is as set out in the unitization agreement.
(4) When the Crown’s percentage share of the production of oil or gas has been determined under subsection (2) or (3), the royalty payable to the Crown shall be calculated in accordance with section 17. O. Reg. 116/97, s. 18.
General
19. A licensee or lessee shall carry out all exploration, drilling and production operations in accordance with,
(a) the Act and this Regulation;
(b) the terms and conditions of the licence or lease;
(c) the Petroleum Resources Act and the regulations made under it; and
(d) any order of the Ontario Energy Board or of the Mining and Lands Commissioner. O. Reg. 116/97, s. 19.
20. On paying the fee set out in the Schedule, a licensee or lessee may, with the Minister’s consent, transfer or assign to any other person the rights conferred under the licence or lease, as the case may be, with respect to the whole or any part of the area covered by the licence or lease, on condition that the licensee or lessee does not retain any interest in the area or part of an area transferred or assigned. O. Reg. 116/97, s. 20.
21. (1) Subject to subsections (2) and (3), the Minister may forthwith cancel a licence or terminate a lease without liability and without compensation to the licensee or lessee, as the case may be, if the licensee or lessee fails,
(a) to comply with the terms and conditions of the licence or lease;
(b) to comply with the Act or the Petroleum Resources Act or the regulations made under them;
(c) to comply with an order of the Ontario Energy Board or the Mining and Lands Commissioner;
(d) to make a rental or royalty payment as required by this Regulation; or
(e) to produce oil or gas under a lease on or before the fifth anniversary of the lease or during any five-year period during the term of the lease.
(2) The Minister may not cancel a licence or terminate a lease under subsection (1) unless he or she delivers or sends by registered mail to the licensee or lessee at the licensee’s or lessee’s last address on record with the Ministry a notice setting out the default and requiring that it be remedied.
(3) If the licensee or lessee remedies the default within 30 days after delivery or receipt of the notice, the Minister shall not cancel the licence or terminate the lease.
(4) For the purposes of subsection (2), a notice of failure to comply sent by registered mail shall be deemed to have been received on the fifth day after the date of mailing, unless the contrary is shown.
(5) If a licence has been cancelled for failure to comply with a term of the licence, the Minister may cancel, in whole or in part, any or all other licences held by the licensee if, in the Minister’s opinion, the licensee is unable to satisfactorily develop the area or areas covered by those licences because the licensee is financially insolvent or because the licensee is unable to meet the requirements of the Petroleum Resources Act and the regulations made under it. O. Reg. 116/97, s. 21.
22. The Minister may require that a licensee or lessee make and file a cadastral survey satisfactory to the Minister with respect to the position of any boundary that is uncertain or becomes the subject of a dispute. O. Reg. 116/97, s. 22.
Transition
23. (1) Licences issued and leases granted under a predecessor of this Regulation shall be deemed to have been issued or granted under this Regulation and to be subject to the conditions and requirements of this Regulation.
(2) Land use permits issued under the Public Lands Act for the purposes of oil or gas exploration shall be deemed to be licences issued under this Regulation and to be subject to the conditions and requirements of this Regulation with respect to licences, except that nothing in this Regulation affects the expiry dates of such land use permits.
(3) Rights of first refusal for obtaining a lease for producing oil acquired before the coming into force of this Regulation are continued but shall be subject to the $1 per hectare per year maintenance fee referred to in clause 11 (2) (b). O. Reg. 116/97, s. 23.
SCHEDULE
Exploration Licence Fees | |
Application for and surrender, assignment or extension of licence |
$100.00 per licence |
Production Lease Fees | |
Application for and surrender, assignment or renewal of lease |
$100.00 per lease |
Exploration Licence and Production Lease Rentals | ||
1. |
The following are the annual rentals for an exploration licence: | |
1. |
$0.60 per hectare in the first year of the term of the licence. | |
2. |
$1.20 per hectare in the second year of the term of the licence. | |
3. |
$1.80 per hectare in the third term of the licence. | |
4. |
$2.40 per hectare in the fourth year of the term of the licence. | |
5. |
$3.00 per hectare in the fifth year of the term of the licence. | |
2. |
The annual rental for a production lease is $2.50 per hectare or $100, whichever is greater. |
Gas Royalty Percentages | ||
1. |
For gas produced from water-covered areas of Lake Erie |
10.0% |
2. |
For gas produced from nearshore water-covered areas |
12.5% |
3. |
For gas produced from land based areas |
12.5% |
O. Reg. 116/97, Sched.