Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act (S.C. 1988, c. 28)

Marginal note:Effect of pooling order

174 Where a pooling order is made, all working interest owners and royalty owners having interests in the pooled spacing unit shall, on the making of the pooling order, be deemed to have entered into a pooling agreement as set out in the pooling order and that order shall be deemed to be a valid contract between the parties having interests in the pooled spacing unit, and all its terms and provisions, as set out therein or as altered pursuant to section 175, are binding on and enforceable against the parties thereto, including Her Majesty.

Marginal note:Application to alter pooling order

• 175 (1) The Committee shall hear any application to vary, amend or terminate a pooling order where such application is made by the owners of over twenty-five per cent of the working interests in the pooled spacing unit, calculated on a prorated area basis, and may, in its discretion, order a hearing on the application of any working interest owner or royalty owner.

• Marginal note:Alteration of pooling order

  (2) After a hearing held pursuant to subsection (1), the Committee may vary or amend the pooling order to supply any deficiency therein or to meet changing conditions and may vary or revoke any provision that the Committee deems to be unfair or inequitable or it may terminate the pooling order.

• Marginal note:Tract participation ratios protected

  (3) Where a pooling order is varied or amended, no change shall be made that will alter the ratios of tract participations between the pooled tracts as originally set out in the pooling order.

Marginal note:Prohibition

• 176 (1) No person shall produce any petroleum within a spacing unit in which there are two or more leases or two or more separately owned working interests unless a pooling agreement has been entered into in accordance with section 172 or in accordance with a pooling order made under section 173.

• Marginal note:Saving

  (2) Subsection (1) does not prohibit the production of petroleum for testing in any quantities approved by the Chief Conservation Officer.

Unitization

Marginal note:Unit operation

• 177 (1) Any one or more working interest owners in a pool or part thereof exceeding in area a spacing unit, together with the royalty owners, may enter into a unit agreement and operate their interests pursuant to the terms of the unit agreement or any amendment thereto if a copy of the agreement and any amendment has been filed with the Chief Conservation Officer.

• Marginal note:Board may enter into unit agreement

  (2) The Board may enter into a unit agreement binding on Her Majesty, on any terms and conditions that it may deem advisable, and any of the regulations under Part II or this Part or the Federal Real Property and Federal Immovables Act that may be in conflict with the terms and conditions of the unit agreement stand varied or suspended to the extent necessary to give full effect to the terms and conditions of the unit agreement.

• Marginal note:Unit operator’s relationship to parties

  (3) Where a unit agreement filed under this section provides that a unit operator shall be the agent of the parties thereto with respect to their powers and responsibilities under this Part, the performance or non-performance thereof by the unit operator shall be deemed to be the performance or non-performance by the parties otherwise having those powers and responsibilities under this Part.

Marginal note:Requiring unitization to prevent waste

• 178 (1) Notwithstanding anything in this Part, where, in the opinion of the Chief Conservation Officer, the unit operation of a pool or part thereof would prevent waste, the Chief Conservation Officer may apply to the Committee for an order requiring the working interest owners in the pool or part thereof to enter into a unit agreement and a unit operating agreement in respect of the pool or part thereof, as the case may be.

• Marginal note:Hearing

  (2) Where an application is made by the Chief Conservation Officer pursuant to subsection (1), the Committee shall hold a hearing at which all interested persons shall be afforded an opportunity to be heard.

• Marginal note:Order

  (3) If, after the hearing referred to in subsection (2), the Committee is of the opinion that unit operation of a pool or part thereof would prevent waste, the Committee may by order require the working interest owners in the pool or part thereof to enter into a unit agreement and a unit operating agreement in respect of the pool or part thereof.

• Marginal note:Cessation of operations

  (4) If, in the time specified in the order referred to in subsection (3), being not less than six months after the date of the making of the order, the working interest owners and royalty owners fail to enter into a unit agreement and a unit operating agreement approved by the Committee, all drilling and producing operations within the pool or part thereof in respect of which the order was made shall cease until such time as a unit agreement and a unit operating agreement have been approved by the Committee and filed with the Chief Conservation Officer.

• Marginal note:Permit to continue operations

  (5) Notwithstanding subsection (4), the Committee may permit the continued operation of the pool or part thereof after the time specified in the order referred to in subsection (3) if it is of the opinion that a unit agreement and unit operating agreement are in the course of being entered into, but any such continuation of operations shall be subject to any conditions prescribed by the Committee.

Compulsory Unitization

Marginal note:Who may apply for unitization order

• 179 (1) One or more working interest owners who are parties to a unit agreement and a unit operating agreement and own in the aggregate sixty-five per cent or more of the working interests in a unit area may apply for a unitization order with respect to the agreements.

• Marginal note:Application for unitization order

  (2) An application under subsection (1) shall be made to the Board which shall refer the application to the Committee for the purpose of holding a hearing thereon in accordance with section 181.

• Marginal note:Application by proposed unit operator

  (3) An application under subsection (1) may be made by the unit operator or proposed unit operator on behalf of the working interest owners referred to in subsection (1).

Marginal note:Contents of unitization application

• 180 (1) An application for a unitization order shall contain

  • (a) a plan showing the unit area that the applicant desires to be made subject to the order;

  • (b) one copy each of the unit agreement and the unit operating agreement;

  • (c) a statement of the nature of the operations to be carried out; and

  • (d) a statement showing

    • (i) with respect to each proposed unit tract, the names and addresses of the working interest owners and royalty owners in that tract, and

    • (ii) the tracts that are entitled to be qualified as unit tracts under the provisions of the unit agreement.

• Marginal note:Details required of unit agreement

  (2) The unit agreement referred to in subsection (1) shall include

  • (a) a description of the unit area and the unit tracts included in the agreement;

  • (b) an allocation to each unit tract of a share of the production from the unitized zone not required, consumed or lost in the unit operation;

  • (c) a provision specifying the manner in which and the circumstances under which the unit operation shall terminate; and

  • (d) a provision specifying that the share of the production from a unit area that has been allocated to a unit tract shall be deemed to have been produced from that unit tract.

• Marginal note:Details required of unit operating agreement

  (3) The unit operating agreement referred to in subsection (1) shall make provision

  • (a) for the contribution or transfer to the unit, and any adjustment among the working interest owners, of the investment in wells and equipment within the unit area;

  • (b) for the charging of the costs and expenses of the unit operation to the working interest owners;

  • (c) for the supervision of the unit operation by the working interest owners through an operating committee composed of their duly authorized representatives and for the appointment of a unit operator to be responsible, under the direction and supervision of the operating committee, for the carrying out of the unit operation;

  • (d) for the determination of the percentage value of the vote of each working interest owner; and

  • (e) for the determination of the method of voting on any motion before the operating committee and the percentage value of the vote required to carry the motion.

Marginal note:Hearing on application

• 181 (1) Where an application made under section 179 is referred by the Board to the Committee, the Committee shall hold a hearing thereon at which all interested persons shall be afforded an opportunity to be heard.

• Marginal note:Unitization order

  (2) If the Committee finds that

  • (a) at the date of the commencement of a hearing referred to in subsection (1)

    • (i) the unit agreement and the unit operating agreement have been executed by one or more working interest owners who own in the aggregate sixty-five per cent or more of the total working interests in the unit area, and

    • (ii) the unit agreement has been executed by one or more royalty owners who own in the aggregate sixty-five per cent or more of the total royalty interests in the unit area, and

  • (b) the unitization order applied for would accomplish the more efficient or more economical production of petroleum from the unitized zone,

  the Committee may order

  • (c) that the unit agreement be a valid contract enuring to the benefit of all the royalty owners and working interest owners in the unit area and binding on and enforceable against all such owners, and

  • (d) that the unit operating agreement be a valid contract enuring to the benefit of all the working interest owners in the unit area and binding on and enforceable against all such owners,

  and, subject to section 182, the unit agreement and the unit operating agreement have the effect given them by the order of the Committee.

• Marginal note:Variation by unitization order

  (3) In a unitization order, the Committee may vary the unit agreement or the unit operating agreement by adding provisions or by deleting or amending any provision thereof.

Marginal note:Effective date of unitization order

• 182 (1) Subject to subsection (2), a unitization order becomes effective on the day that the Committee determines in the order, but that day shall be not less than thirty days after the day on which the order is made.

• Marginal note:Effective date when unit agreement or unit operating agreement varied

  (2) Where a unit agreement or unit operating agreement is varied by the Committee in a unitization order, the effective date prescribed in the order shall be a date not less than thirty days following the day the order is made, but the order becomes ineffective if, before the effective date, the applicant files with the Committee a notice withdrawing the application on behalf of the working interest owners or there are filed with the Committee statements in writing objecting to the order and signed

  • (a) in the case of the unit agreement by

    • (i) one or more working interest owners who own in the aggregate more than twenty-five per cent of the total working interests in the area and were included within the group owning sixty-five per cent or more of the total working interests as described in subparagraph 181(2)(a)(i), and

    • (ii) one or more royalty owners who own in the aggregate more than twenty-five per cent of the total royalty interests in the unit area and were included within the group owning sixty-five per cent or more of the total royalty interests as described in subparagraph 181(2)(a)(ii); or

  • (b) in the case of the unit operating agreement, by one or more working interest owners who own in the aggregate more than twenty-five per cent of the total working interests in the unit area and were included within the group owning sixty-five per cent or more of the total working interests as described in subparagraph 181(2)(a)(i).

• Marginal note:Revocation of order

  (3) Where a unitization order becomes ineffective under subsection (2), the Committee shall forthwith revoke the order.

Marginal note:Technical defects in unitization order

183 A unitization order is not invalid by reason only of the absence of notice or of any irregularities in giving notice to any owner in respect of the application for the order or any proceedings leading to the making of the order.

Marginal note:Amending unitization order

• 184 (1) A unitization order may be amended on the application of a working interest owner, but before amending a unitization order the Committee shall hold a hearing at which all interested parties shall have an opportunity to be heard.

• Marginal note:Voluntary proposal for amendment by owners

  (2) If the Committee finds that, at the date of the commencement of a hearing of an application for the amendment of a unitization order, one or more working interest owners who own in the aggregate sixty-five per cent or more of the total working interests and one or more royalty interest owners who own in the aggregate sixty-five per cent or more of the total royalty interests in the unit area have consented to the proposed amendment, the Committee may amend the unitization order in accordance with the amendment proposed.

Marginal note:Protection of tract participation ratios

185 No amendment shall be made under section 184 that will alter the ratios between the tract participations of those tracts that were qualified for inclusion in the unit area before the commencement of the hearing, and, for the purposes of this section, the tract participations shall be those indicated in the unit agreement when it became subject to a unitization order.

Marginal note:Production prohibited except in accord with unitization order

186 After the date on which a unitization order comes into effect and while the order remains in force, no person shall carry on any operations within the unit area for the purpose of drilling for or producing petroleum from the unitized zone, except in accordance with the provisions of the unit agreement and the unit operating agreement.

Marginal note:How percentages of interests to be determined

187 The percentages of interests referred to in subsections 179(1), 181(2), 182(2) and 184(2) shall be determined

• (a) as to royalty interests, on a prorated area basis; and

• (b) as to working interests, on the basis of tract participations shown in the unit agreement.

General

Marginal note:Pooled spacing unit included in unit area

• 188 (1) A pooled spacing unit that has been pooled pursuant to a pooling order and on which a well has been drilled may be included in a unit area as a single unit tract and the Committee may make such amendments to the pooling order as it deems necessary to remove any conflict between the provisions of the pooling order and the provisions of the unit agreement, or the unit operating agreement or the unitization order, if any.

• Marginal note:Effect of including pooled spacing unit in unit area

  (2) Where a pooled spacing unit is included in a unit area pursuant to subsection (1), the provisions of the unit agreement, the unit operating agreement and the unitization order, if any, prevail over the provisions of the pooling order in the event of a conflict.

• Marginal note:Exceptions

  (3) Notwithstanding subsection (2),

  • (a) the share of the unit production that is allocated to the pooled spacing unit shall in turn be allocated to the separately owned tracts in the pooled spacing unit on the same basis and in the same proportion as production actually obtained from the pooled spacing unit would have been shared under the pooling order;

  • (b) the costs and expenses of the unit operation that are allocated to the pooled spacing unit shall be shared and borne by the owners of the working interests therein on the same basis and in the same proportion as would apply under the pooling order; and

  • (c) the credits allocated under a unit operating agreement to a pooled spacing unit for adjustment of investment for wells and equipment thereon shall be shared by the owners of the working interests therein in the same proportion as would apply to the sharing of production under the pooling order.