Canada Oil and Gas Operations Act (R.S.C., 1985, c. O-7)

Marginal note:Lesser amount

• 27.1 (1) The Minister may, by order, on the recommendation of the Commission of the Canadian Energy Regulator, approve an amount that is less than the amount referred to in paragraph 26(2.2)(a) or (d) or 27(1)(a) in respect of an applicant for, or a holder of, an authorization under paragraph 5(1)(b).

• Marginal note:Financial resources — exception

  (2) If the Minister approves an amount that is less than the amount referred to in paragraph 26(2.2)(a) or (d) in respect of an applicant for an authorization under paragraph 5(1)(b), that applicant, for the purposes of subsection 26.1(1), shall only provide proof that it has the financial resources necessary to pay the adjusted amount approved by the Minister.

• Marginal note:No contravention

  (3) No applicant for an authorization under paragraph 5(1)(b) contravenes paragraph 27(1)(a) if that applicant provides proof of financial responsibility in the amount that is approved by the Minister under this section.

Inquiries

Marginal note:Inquiries

• 28 (1) Where a spill or debris or an accident or incident related to any activity to which this Act applies occurs or is found in any area to which this Act applies and results in death or injury or danger to public safety or the environment, the Minister may direct an inquiry to be made, subject to the Canadian Transportation Accident Investigation and Safety Board Act, and may authorize any person that the Minister deems qualified to conduct the inquiry.

• Marginal note:Mandatory inquiry

  (1.1) Where a spill or debris or an accident or incident related to any activity to which this Act applies occurs or is found in any area to which this Act applies and is serious, as defined by regulation, the Minister shall direct that an inquiry referred to in subsection (1) be made, subject to the Canadian Transportation Accident Investigation and Safety Board Act, and shall ensure that the person who conducts the inquiry is not employed in a part of the federal public administration for which the Minister is responsible.

• Marginal note:Power of persons conducting inquiry

  (2) For the purposes of an inquiry under subsection (1), a person authorized by the Minister under that subsection has all the powers of a commissioner under Part I of the Inquiries Act.

• Marginal note:Compatible procedures and practices

  (3) The person or persons authorized to conduct an inquiry under subsection (1) shall ensure that, as far as practicable, the procedures and practices for the inquiry are compatible with investigation procedures and practices followed by any appropriate provincial authorities, and for those purposes may consult with any of those authorities concerning compatible procedures and practices.

• Marginal note:Report

  (4) As soon as possible after the conclusion of an inquiry under subsection (1), the person or persons authorized to conduct the inquiry shall submit a report to the Minister, together with the evidence and other material that was before the inquiry.

• Marginal note:Publication

  (5) A report made pursuant to subsection (4) shall be published by the Minister within thirty days after he has received it.

• Marginal note:Copies of report

  (6) The Minister may supply copies of a report published pursuant to subsection (5) in such manner and on such terms as he considers proper.

PART IIProduction Arrangements

Interpretation

Marginal note:Definitions

29 In this Part,

expert

expert means a person who is appointed under subsection 48.27(2) or an expert panel appointed under subsection 48.27(3); (expert)

perimeter

perimeter means

• (a) the area in the offshore, as defined in section 48.01, that is within 20 km of the onshore;

• (b) the area in Nunavut that is within 20 km of the limit of that territory; and

• (c) the portion of the submarine area — consisting of the areas referred to in paragraphs 3(d) and (e) — that is within 10 nautical miles of the seaward limit of that area; (bande limitrophe)

pooled spacing unit

pooled spacing unit means the area that is subject to a pooling agreement or a pooling order; (unité d’espacement mise en commun)

pooled tract

pooled tract means the portion of a pooled spacing unit defined as a tract in a pooling agreement or a pooling order; (parcelle mise en commun)

pooling agreement

pooling agreement means an agreement to pool the interests of owners in a spacing unit and to provide for the operation or the drilling and operation of a well thereon; (accord de mise en commun)

pooling order

pooling order means an order made under section 31 or as altered pursuant to section 35; (arrêté de mise en commun)

regulator

regulator means a provincial government, a provincial regulatory agency or a federal-provincial regulatory agency that has administrative responsibility for the exploration for and exploitation of oil and gas in an area adjoining the perimeter; (organisme de réglementation)

royalty interest

royalty interest means any interest in, or the right to receive a portion of, any oil or gas produced and saved from a field or pool or part of a field or pool or the proceeds from the sale thereof, but does not include a working interest or the interest of any person whose sole interest is as a purchaser of oil or gas from the pool or part thereof; (droit à redevance)

royalty owner

royalty owner means a person, including Her Majesty in right of Canada, who owns a royalty interest; (titulaire de redevance)

spacing unit

spacing unit means the area allocated to a well for the purpose of drilling for or producing oil or gas; (unité d’espacement)

tract participation

tract participation means the share of production from a unitized zone that is allocated to a unit tract under a unit agreement or unitization order or the share of production from a pooled spacing unit that is allocated to a pooled tract under a pooling agreement or pooling order; (fraction parcellaire)

transboundary

transboundary means, in relation to a pool, extending beyond the Commission of the Canadian Energy Regulator’s jurisdiction under this Act or, in relation to a field, underlain only by one or more such pools; (transfrontalier)

unit agreement

unit agreement means an agreement to unitize the interests of owners in a pool or a part of a pool exceeding in area a spacing unit, or such an agreement as varied by a unitization order; (accord d’union)

unit area

unit area means the area that is subject to a unit agreement; (secteur unitaire)

unitization order

unitization order means an order made under section 41, 48.092 or 48.23; (arrêté d’union)

unitized zone

unitized zone means a geological formation that is within a unit area and subject to a unit agreement; (terrain)

unit operating agreement

unit operating agreement means an agreement, providing for the management and operation of a unit area and a unitized zone, that is entered into by working interest owners who are parties to a unit agreement with respect to that unit area and unitized zone, and includes a unit operating agreement as varied by a unitization order; (accord d’exploitation unitaire)

unit operation

unit operation means those operations conducted pursuant to a unit agreement or a unitization order; (exploitation unitaire)

unit operator

unit operator means a person designated as a unit operator under a unit operating agreement; (exploitant unitaire)

unit tract

unit tract means the portion of a unit area that is defined as a tract in a unit agreement; (parcelle unitaire)

working interest

working interest means a right, in whole or in part, to produce and dispose of oil or gas from a pool or part of a pool, whether that right is held as an incident of ownership of an estate in fee simple in the oil or gas or under a lease, agreement or other instrument, if the right is chargeable with and the holder thereof is obligated to pay or bear, either in cash or out of production, all or a portion of the costs in connection with the drilling for, recovery and disposal of oil or gas from the pool or part thereof; (intérêt économique direct)

working interest owner

working interest owner means a person who owns a working interest. (détenteur)

Pooling

Marginal note:Voluntary pooling

• 30 (1) Where one or more working interest owners have leases or separately owned working interests within a spacing unit, the working interest owners and the royalty owners who own all of the interests in the spacing unit may pool their working interests and royalty interests in the spacing unit for the purpose of drilling for or producing, or both drilling for and producing, oil and gas if a copy of the pooling agreement and any amendment thereto has been filed with the Chief Conservation Officer.

• Marginal note:Pooling agreement by Her Majesty

  (2) The Minister may, on behalf of Her Majesty, enter into a pooling agreement on any terms and conditions that the Minister deems advisable and, despite anything in this Act, the Territorial Lands Act, the Federal Real Property and Federal Immovables Act, the Canada Petroleum Resources Act or any regulations made under those Acts, the pooling agreement is binding on Her Majesty.

Marginal note:Application for pooling order

• 31 (1) In the absence of a pooling agreement, a working interest owner in a spacing unit may apply for a pooling order directing the working interest owners and royalty owners within the spacing unit to pool their interests in the spacing unit for the purpose of drilling for and producing, or producing, oil or gas or both from the spacing unit.

• Marginal note:Hearing by Committee

  (2) An application under subsection (1) shall be made to the Minister who shall refer the application to the Committee for the purpose of holding a hearing to determine whether a pooling order should be made and at that hearing the Committee shall afford all interested parties an opportunity to be heard.

• Marginal note:Matter to be supplied Committee on hearing

  (3) Prior to a hearing held pursuant to subsection (2), the working interest owner making application shall provide the Committee, and such other interested parties as the Committee may direct, with a proposed form of pooling agreement, and the working interest owners who have interests in the spacing unit to which the proposed pooling agreement relates shall provide the Committee with such information as the Committee deems necessary.

• Marginal note:Order of Committee

  (4) After a hearing held pursuant to subsection (2), the Committee may order that all working interest owners and royalty owners who have an interest in the spacing unit shall be deemed to have entered into a pooling agreement as set out in the pooling order.

Marginal note:Contents of pooling order

32 Every pooling order shall provide

• (a) for the drilling and operation of a well on the spacing unit or, where a well that is capable of or that can be made capable of production has been drilled on the spacing unit before the making of the pooling order, for the future production and operation of that well;

• (b) for the appointment of a working interest owner as operator to be responsible for the drilling, operation or abandoning of the well whether drilled before or after the making of the pooling order;

• (c) for the allocation to each pooled tract of its share of the production of the oil or gas from the pooled spacing unit that is not required, consumed or lost in the operation of the well, which allocation shall be on a prorated area basis unless it can be shown to the satisfaction of the Committee that that basis is unfair, whereupon the Committee may make an allocation on another more equitable basis;

• (d) in the event that no production of oil or gas is obtained, for the payment by the applicant therefor of all costs incurred in the drilling and abandoning of the well;

• (e) where production has been obtained, for the payment of the actual costs of drilling the well, whether drilled before or after the making of the pooling order, and for the payment of the actual costs of the completion, operation and abandoning of the well; and

• (f) for the sale by the operator of any oil or gas allocated pursuant to paragraph (c) to a working interest owner where the working interest owner thereof fails to take in kind and dispose of the production, and for the deduction out of the proceeds by the operator of his expenses reasonably incurred in connection with the sale.

Marginal note:Provision of penalty

• 33 (1) A pooling order may provide for a penalty for a working interest owner who does not, within the time specified in the order, pay the portion of the costs attributable to him as his share of the cost of drilling and completion of the well, but the penalty shall not exceed an amount equal to one-half of that working interest owner’s share of those costs.

• Marginal note:Recovery of costs and penalty

  (2) If a working interest owner does not, within the time specified therefor in the pooling order, pay his share of the costs of the drilling, completing, operating and abandoning of the well, his portion of the costs and the penalty, if any, are recoverable only out of his share of production from the spacing unit and not in any other manner.

Marginal note:Effect of pooling order

34 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 order, be deemed to have entered into a pooling agreement as set out in the pooling order and the 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 35, are binding on and enforceable against the parties thereto, including Her Majesty.

Marginal note:Application to alter pooling order

• 35 (1) The Committee shall hear any application to vary, amend or terminate a pooling order where the 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.