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

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.

Marginal note:Prohibition

• 36 (1) No person shall produce any oil or gas 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 30 or in accordance with a pooling order made under section 31.

• Marginal note:Saving

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

Unitization

Marginal note:Unit operation

• 37 (1) Any one or more working interest owners in a pool or part of a pool 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:Minister may enter into unit agreement

  (2) The Minister may enter into a unit agreement binding on Her Majesty, on any terms and conditions that the Minister may deem advisable, and any of the regulations under this Act, the Territorial Lands Act, the Federal Real Property and Federal Immovables Act or the Canada Petroleum Resources 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 Act, 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 Act.

Marginal note:Requiring unitization to prevent waste

• 38 (1) Notwithstanding anything in this Act, where, in the opinion of the Chief Conservation Officer, the unit operation of a pool or part thereof would prevent waste, he 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 mentioned in subsection (2), the Committee is of the opinion that the 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

• 39 (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 Minister who shall refer the application to the Committee for the purpose of holding a hearing thereon in accordance with section 41.

• 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 that subsection.

Marginal note:Contents of unitization application

• 40 (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

• 41 (1) Where an application made under section 39 is referred by the Minister 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 oil or gas or both 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 42, 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.