Canada Oil and Gas Land Regulations (C.R.C., c. 1518)

Oil and Gas Leases

Oil and Gas Lease upon Application

• 54 (1) On application to the Minister, a permittee, the holder of an exploration agreement or the holder of a special renewal permit shall be granted an oil and gas lease.

• (2) An oil and gas lease shall not be granted under this section

  • (a) to a person unless the Minister is satisfied that he is a Canadian citizen over 21 years of age, and that he will be the beneficial owner of the interest to be granted;

  • (b) to a corporation incorporated outside Canada; or

  • (c) to a corporation unless the Minister is satisfied

    • (i) that at least 50 per cent of the issued shares of the corporation is beneficially owned by

      • (A) persons who are Canadian citizens,

      • (B) corporations that meet the qualifications set out in subparagraph (ii), or

      • (C) both such persons and corporations,

    • (ii) that the shares of the corporation are listed on a recognized Canadian stock exchange and that Canadians will have an opportunity of participating in the financing and ownership of the corporation, or

    • (iii) that the shares of the corporation are wholly owned, directly or indirectly, by a corporation that meets the qualifications outlined in subparagraph (i) or (ii).

• 55 (1) The land to be included in an oil and gas lease granted pursuant to section 54 shall be selected by the permittee from his permit area.

• (2) The Minister shall not grant an oil and gas lease pursuant to section 54 for more than one-half of the number of sections in the permit area held by the applicant.

• (3) An oil and gas lease granted pursuant to section 54 shall commence on the day the application is received by the Chief.

• 56 (1) Every application for an oil and gas lease shall be made on a form approved by the Chief and shall be accompanied by

  • (a) the fee set out in Schedule I;

  • (b) the rental required by section 78; and

  • (e) a diagram and description of the area for which the application is made.

• (2) The application shall be delivered in person or be sent by registered mail to the office of the Chief in Ottawa.

• (3) The Chief shall cause to be endorsed on each application the date and time that the application is received.

Other Leasing

• 57 (1) The Minister may grant an oil and gas lease or call tenders for the purchase of an oil and gas lease for Canada lands

  • (a) that have been held under a permit or oil and gas lease, which permit or oil and gas lease has expired, been cancelled or been surrendered;

  • (b) referred to in subsection 17(3); or

  • (c) that are a combination of the lands referred to in paragraphs (a) and (b) or either of them.

• (2) All oil and gas lease granted pursuant to this section may be granted upon such terms and conditions as the Minister may order.

• (3) A call for tenders under this section shall

  • (a) be advertised in the Canada Gazette and in such other manner as the Minister considers advisable at least 30 days before the date fixed for the closing of tenders; and

  • (b) state the terms and conditions upon which the tender is called and upon which the oil and gas lease is to be granted.

• (4) Where tenders are called pursuant to this section and

  • (a) no tender is received, or

  • (b) a tender has been received and the Minister has refused to accept that tender,

  the Minister may dispose of those lands by an oil and gas lease pursuant to this section in such manner and upon such terms as the Minister may determine.

Powers of Lessee

• 58 (1) A lessee who is the holder of a licence may

  • (a) carry out exploratory work and drill wells in the Canada lands included in his lease; and

  • (b) produce, mine, quarry or extract any oil or gas or any minerals or substances that are produced mined, quarried or extracted in association with any oil or gas from the Canada lands included in his lease.

• (2) Where a lessee is authorized to carry out work or operations under these Regulations, that work or those operations may be performed by any person employed or hired by the lessee.

Lease Area

• 59 (1) Subject to subsection (2), a lease area shall be composed of quadrilateral blocks of sections not larger than five sections by three sections or four sections by four sections.

• (2) Where leases are granted for not more than two-fifths of the number of sections in the permit area held by the applicant, the lease areas may be composed of quadrilateral blocks of sections not larger than six sections by three sections.

• (3) The lease areas within a permit area shall

  • (a) corner one another;

  • (b) be separated from one another by at least one section; or

  • (c) be a combination of the blocks referred to in paragraphs (a) and (b).

• (4) Except in the case of

  • (a) sections that are reduced pursuant to subsection 17(1), and

  • (b) Canada lands referred to in subsection 17(3),

  no oil and gas lease shall be granted for less than one section.

• (5) Except as provided in subsection (2), nothing in these Regulations shall be construed so as to prevent a permittee from leasing a total of one-half of the number of sections in the permit area.

• (6) Subsections (1) and (3) do not apply to an oil and gas lease granted pursuant to section 57.

• 60 (1) Subject to subsection (2), where an oil and gas lease is granted pursuant to section 54, the Canada land within the permit areas, but not included in the lease, shall be surrendered to Her Majesty.

• (2) Where an oil and gas lease is granted pursuant to section 54, the Chief may allow the permittee to retain under permit those sections of the permit area that are not

  • (a) included in the oil and gas lease, or

  • (b) contiguous to the lease area.

Term of Lease

61 Subject to subsection 35(2), every oil and gas lease shall be granted for a term of 21 years.

62 An oil and gas lease shall, upon application by the lessee, be renewed for successive terms of 21 years if

• (a) the area under the oil and gas lease is, in the opinion of the Minister, capable of producing oil or gas; and

• (b) the lessee has complied with the terms of the oil and gas lease and with the provisions of these Regulations in force at the date on which the oil and gas lease was granted.

63 Where, during the term of an oil and gas lease, commercial exploitation begins and the lessee has complied with

• (a) the terms of the oil and gas lease, and

• (b) the provisions of these Regulations in force at the date on which the oil and gas lease was granted,

the Minister shall, at the request of the lessee, reissue the lease for a term of 21 years from the date of the commencement of commercial exploitation.

• 64 (1) Subject to subsection (2), an oil and gas lease renewed pursuant to section 62 or reissued pursuant to section 63 shall be renewed or reissued as the case may be upon the conditions that the Minister may order and shall be subject to the provisions of these Regulations in force at the date of the renewal.

• (2) The royalty payable under an oil and gas lease reissued pursuant to section 63 shall be the same as the royalty required to be paid under the original oil and gas lease.

Obligation to Lease

65 The Chief may at any time order that a well within a permit area contains oil or gas in commercial quantity.

• 66 (1) A copy of the order referred to in section 65 shall be sent by registered mail addressed to the permittee at his last known address.

• (2) The permittee shall, within one year from the date of the mailing to him of the order made pursuant to section 65, apply for an oil and gas lease of the area within which the well is located.

• 67 (1) A permittee may, within 90 days from the date of mailing the order, serve on the Minister a notice of objection setting out the reason for the objection and all relevant facts.

• (2) A notice of objection under this section shall be served by being sent by registered mail addressed to the Minister at Ottawa.

• (3) Upon receipt of the notice of objection, the Minister shall consider the order and vacate, confirm or vary the order and the Minister shall thereupon notify the permittee of his decision by registered mail.

68 Where an order has been made pursuant to section 65 and no application has been made pursuant to section 66, no person shall drill a well in that permit area within 4 1/2 miles of the well to which the order refers.

• 69 (1) Where an oil and gas lease is granted subsequent to an order made pursuant to section 65 or 67, all sections within the permit area contiguous to, but not cornering, the lease area shall be surrendered to Her Majesty.

• (2) Where an oil and gas lease is granted subsequent to an order made under section 65 or 67, all that part of the permit area not included in the oil and gas lease and not surrendered pursuant to subsection (1) may be retained under permit by the permittee.

• (3) Where part of the permit area is retained under permit pursuant to subsection (2), the permittee shall send the permit to the Chief for amendment.

Publication upon Surrender or Cancellation

• 70 (1) Where Canada lands have been held under a permit or an oil and gas lease, which permit or oil and gas lease or any part thereof has expired, been cancelled or been surrendered, the Minister shall publish in the Canada Gazette a notice of the expiration, cancellation or surrender of that permit or oil and gas lease.

• (2) The notice referred to in subsection (1) shall state

  • (a) the number of the permit or oil and gas lease; and

  • (b) whether the permit or oil and gas lease has expired, been cancelled or been surrendered.

Transfer of Permit or Lease

71 No transfer of a permit or oil and gas lease shall pass any interest in the permit or oil and gas lease until the transfer is registered in accordance with these Regulations.

• 72 (1) No oil and gas lease shall be transferred to

  • (a) a person to whom the granting of an oil and gas lease is prohibited under subsection 54(2); or

  • (b) to a corporation unless the corporation satisfies the Minister that persons who are Canadian citizens will have an opportunity of participating in the beneficial ownership of the corporation.

• (2) A transfer made contrary to the provisions of subsection (1) is void.

73 No transfer of a permit or oil and gas lease shall be registered without the approval of the Chief.

• 74 (1) Subject to subsection (2), where a transfer is executed in a manner satisfactory to the Chief and is accompanied by the transfer fee set out in Schedule I, the Chief may approve the transfer of

  • (a) the whole or any sections of a lease area;

  • (b) the whole or one-half of a permit area;

  • (c) a specified undivided interest in a permit or oil and gas lease to not more than five transferees; or

  • (d) a specified undivided interest in a permit or oil and gas lease to more than five transferees upon such terms and conditions as the Chief may require.

• (2) The Chief shall not approve the transfer of

  • (a) a lease area smaller than one section; or

  • (b) a permit area of other than one grid area or one-half of a grid area.

• (3) Paragraph (2)(a) does not apply to an oil and gas lease that has been granted for an area smaller than one section.

• (4) Paragraph (2)(b) does not apply to a permit that has been issued for an area smaller than one grid area or one-half of a grid area.