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

122 Where Petro-Canada Limited is granted an interest in a special renewal permit under section 121,

• (a) that interest shall be obtained by reducing the interest of each of the holders of the special renewal permit, including any existing Petro-Canada Limited interest, by a percentage of that interest equal to the product of that interest and the percentage interest granted to Petro-Canada Limited under that section;

• (b) the special renewal permit shall be granted to give Petro-Canada Limited its interest under section 121 and the other holders their interests reduced in accordance with paragraph (a);

• (c) Petro-Canada Limited shall not be liable to the other interest holders for any exploration expenses incurred by them prior to the granting of its interest; and

• (d) Petro-Canada Limited shall not, without the prior approval in writing of the Minister, which may be given on application by any interested party, transfer, assign or in any other manner dispose of any interest or right therein otherwise than by way of charge or mortgage.

Canadian Participation Rate

123 In determining the Canadian participation rate of an applicant for a special renewal permit for the purposes of sections 121 and 122, the following Rules shall apply:

• Rule 1 (1) If the applicant is

  • (a) an individual who is a Canadian citizen ordinarily resident in Canada or a landed immigrant within the meaning of the Immigration and Refugee Protection Act who is ordinarily resident in Canada other than a landed immigrant who has been ordinarily resident in Canada for more than one year after the time at which he first became eligible to apply for Canadian citizenship, his Canadian participation rate is 100 per cent;

  • (b) an individual other than an individual referred to in paragraph (a), his Canadian participation rate is 0 per cent;

  • (c) a corporation that has been incorporated in Canada and is not a non-eligible person within the meaning of the Foreign Investment Review Act, its Canadian participation rate is 100 per cent;

  • (d) an enterprise formed by a group of individuals, corporations or individuals and corporations in which each beneficial owner of an interest is an individual referred to in paragraph (a) or a corporation referred to in paragraph (c), its Canadian participation rate is 100 per cent; or

  • (e) a corporation that is a non-eligible person within the meaning of the Foreign Investment Review Act, or is an enterprise formed by a group of individuals, corporations, or individuals and corporations, other than an enterprise referred to in paragraph (d), its Canadian participation rate shall be determined by the application of Rule 2.

  • (2) Where the applicant would be the beneficial owner of the permit, if granted, this Rule shall apply to that applicant, but where the applicant would not be the beneficial owner of the permit, if granted, this Rule shall be applied to the person or enterprise that would be the beneficial owner of the permit as if that person or enterprise were the applicant and where in this manner a Canadian participation rate is determined for a beneficial owner, that Canadian participation rate shall be deemed to be the Canadian participation rate of the applicant for the purposes of section 121.

• Rule 2 Where the application is made by a corporation or enterprise referred to in paragraph (e) of subrule 1(1), the Canadian participation rate in the corporation or enterprise is a percentage equal to the sum of the products obtained by multiplying, for each beneficial owner of voting shares of the corporation or of an interest in the enterprise, the Canadian participation rate for that owner under Rule 3 or 4 by the percentage of the total number of voting shares of, or total interest in, the corporation or enterprise, beneficially owned by that owner.

• Rule 3 For the purposes of Rule 2, any beneficial owner of voting shares in the applicant corporation, or of an interest in the applicant enterprise, that falls within any of the following classes shall be regarded as having a Canadian participation rate of 100 per cent:

  • (a) an individual referred to in paragraph (a) of subrule 1(1),

  • (b) a corporation referred to in paragraph (c) of subrule 1(1),

  • (c) an enterprise in which the majority interest is beneficially owned by individuals referred to in paragraph (a) or corporations referred to in paragraph (b) of this Rule or any combination of such individuals and corporations,

  and the Canadian participation rate for any beneficial owner not falling within any of the above classes is, except where Rule 4 applies, 0 per cent.

• Rule 4 For the purposes of Rule 2, any non-eligible person within the meaning of the Foreign Investment Review Act, or any enterprise other than one referred to in paragraph (c) of Rule 3, that is a beneficial owner of voting shares in the applicant corporation, or any beneficial owner of an interest in the applicant enterprise where that applicant enterprise includes any persons who are non-eligible persons within the meaning of the Foreign Investment Review Act, shall have its Canadian participation rate determined by treating it as if it were the applicant corporation or applicant enterprise under Rule 2 and applying Rule 3 in respect of any of its shareholders or interest owners falling within any of the classes set out in Rule 3, and this Rule in respect of any of its shareholders or interest owners not falling within any of those classes.

• Rule 5 (1) Where, under these Rules, the question arises whether or not a person is a non-eligible person within the meaning of the Foreign Investment Review Act, the Minister or a person designated by the Minister shall apply to the determination of that question the provisions of subsection 4(1) and the other relevant provisions of the Foreign Investment Review Act, subject to such modifications as the circumstances may require, as if the person were an applicant for a statement in writing under that subsection, and as if the Minister or the person designated by the Minister were the Minister referred to in that Act.

  • (2) Any determination made by the Minister or the person designated by the Minister pursuant to subrule (1) is binding only on the person in respect of whom the determination was made, and on the Minister or the person designated by the Minister who made it, and only for the purposes of these Regulations.

• Rule 6 (1) In these Rules,

  enterprise

  enterprise means any group or combination of individuals, corporations or individuals and corporations and for greater certainty, but without restricting the generality of the foregoing, includes partnerships, joint ventures, trusts, syndicates or other associations; entreprise

  voting shares

  voting shares means an issued and outstanding share of the capital stock of a corporation to which are attached voting rights ordinarily exercisable at meetings of shareholders. action comportant droit de vote

  • (2) For the purposes of these Rules,

    • (a) where any voting share carries the right to more than one vote, the share shall be deemed to be a number of shares equal to the number of votes that it carries;

    • (b) the onus is on the applicant to demonstrate his Canadian participation rate to the satisfaction of the Minister or a person designated by the Minister but where he has not so demonstrated his Canadian participation rate within such reasonable time, but not less than 30 days, as the Minister may allow, the Minister may allocate to the applicant such Canadian participation rate as he deems reasonable in the circumstances, but, in the case of an application made before April 1, 1978, the applicant shall have a period of four months from the day of such allocation to discharge the onus imposed on him by this paragraph and, at the expiration of that period, the allocation is final if the onus has not been discharged, or shall be adjusted to conform to the Canadian participation rate so demonstrated if the onus has been discharged, and such final allocation or adjusted allocation shall constitute the determination of the Canadian participation rate of the applicant for the purposes of section 121;

    • (c) the Canadian participation rate shall be determined as of the day on which any application under section 116 or 117 is made for a special renewal permit and shall be based on information that, in the opinion of the Minister or a person designated by the Minister, is current and accurate information, and such determination is, if all material facts have been disclosed to the Minister or the person designated by the Minister, binding for two years from the day as of which the determination was made, if throughout that period the material facts so disclosed remain substantially unchanged;

    • (d) where it is made to appear to the Minister that any matter required to be determined under these Rules cannot reasonably be determined thereunder in any case or class of cases, he may make the determination, or authorize it to be made, in accordance with such criteria as he considers reasonable in the circumstances; and

    • (e) where, in applying Rule 4, it is found that the applicant corporation or enterprise is one of the beneficial shareholders or interest owners of the corporation or enterprise that is, for the purposes of that Rule, being treated as if it were the applicant corporation or enterprise, the applicant corporation or enterprise shall be deemed not to own the shares or interest in question, and such shares or interest shall be regarded as not forming part of the issued shares of the corporation in question or of the interest in the enterprise in question, as the case may be.

Significant Discoveries

• 124 (1) Where the Minister or a person designated by the Minister is satisfied that a significant discovery has been made on any Canada lands in respect of which a permit or a special renewal permit has been granted or an exploration agreement has been entered into, he may make a declaration in writing that a significant discovery has been made on those lands and on any adjacent lands into or under which he has reasonable grounds to believe that the discovered deposit may extend and the declaration shall specify the grid area or areas overlying the lands on which the significant discovery was made and into or under which the discovered deposit extends.

• (2) A person who has reason to believe that a significant discovery has been made on or adjacent to any Canada lands in respect of which he has entered into an exploration agreement or holds a permit or a special renewal permit may apply to the Minister or a person designated by the Minister for a declaration that a significant discovery has been made on those lands, and if the Minister or the person designated by the Minister is satisfied that a significant discovery has been made, he shall make a declaration thereof in writing, and the declaration shall specify the grid area or areas overlying the lands on which the significant discovery was made.

• (3) Where, based on the results of further drilling, the Minister is satisfied that a discovery in respect of which a declaration has been made pursuant to subsection (1) or (2) is not a significant discovery in respect of the whole or any part of the area to which it relates, the Minister may revoke in writing the declaration in respect of the whole or such part of the area.

• (4) A copy of a declaration of a significant discovery made under subsection (1) or (2) and of any revocation made under subsection (3) shall be published in the Canada Gazette and

  • (a) shall be sent by registered mail to each person who has entered into an exploration agreement or to whom a special renewal permit or permit has been issued in respect of lands to which the declaration relates;

  • (b) may be sent by registered mail to any person who has entered into an exploration agreement or to whom a special renewal permit or permit has been issued in respect of land adjacent to the land to which the declaration relates; and

  • (c) in the ease of a special renewal permit in respect of which Petro-Canada Limited might otherwise have had the right accorded to it by section 121, shall be sent by registered mail to Petro-Canada Limited.

• (5) Before making any revocation under subsection (3), the Minister or a person designated by the Minister shall give notice in writing to the persons intended to be affected thereby of not less than 14 days or of such longer period as he considers appropriate in the circumstances, specifying the revocation proposed to be made.

• (6) Within 14 days after a notice is given under subsection (5), any person receiving the notice may, in writing, request a hearing and on receipt of such request the Minister or a person designated by the Minister shall appoint a time and place for a hearing and give notice thereof of not less than 7 days to the person who requested the hearing.

• (7) Any person to whom notice is required to be given under subsection (5) may make representations and introduce documents and witnesses at any hearing held under this section, whether or not such person has been given notice thereof and in making any revocation on which a hearing has been held, the Minister or a person designated by the Minister shall consider any representations made and evidence introduced at the hearing and shall make available on request by any such person the reasons for the revocation.

• (8) Any declaration under subsection (1) or (2) is final and conclusive.

• (9) Where a hearing is not requested within the 14-day period specified in subsection (6) or is held under this section, any revocation made under this section is final and conclusive.

• (10) Where applications affecting the same Canada lands are pending at the same time under subsection (2) and under section 116 or 117, the application under subsection (2) shall be disposed of first and, if any delay arising from the operation of this subsection adversely affects the right of any person to apply or maintain an application for a special renewal permit or a lease under section 54, such right shall be deemed not to be so affected.

Drilling Orders

• 125 (1) Where a significant discovery has been declared on land in respect of which an exploration agreement has been entered into or a special renewal permit has been granted, the Minister may, at any time thereafter, order the drilling thereon of a well in relation to that significant discovery, subject to such specifications as may be included in the order, to commence within one year after the making of the order or such longer period specified in the order as the Minister considers appropriate in the circumstances.

• (2) Where an order has been made under subsection (1), the Minister shall not make any further order for the drilling of a well in relation to the same significant discovery as long as work is actively progressing in compliance with the order that has been made.

Enforcement

• 126 (1) Where any person holding an exploration agreement or a special renewal permit does not comply with any term or condition therein, or with any order made under section 125, the Minister may give notice in writing to that person directing him to comply with the term, condition or order within 90 days of the date of the notice.

• (2) Where a person notified under subsection (1) fails to comply with the notice within the 90-day period specified therein, the Minister may cancel the exploration agreement or special renewal permit or suspend it for any period on any conditions he considers appropriate in the circumstances.

127 No disposition of or other dealing in any land in respect of which Petro-Canada Limited has the rights granted by section 33 or 121 is vitiated by reason only of

• (a) any failure to give Petro-Canada Limited any notice required by or under those sections; or

• (b) an erroneous determination of any Canadian participation rate under these Regulations.