THE ALBERTA GAZETTE,

PART II, JANUARY 15, 1998

Alberta Regulation 261/97

Mines and Minerals Act

METALLIC AND INDUSTRIAL MINERALS AMENDMENT REGULATION

Filed: December 17, 1997

Made by the Lieutenant Governor in Council (O.C. 641/97) pursuant to

section 5 of the Mines and Minerals Act.

1 The Metallic and Industrial Minerals Regulation (AR 66/93) is amended

by this Regulation.

2 The heading "PLACER MINING OPERATIONS" preceding

section 4 is struck

out and "PLACER MINING LICENCES" is substituted.

Section 5(2)(

b) is repealed and the following is substituted:

(

b) the fee for an application prescribed in the General Regulation

(AR 163/84).

Section 8 is amended by adding ", without the prior written consent of

the lessee," after "shall not".

Section 10 is amended by adding the following after subsection (2):

(3) The Minister shall refuse an application for a permit in respect

of the metallic and industrial minerals in any part of the proposed

location of the permit that the applicant held under an agreement during

the 60-day period preceding the receipt of the application by the Minister.

Section 11(1) is repealed and the following is substituted:

Rights conveyed by permit

11(1) Subject to subsection (2), a permit grants in accordance with

(

a) the exclusive right to explore for metallic and

industrial minerals that are the property of the Crown in right of Alberta

in the location;

(

b) the right to remove metallic and industrial

minerals from the location for the purposes of assaying and testing and of

metallurgical, mineralogical or other scientific studies.

Section 13(3) is repealed and the following is substituted:

(3) Subject to subsection (1), the Minister may reduce the area of a

permit at any time during the term of the permit, if the permit holder

provides written instructions to the Minister indicating the area that is

to be deleted from the permit.

Section 14 is amended

(

a) in subsection (1) by striking out "Subject to subsection (2),"

and substituting "Subject to subsections (2), (3) and (4),";

(

b) in subsection (2) by striking out "the permit holder may apply

to the Minister to credit" and substituting "the Minister may, on the

direction of the permit holder, credit";

(

c) by adding the following after subsection (2):

(3) If, during any 2-year period referred to in subsection

(1), a permit holder spends on assessment work on the location of the

permit less than the minimum amount required for that 2-year period in

accordance with subsection (1), the Minister shall, on application of the

permit holder, allow the permit holder to retain a part of the location in

respect of which, in the opinion of the Minister, the minimum spending

requirements under subsection (1) would have been met.

(4) The permit holder may, once during the term of the permit,

pay to the Minister the minimum amount specified for a 2-year period

referred to in subsection (1), instead of spending that amount during that

period in accordance with subsection (1).

(5) A permit holder who pays an amount in accordance with

subsection (4) is considered to have complied with the assessment work

requirements for the period in respect of which the payment is made.

Section 15(2) and (3) are repealed and the following is substituted:

(2) An assessment work report submitted under subsection (1) shall

(

a) comply with the requirements for an assessment work

report set forth in

Schedule 2,

(

b) be accompanied by an authorization from the person

who prepared the report to copy or reproduce the report or any part of it

after the end of the one-year confidentiality period for the purpose

referred to in

section 15.1(2), and

(

c) be otherwise satisfactory to the Minister.

(3) If, in the Minister's opinion, an assessment work report

submitted under subsection (1) does not

(

a) conform to the requirements of subsection (2),

(

b) show adequate work for the 2-year period to which

the report relates, or

(

c) show work that is adequate to support the statement

of expenditures for the 2-year period that is contained in the report,

the Minister may

(

d) require the permit holder to furnish or correct any

deficiencies in the assessment work report, or

(

e) reject the assessment work report in whole or in

part and require the permit holder to submit another report or part of a

report for the relevant period within the time prescribed by the Minister.

(4) The permit holder is considered not to have complied with

section 14(1) or subsection (1) of this

section until the permit holder

complies with the Minister's requirements under subsection (3).

10 The following is added after

section 15:

Confidentiality of assessment work report

15.1(1) Subject to

section 6 of the General Regulation (AR 163/84),

the Minister shall keep confidential any information and data contained in

an assessment work report for one year after the report is received by the

Minister.

(2) The Minister shall, at the end of the confidentiality period

referred to in subsection (1), make the assessment work report available to

the public.

(3) The Minister, in making an assessment report available under

subsection (2), may only recover the costs, including overhead, associated

with the copying or reproduction of the report.

Grouping of permits

15.2(1) Subject to this section, the Minister may, on application in

writing by a permit holder or his authorized representative, approve the

grouping of 2 or more permits held by the permit holder for the purpose of

being dealt with in accordance with sections 15.3 to 15.8, if the locations

of the permits proposed to be grouped are contiguous.

(2) A permit may not be included in more than one group at a time.

(3) The Minister may give an approval under subsection (1) subject

(4) If a permit holder intends that all or any of the matters

pertaining to grouped permits held by him that are referred to in sections

15.3 to 15.8 should be dealt with on his behalf by a representative, the

permit holder or that representative shall submit to the Minister a

document providing evidence satisfactory to the Minister of the

representative's authority to act on behalf of the permit holder in respect

of those matters.

Assessment work reports for groups

15.3(1) If permits are grouped pursuant to

section 15.2(1), the

permit holder shall submit to the Minister an assessment work report for

the group that, in respect of each of the permits in the group, complies

with

section 15(1), and

(

a) describes the results of the assessment work

conducted on the land comprised within the group,

(

b) contains a detailed statement of, and a statement

of the total of, the expenditures incurred in conducting that assessment

work, and

(

c) indicates the permits or parts of permits within

the group that the permit holder or its authorized representative has

selected to retain.

(2) Sections 15 and 15.1 apply with the necessary modifications to

an assessment work report submitted in respect of permits that have been

grouped under

section 15.2(1).

Retention of permits

15.4(1) The permit holder may retain the permits and parts of

permits indicated under

section 15.3(1)(

c) if the total expenditures

incurred in conducting assessment work as shown in the assessment work

report submitted under

section 15.3(1)(

b) equal or exceed the total of the

minimum spending requirements for those permits and parts of permits as

determined under

section 14.

(2) The minimum spending requirement under

section 14 for a permit

or part of a permit selected under

section 15.3(1)(

c) must be calculated on

the minimum spending requirement per hectare under

section 14(1) for the

2-year period of that permit that is running at the time the assessment

work report is submitted under

section 15.3.

Application of excess spending requirements

15.5(1) This

section applies if the total expenditures incurred in

conducting assessment work as shown in the assessment work report submitted

under

section 15.3 exceed the total of the minimum spending requirements

for the permits and parts of permits selected under

section 15.3(1)(

c) as

determined under

section 15.4.

(2) The Minister may, on direction of the holder of the permits in

the group or its authorized representative, credit the excess against the

minimum spending requirements for any period of the permits and parts of

permits that is subsequent to the period referred to in

section 15.4(2).

Expenditures of less than minimum requirements

15.6(1) This

section applies if the total expenditures on locations

within the group as shown in the assessment work report submitted under

section 15.3 are less than the total of the minimum spending requirements

for the permits and parts of permits selected under

section 15.3(1)(

c) as

determined under

section 15.4.

(2) The holder of the permits in the group or its authorized

representative may, on application to the Minister, retain a reduced area

of the permits or parts of permits for which, in the opinion of the

Minister, the total of the minimum spending requirements as determined

under

section 15.4 equals the total expenditures on locations within the

group as shown in the assessment work report submitted under

section 15.3.

Cancellation of permits in a group

15.7 The Minister may cancel all the permits in a group for a

failure to comply with

section 15 or 15.3.

Amending of groupings

15.8 A grouping may be amended if the holder of the permits in the

group or its authorized representative applies in writing to the Minister

to amend the grouping and the Minister approves the amendment.

Expiry of grouping

15.9 A grouping under

section 15.2(1) expires on the submission of

an assessment work report for the group under

section 15.3(1).

Section 16 is repealed.

Section 17(

b) is repealed and the following is substituted:

(

b) to a permit holder who

(

i) has complied with the requirements of

Part 2,

(ii) has held the permit for at least the 2-year period

referred to in

section 14(1)(a), and

(iii) applies, at any time before the permit expires, for

a lease in respect of all or part of the location described in the permit,

Section 22 is amended

(

a) by repealing subsection (2);

(

b) in subsection (3) by striking out "under this section" and

substituting "before the end of its term".

Section 23 is repealed and the following is added after the heading

"PART 4 GENERAL":

Cores, cuttings requirements

23(1) A lessee, licensee or permit holder shall follow all

directions or instructions given by the Minister or by any person

authorized by the Minister with respect to

(

a) cores or cuttings,

(

b) the retrieval, selection, labelling, delivery,

transportation and storage of core samples, rock samples or drill cuttings,

and

(

c) the records to accompany samples and cuttings.

(2) The lessee, licensee or permit holder to whom the directions and

instructions referred to in subsection (1) have been given must bear the

cost of complying with the directions and instructions.

(3) The Minister, on application by a lessee, licensee or permit

holder, may waive compliance with all or any directions or instructions

referred to in subsection (1).

Property of the Crown

23.1 All core samples, rock samples or drill cuttings delivered to

the Department pursuant to directions or instructions given under

section

23(1) and all records accompanying the samples and cuttings

(

a) are thereafter, subject to clause (b), the property

of the Crown in right of Alberta, and

(

b) shall, subject to

section 6 of the General

Regulation (AR 163/84), be kept confidential for one year after they are

received by the Department.

Schedule 2 is amended

(

a) in

section 1(

c) by striking out "under oath";

(

b) in

section 3(3) by adding "or another agreement" after "same

agreement".

------------------------------

Alberta Regulation 262/97

Mines and Minerals Act

MINES AND MINERALS ADMINISTRATION REGULATION

Filed: December 17, 1997

Made by the Lieutenant Governor in Council (O.C. 642/97) pursuant to

sections 5 and 93 of the Mines and Minerals Act.

Table of Contents

Definitions 1

Designated Representatives, Notices and Applications

Designation of representative 2

Official service address 3

Giving of notices, etc. by the Minister 4

Giving of notices, etc. to the Minister 5

Applications to the Minister 6

Agreements

Issuance of agreement 7

Agreement issued to 2 or more lessees 8

Specified undivided interests 9

Term of agreement 10

Surrender of agreement 11

Partial transfers, divisions and consolidations of agreements 12

Amendment of agreement 13

Cancellation of agreement 14

Commencement of reinstatement application period 15

Persons ineligible as lessees 16

Fees, Rentals and Interest

Prescribed fees 17

Fee accounts 18

Monthly invoice arrangements 19

Annual rentals 20

Liability to the Crown for interest 21

Crown's liability for interest on overpayments 22

Application of payments 23

General

Return of deposit or security 24

Retention of records 25

Disclosure of information 26

Exceptions to

section 33(1)(

a) of the Act 27

Deemed areas 28

Mineral title transfers and notifications 29

Consequential Amendments

Ammonite Shell Regulation amended 30

Coal Royalty Regulation amended 31

Metallic and Industrial Minerals Regulation amended 32

Metallic and Industrial Minerals Royalty Regulation amended 33

Natural Gas Royalty Regulation, 1994 amended 34

Oil Sands Regulation amended 35

Oil Sands Royalty Regulation, 1997 amended 36

Repeal, Expiry and Coming into Force

Repeal 37

Expiry 38

Coming into force 39

Schedule

Definitions

1 In this Regulation,

(a) "Act" means the Mines and Minerals Act;

(b) "amount owing to the Crown" means a money amount owing to the

Crown under the Act, the regulations or an agreement;

(c) "Board" means the Alberta Energy and Utilities Board;

(d) "designated representative", in relation to an agreement, means

(

i) the person who is designated as the representative

of the lessee or lessees of the agreement, according to the notice of the

designation given to the Minister pursuant to

section 30.1 of the Act, or

(ii) the lessee of the agreement, if the agreement is

held by only one lessee who has not given the Minister a notice of a

designation of a representative pursuant to

section 30.1 of the Act or has

given the Minister a notice of the revocation of a previous designation of

a representative;

(e) "due date", in relation to the payment of an amount owing to

the Crown, means

(

i) the due date for the payment prescribed by the Act,

the regulations or an agreement, unless the payment is made pursuant to a

monthly invoice arrangement that provides for a different due date for the

payment,

(ii) the due date for the payment specified in the

monthly invoice arrangement, if the payment is made pursuant to a monthly

invoice arrangement, or

(iii) the due date for the payment specified in an

invoice or notice sent by the Minister, if no due date for the payment is

prescribed by the Act, the regulations or an agreement;

(f) "official service address", in relation to any person, means

that person's official service address shown in the current notice given by

that person to the Minister pursuant to

section 31 of the Act;

(g) "petroleum and natural gas lease" means a lease granting rights

to petroleum or natural gas or both;

(h) "petroleum and natural gas licence" means a licence granting

rights to petroleum or natural gas or both;

(i) "prescribed", in relation to a fee or rental, means prescribed

by this Regulation;

(j) "regulations" means this Regulation or any other regulations

under the Act;

(k) "royalty amount" means an amount owing to the Crown

(

i) on account of a money royalty,

(ii) in respect of the Crown's royalty share of a

mineral when disposed of by an agent, or

(iii) on account of royalty compensation;

(l) "spacing unit" means

(

i) in relation to a well drilled or being drilled,

(

A) the drilling spacing unit for the well

prescribed by or pursuant to the Oil and Gas Conservation Regulations (AR

151/71), or

(

B) where the Board has issued an order

suspending the operation of

Part 4 of the Oil and Gas Conservation

Regulations (AR 151/71) in respect of the area in which the well is drilled

or being drilled, the area that was, immediately before the effective date

of the order, the drilling spacing unit prescribed for the well by or

pursuant to those Regulations,

(ii) the area that would be the drilling spacing unit

prescribed for a well by or pursuant to the Oil and Gas Conservation

Regulations (AR 151/71) if the well were drilled and in the absence of any

order of the Board suspending the operation of

Part 4 of those Regulations

in respect of that area.

Designated Representatives, Notices and Applications

Designation of representative

2(1) Subject to subsections (2) and (3), the following documents given to

the Minister pursuant to

section 30.1 of the Act shall be in a form

determined or approved by the Minister:

(

a) a notice of the designation of a representative;

(

b) a notice of the replacement of the designation of a

representative;

(

c) a notice by the sole lessee of an agreement of the revocation

of the lessee's designation of a representative.

(2) A statement respecting the designation of a representative in relation

to an agreement included in

(

a) the application for the agreement made pursuant to

section

16(

a) of the Act,

(

b) the tender for the agreement, where the agreement is sold by

way of a sale by public tender pursuant to

section 16(

b) of the Act,

(

c) the registered transfer of part of the location of an agreement

that led to the issuance of the agreement, or

(

d) a registered transfer of the agreement from a sole lessee who

at the time of registration had not designated a representative for the

agreement, to another person who on registration of the transfer became

the sole lessee of the agreement,

constitutes a notice to the Minister of the designation of that

representative in relation to that agreement pursuant to

section 30.1 of

the Act.

(3) A statement respecting the replacement of the designation of a

representative in relation to an agreement included in a registered

transfer affecting that agreement constitutes a notice to the Minister of

the replacement of the representative in relation to the agreement pursuant

section 30.1(4)(

a) of the Act.

(4) Not more than one person may be designated pursuant to

section 30.1 of

the Act as a representative in relation to the same agreement.

(5) A notice of the designation of a representative given to the Minister

(

a) in a form determined or approved pursuant to subsection (1)(

a) or (b), or

(

b) in accordance with subsection (2) or (3),

is, as against the Crown, binding on the lessees or the lessee, as the case

may be, of the agreement to which the designation relates.

Official service address

3(1) A notice of a person's official service address given to the Minister

under

section 31(1) of the Act

(

a) shall be in the form determined or approved by the Minister,

and

(

b) shall not show more than one official service address for that

person.

(2) A request to a person by the Minister pursuant to

section 13(5)(d)(

i) of the Mines and Minerals Amendment Act, 1997 may be made to that person in

any manner provided for in

section 4, as though it were a notice to that

person.

Giving of notices, etc. by the Minister

4(1) Any notice that the Minister is required or authorized to give to any

person under the Act, the regulations or an agreement may be given in any

of the following ways:

(

a) by mail addressed to that person's official service address or,

if that person has no official service address, to that person's last known

address according to the records of the Department;

(

b) by delivery of the notice to that person's official service

address or, if that person has no official service address, to that

person's last known address according to the records of the Department;

(

c) by fax or e-mail transmission to that person in accordance with

an arrangement made between the Minister and that person pursuant to

subsection (3).

(2) If a notice is given by the Minister by mail in accordance with

subsection (1)(a),

(

a) section 22.1 of the

Interpretation Act does not apply to the

notice, and

(

b) the notice shall be considered as being given on the day on

which it is delivered to the Canada Post Corporation.

(3) The Minister may make an arrangement with a person under which that

person agrees

(

a) that the Minister may give all or any specified class of

notices to that person under the Act, the regulations or an agreement by

(

i) fax transmission to that person, to a fax number

specified by that person, or

(ii) e-mail transmission to that person, at an e-mail

address specified by that person,

and

(

b) that transmission of a notice to that person by fax or e-mail

in accordance with clause (

a) will constitute sufficient service of the

notice on that person.

(4) Subsections (1) and (2) also apply, with the necessary changes, to any

letter, request, notification, invoice, demand or other document that the

Minister is required or authorized by the Act, the regulations or an

agreement to give, send or furnish to a designated representative or other

person.

Giving of notices, etc. to the Minister

5(1) Where a person is required or authorized by the Act, the regulations

or an agreement to give a notice to the Minister, the notice may be given

to the Minister in any of the following ways:

(

a) by physical delivery to an office of the Department;

(

b) by mail addressed to the Department;

(

c) by fax transmission to the Department, to a fax number

specified by the Minister for notices of that kind;

(

d) by e-mail transmission to the Department, at an e-mail address

specified by the Minister for notices of that kind.

(2) If a notice is given to the Minister by mail in accordance with

subsection (1)(b),

(

a) section 22.1 of the

Interpretation Act does not apply to the

notice, and

(

b) the notice shall be considered as being given by mail to the

Minister on the day on which it is received in an office of the Department.

(3) Where a provision of the Act, the regulations or an agreement

authorizes a person to give a notice to the Minister within a prescribed

period or before a prescribed deadline, a notice given by that person shall

be considered as being given to the Minister only if it is received by the

Department within that period or before that deadline.

(4) Subsections (1), (2) and (3) also apply, with the necessary changes,

to any application or other document that a person is required or

authorized by the Act, the regulations or an agreement to make or furnish

to the Minister, except that a transfer, security notice or other document

may not be submitted for registration under

Part 8 of the Act by fax or

e-mail transmission.

(5) If a provision of another regulation is in conflict with or

inconsistent with this section, the provision of the other regulation

prevails to the extent of the conflict or inconsistency.

Applications to the Minister

6 Where the Act, the regulations or an agreement authorizes a lessee of

an agreement to make an application to the Minister, then, unless otherwise

expressly provided by the regulations, the application may be made only by

(

a) the person who is the designated representative in relation to

the agreement, or

(

b) a person authorized by the designated representative to make

the application.

Agreements

Issuance of agreement

7(1) For the purposes of the Act,

(

a) an agreement applied for under

section 16(

a) of the Act is

issued when the Minister approves the application and the applicant accepts

the conditions, if any, to which the Minister's approval is subject,

(

b) an agreement sold by way of public tender pursuant to

section

16(

b) of the Act is issued when the Minister publicly announces the name of

the successful tenderer for the agreement and the tenderer has complied

with the provisions in the sale notice respecting preconditions for the

issuance of the agreement, and

(

c) an agreement issued pursuant to

section 16(

c) of the Act is

issued at the time provided for in the procedure determined by the Minister

under that section.

(2) For the purposes of

section 20(5) of the Act, the prescribed date is

the date on which the agreement is mailed to the lessee and, in the absence

of proof to the contrary, the date of the letter accompanying the agreement

is deemed to be the date on which the agreement is mailed to the lessee.

(3) Unless the Minister otherwise directs in a particular case, an

agreement shall not be issued unless the prescribed issuance fee and the

prescribed rental for the first year of the term of the agreement are

received by the Minister.

Agreements issued to 2 or more lessees

8(1) Subject to subsection (2), an agreement shall not be issued to 2 or

more lessees unless each of those lessees will be the holder of a specified

undivided interest in the agreement.

(2) An agreement may be issued to 2 or more lessees other than as holders

of specified undivided interests if each of them is an individual.

(3) Subsection (1) does not preclude the issuance of an agreement under

which 2 or more persons will be the lessees in respect of the same

specified undivided interest in the agreement if each of those lessees is

an individual.

Specified undivided interests

9(1) The Minister may refuse to issue an agreement if any of the lessees

would hold less than a 1% undivided interest under the agreement.

(2) The Minister may refuse to issue an agreement under which any lessee

is to hold a specified undivided interest in the agreement if the interest

(

a) is expressed otherwise than in decimal form, or

(

b) is expressed in decimal form but to more than 7 decimal places.

Term of agreement

10 Where an agreement is issued for a term of more than one year,

(

a) the first year of the term commences on the date shown in the

agreement as its term commencement date and ends at the expiration of the

first anniversary of that term commencement date, and

(

b) each subsequent year of the term is a 12-month period expiring

on an anniversary of the term commencement date.

Surrender of agreement

11(1) The lessee of an agreement may, in accordance with this section,

(

a) surrender the agreement, or

(

b) with the consent of the Minister, surrender the agreement as to

part of its location.

(2) A surrender referred to in subsection (1)

(

a) must be submitted to the Minister in a form determined or

approved by the Minister, and

(

b) is binding on the Crown and the lessee only if it is accepted

by the Minister, as evidenced by the Minister's notification to the lessee

confirming the acceptance.

(3) Where a surrender referred to in subsection (1)

(

a) is received by the Minister after an anniversary of the term

commencement date of the agreement, or

(

b) is received by the Minister on or before an anniversary of the

term commencement date of the agreement but provides for an effective date

occurring after that anniversary date,

the Minister shall not accept the surrender unless the Minister receives

payment of the rental for the year of the term following that anniversary

date calculated on the basis of the area of the location as it stood on

that anniversary date.

Partial transfers, divisions and consolidations of agreements

12(1) A lessee may, with the consent of the Minister, transfer any part of

the location of the lessee's agreement.

(2) The Minister, on application by the lessee of an agreement, may

(

a) divide the lessee's agreement into 2 or more agreements, or

(

b) consolidate the lessee's agreement with one or more other

agreements held by the lessee.

(3) Notwithstanding subsections (1) and (2), the Minister shall not accept

an application for

(

a) the consent of the Minister to a transfer of part of the

location of a petroleum and natural gas licence during its initial term,

(

b) the division of a petroleum and natural gas licence during its

initial term, or

(

c) the consolidation of 2 or more petroleum and natural gas

licences during the initial term of any of them.

Amendment of agreement

13 If, pursuant to the Act or the regulations,

(

a) a description of the location in an agreement is amended, or

(

b) an agreement is amended in respect of the rights granted under

it,

the Minister shall send a copy of the amendment to the lessee of the

agreement.

Cancellation of agreement

14(1) Where the Minister cancels an agreement pursuant to

section 44 of

the Act, the Minister shall send to the person who was the designated

representative for the agreement immediately before it was cancelled, a

notification confirming the cancellation of the agreement.

(2) Where the Minister cancels a petroleum and natural gas licence or

lease as to part of its location pursuant to

section 20(4) of the Petroleum

and Natural Gas Tenure Regulation (AR 263/97), the Minister shall send a

notification to the licensee or lessee, as the case may be, confirming the

cancellation in part of the agreement.

Commence-ment of reinstatement application period

15 For the purposes of

section 8(1)(e)(

i) of the Act, the effective date

of the surrender or cancellation of an agreement is prescribed as the date

of the notification from the Minister to the lessee confirming the

Minister's acceptance of the surrender or confirming the cancellation, as

the case may be.

Persons ineligible as lessees

16(1) Where the lessee or one of the lessees of an agreement is a person

ineligible to be a lessee by reason of

section 24 of the Act, a notice

given by the Minister to the ineligible person pursuant to

section 24(4)(

a) of the Act must also be given to

(

a) the designated representative in relation to the agreement, and

(

b) each of the other lessees of the agreement, if it is held by 2

or more lessees.

(2) Where the ineligibility of a corporation under

section 24 of the Act

is the result of the dissolution of the corporation, a notice given by the

Minister pursuant to

section 24(4)(

b) of the Act must be given to the

corporation despite its dissolution at

(

a) its official service address if it had given a notice to the

Minister containing that address, or

(

b) in any other case, its last known address according to the

records of the Department.

(3) Unless the Minister otherwise directs in a particular case, an

individual under the age of 18 years is eligible to be the lessee or one of

the lessees of a metallic and industrial minerals licence under the

Metallic and Industrial Minerals Regulation (AR 66/93).

Fees, Rentals and Interest

Prescribed fees

17 The fee payable to the Minister for any service described in the

Schedule to this Regulation is the fee shown in the

Schedule for that

service.

Fee accounts

18(1) The Minister may enter into an arrangement with a person under which

prescribed fees payable by that person in respect of the class of services

specified under the arrangement will be charged to that person's account on

a continuing basis and on the conditions determined by the Minister.

(2) If a prescribed fee is payable by a person during the period an

arrangement under subsection (1) is in effect and not suspended under

subsection (3), the fee shall be charged to that person's account.

(3) If the Minister sends an invoice in respect of the amounts charged to

a person under an arrangement under this

section and the total amount of

the invoice is not paid on or before the date specified in the invoice, the

Minister may suspend the arrangement with that person until all amounts

owing under it are paid in full.

(4) The Minister may terminate an arrangement with any person under this

section on the giving of at least one week's notice to that person.

Monthly invoice arrangements

19(1) Subject to subsection (3), the Minister may enter into an

arrangement with any person under which the payment to the Crown of any

class of amounts owing to the Crown is to be made on the basis of monthly

invoices.

(2) Notwithstanding anything in an agreement, a monthly invoice

arrangement may, in respect of any class of amounts owing to the Crown

covered by the arrangement, provide for a due date for the payment of

amounts of that class that differs from the due date otherwise provided for

those payments by the regulations or the agreement.

(3) If a monthly invoice relates to payments of any amounts owing to the

Crown under one or more agreements, the arrangement shall be entered into

with the designated representative in relation to those agreements or a

person authorized to do so by the designated representative.

Annual rentals

20(1) The lessee of an agreement is liable to the Crown for the payment of

a rental for each year of the term of the agreement.

(2) For the purposes of this section,

(

a) a year during which a petroleum and natural gas lease is

continued after the expiration of its term is deemed to be a year of the

term of the lease, and

(

b) a year during which a petroleum and natural gas licence is

continued after the expiration of its intermediate term is deemed to be a

year of the term of the licence.

(3) Except in the case of an agreement referred to in

section 54.1(5)(

c) of the Act, a rental for a year of the term of an agreement is payable at

the rate of $3.50 per year for each hectare in the area of the location of

the agreement, subject to a minimum of $50 per year.

(4) Subject to subsections (5) and (6), a rental for the 2nd or any

subsequent year of the term of an agreement

(

a) is due and payable on the last day of the preceding year of the

term of the agreement, and

(

b) shall be calculated on the basis of the area of the location of

the agreement as it stood on that due date.

(5) Subsection (4)(

a) does not apply if the payment of the rental for the

year is to be made pursuant to a monthly invoice arrangement.

(6) Notwithstanding anything in an agreement,

(

a) the rental for the first year of the intermediate term of a

petroleum and natural gas licence, and

(

b) the rental for any year of the term of a petroleum and natural

gas lease or licence that

(

i) occurs during its continuation pursuant to

section

15, 16 or 17 of the Petroleum and Natural Gas Tenure Regulation (AR

263/97), and

(ii) is exempted by the Minister from the operation of

subsection (4),

is due and payable on the date shown as the due date for its payment in a

notice given by the Minister to the lessee of the lease or licence, and

shall be calculated on the basis of the area of the location as it stood at

the beginning of that year.

Liability to the Crown for interest

21(1) If an amount owing to the Crown is not received in full by the

Minister on or before the due date for its payment, interest is payable to

the Crown by the person who owes that amount, computed in accordance with

this section.

(2) Interest payable under this

section shall be computed as an amount

equal to 3% of

(

a) the principal amount owing to the Crown, or

(

b) if partial payment of that principal amount is received on or

before the due date for its payment, the portion of that principal amount

remaining unpaid on that due date.

(3) If an amount of interest that would otherwise be payable in the

absence of this subsection is $20 or less, no interest is payable.

(4) This

section does not apply to interest on an amount owing to the

Crown in cases where provisions respecting the imposition of that interest

are contained in some other regulation.

Crown's liability for interest on overpayments

22(1) If a payment is made in respect of an amount owing to the Crown in

excess of the actual amount owing on the due date for its payment and the

excess payment is wholly or primarily attributable to an error made by the

Department, the excess amount is an "overpayment" for the purposes of this

section.

(2) If the Crown is liable to a person for an overpayment, interest is

payable by the Crown to that person on the amount of the overpayment,

computed in accordance with this section.

(3) An amount of interest payable by the Crown under this

section

(

a) shall be computed from the later of

(

i) the due date for payment of the amount owing to the

Crown to which the overpayment relates, and

(ii) the date on which the Minister received the

overpayment,

continuing to the date of the requisition by the Department to

the Provincial Treasurer for the issuance of a cheque for the overpayment

and interest, and

(

b) shall be computed for each day in the period referred to in

clause (

a) at a rate of yearly interest that is 1% greater than the rate of

interest established by the Alberta Treasury Branches as its prime lending

rate on loans payable in Canadian dollars and in effect on the first day of

the month in which that day occurs.

(4) If an amount of interest that would otherwise be payable in the

absence of this subsection is $20 or less, no interest is payable under

this section.

(5) This

section does not apply to the payment of interest on overpayments

in cases where provisions respecting the payment of that interest are

contained in some other regulation.

Application of payments

23(1) Subject to subsections (2) and (3), unless the Minister directs

otherwise, if money is paid to the Crown in respect of an agreement, the

money shall be applied in the following order:

(

a) first, goods and services tax payable under Excise Tax Act

(Canada) in respect of amounts owing to the Crown under the agreement;

(b) 2nd, on fees owing by that person under the agreement;

(c) 3rd, on penalties owing by that person under the agreement;

(d) 4th, on interest owing by that person under the agreement;

(e) 5th, on rentals owing by that person under the agreement;

(f) 6th, on royalty amounts owing under the agreement.

(2) If the Minister sends to any person an invoice for one or more amounts

owing to the Crown, money paid to the Crown on account of that invoice

shall be applied in the following order:

(

a) first, goods and services tax under the Excise Tax Act (Canada)

charged in the invoice;

(b) 2nd, interest owing in accordance with the invoice on the

principal amount of the invoice;

(c) 3rd, any unpaid balance of a previous invoice that is carried

forward in the current invoice;

(d) 4th, subject to clause (c), the principal amount of the

invoice.

(3) Subsections (1) and (2) do not apply to payments of any class of

amounts owing to the Crown if another regulation provides for some other

order of application of those payments.

General

Return of deposit or security

24 Where

(

a) a deposit or security is furnished by the lessee of an

agreement to the Government pursuant to the Act or the regulations,

(

b) the Minister subsequently registers a transfer of the agreement

or of a specified undivided interest in the agreement, and

(

c) the Minister becomes obligated to return or refund all or part

of the deposit or security,

then, subject to

section 45(4) of the Act, the deposit or security or the

part of the deposit or security, as the case may be, shall be returned or

refunded to the person who originally furnished the deposit or security

unless that person directs the Minister to return or refund it to some

other person.

Retention of records

25 A person who is a lessee or a former lessee of an agreement shall keep

all records that come into that person's possession or the possession of

any of that person's agents and that are or were used for the purpose of

preparing any return or report required to be given to or filed with the

Minister by that person in relation to the agreement pursuant to the Act,

the regulations or the agreement.

Disclosure of information

26(1) The Minister may make available any records, returns or other

information obtained under the Act, the regulations or an agreement

(

a) to any person for the purpose of enforcing a law of Canada or a

province, or

(

b) to a person employed in or acting on behalf of the Department

for the purpose of administering any enactment under the administration of

the Minister or evaluating, formulating or administering a policy or

program of the Department.

(2) The Minister may classify types of information obtained under the Act,

the regulations or agreements as non-confidential and may systematically

authorize the release to the public of information classified as

non-confidential.

(3) With the authorization of the Minister, confidential information

obtained under the Act, the regulations or agreements may be provided or

published in summarized or statistical form in such a manner that it is not

possible to relate the information to any identifiable person.

(4) A person employed or engaged in the administration of the Act may

communicate, disclose or make available records, returns or other

information received in respect of an agreement pursuant to the Act, the

regulations or the agreement to

(

a) the person from whom the record, return or other information

was obtained, or

(

b) a person who has the consent in writing of the person from whom

the record, return or other information was obtained.

Exceptions to

section 33(1)(

a) of the Act

27(1)

Section 33(1)(

a) of the Act does not apply to a well or to the

installations and equipment, including casing, incidental to the well if

(

a) all or part of the spacing unit for the well continues under

another agreement,

(

b) the Board notifies the Minister that, on the basis of evidence

and representations presented to it by one or more interested parties,

(

i) the well should not be abandoned because it is or

will be used for some useful purpose, or

(ii) the well has evaluated a mineral, the rights to

which are granted by another agreement, by reason of having penetrated a

zone underlying the location of that other agreement, where the surrendered

or cancelled agreement and that other agreement had a common surface area,

(

c) the agreement pursuant to which the well was drilled expires

but is renewed, or

(

d) the agreement pursuant to which the well is drilled is

cancelled or expires and, as a consequence of the exercise of a right of

lease selection conferred by the agreement, the well is in the location of

a lease so selected.

(2) Section 33(1)(

a) of the Act does not apply to any installations or

equipment, including casing, incidental to a well if, at the time of the

expiration, surrender or cancellation of the agreement, the installations

or equipment is being used in the operation of another well not affected by

the expiration, surrender or cancellation.

Deemed areas

28 For the purposes of an agreement, a section, quarter-section and legal

subdivision of land are deemed to contain 256 hectares, 64 hectares and 16

hectares respectively, unless the Minister directs otherwise in a

particular case.

Mineral title transfers and notifications

29 For the purposes of the Act,

(

a) a transfer of title referred to in

section 12 of the Act is

issued when it is signed by the Minister, and

(

b) a notification referred to in

section 13 of the Act is issued

when it is signed by the Minister and delivered to the appropriate Land

Titles Office for registration.

Consequential Amendments

Ammonite Shell Regulation amended

30(1) The Ammonite Shell Regulation (AR 59/89) is amended by this section.

(2) Section 3 is amended

(

a) in subsection (2) by striking out "the fee for the permit

prescribed in the General Regulation (Alta. Reg. 163/84)" and substituting

"the application fee prescribed in the

Schedule to the Mines and Minerals

Administration Regulation (AR 262/97)";

(

b) by repealing subsection (3)(

a) and substituting the following:

(

a) the application fee prescribed in the

Schedule to

the Mines and Minerals Administration Regulation (AR 262/97), and

(

c) by repealing subsections (4) and (4.1).

Coal Royalty Regulation amended

31(1) The Coal Royalty Regulation (AR 295/92) is amended by this section.

(2) Section 8(2) is repealed and the following is substituted:

(2) If a lessee contravenes subsection (1) by failing to submit a

report on or before the deadline prescribed by or pursuant to that

subsection, the Minister may impose a pecuniary penalty on the lessee by

reason of the contravention, subject to the following:

(

a) the Minister must give a notice to the lessee

describing the contravention, specifying the period within which the report

must be submitted to the Minister in order to avoid liability for the

penalty and specifying the penalty for which the lessee will be liable if

the report is not submitted before the end of that period;

(

b) the "default period" for the purposes of this

subsection is the period

(

i) commencing on the day after the

expiration of the period specified in the notice given pursuant to clause

(a), and

(ii) ending on the day immediately before

the day on which the report is submitted to the Minister;

(

c) the notice shall not specify a penalty in excess of

(i) $10 000 in respect of the first day of

the default period, or

(ii) $1000 in respect of the 2nd and each

subsequent day of the default period;

(

d) if the report is not submitted to the Minister

within the period specified in the notice, the lessee is liable to pay to

the Minister the penalty specified in the notice.

(3) Section 9 is amended

(

a) in subsection (1) by striking out "Notwithstanding

section 7 of

the General Regulation (Alta. Reg. 163/84), interest" and substituting

"Interest";

(

b) in subsection (2) by striking out "Notwithstanding

section 8 of

the General Regulation (Alta. Reg. 163/84), interest" and substituting

"Interest".

(

c) in subsection (3) by striking out "Notwithstanding

section 7 of

the General Regulation (Alta. Reg. 163/84), if" and substituting "If".

Metallic and Industrial Minerals Regulation amended

32(1) The Metallic and Industrial Minerals Regulation (AR 66/93) is

amended by this section.

(2) Section 5(2)(

b) is repealed and the following is substituted:

(

b) the application fee prescribed in the

Schedule to the Mines and

Minerals Administration Regulation (AR 262/97).

(3) Section 10(2)(

b) is repealed and the following is substituted:

(

b) the application fee prescribed in the

Schedule to the Mines and

Minerals Administration Regulation (AR 262/97).

(4) Section 15.1 is amended by striking out "Subject to

section 6 of the

General Regulation (AR 163/84), the" and substituting "The".

(5) Section 18(

b) is repealed and the following is substituted:

(

b) the application fee prescribed in the

Schedule to the Mines and

Minerals Administration Regulation (AR 262/97), and

(6) Section 19 is repealed.

(7) Section 23.1(

b) is amended by striking out ", subject to

section 6 of

the General Regulation (AR 163/84),".

Metallic and Industrial Minerals Royalty Regulation amended

33(1) The Metallic and Industrial Minerals Royalty Regulation (AR 350/93)

is amended by this section.

(2) Section 2 is repealed and the following is substituted:

Returns respecting royalty

2(1) The holder of a lease or licence shall furnish to the Minister

written returns pertaining to the calculation of royalty reserved to the

Crown in right of Alberta under the lease or licence, by the deadlines, in

the manner and in respect of the periods determined by the Minister and

containing the information requested by the Minister.

(2) If the holder of a lease or licence contravenes subsection

(1) by failing to furnish a return to the Minister before the deadline

determined by the Minister under that subsection, the Minister may impose a

pecuniary penalty on the holder by reason of the contravention, subject to

the following:

(

a) the Minister must give a notice to the holder

describing the contravention, specifying the period within which the return

must be furnished in order to avoid liability for the penalty and

specifying the penalty for which the lessee will be liable if the return is

not furnished before the end of that period;

(

b) the "default period" for the purpose of this

subsection is the period

(

i) commencing on the day after the

expiration of the period specified in the notice given pursuant to clause

(a), and

(ii) ending on the day immediately before

the day on which the return is furnished to the Minister;

(

c) the notice shall not specify a penalty in excess of

(i) $10 000 in respect of the first day of

the default period, or

(ii) $1000 in respect of the 2nd and each

subsequent day of the default period;

(

d) if the return is not furnished to the Minister

within the period specified in the notice, the holder is liable to pay to

the Minister the penalty specified in the notice.

Natural Gas Royalty Regulation, 1994 amended

34 The Natural Gas Royalty Regulation, 1994 (AR 351/93) is amended by

repealing

section 25(5).

Oil Sands Regulation amended

35(1) The Oil Sands Regulation (AR 228/91) is amended by this section.

(2) Section 2(1)(

a) is repealed and the following is substituted:

(

a) the application fee prescribed in the

Schedule to the Mines and

Minerals Administration Regulation (AR 262/97), and

(3) Section 4 is repealed.

Oil Sands Royalty Regulation, 1997 amended

36 The Oil Sands Royalty Regulation, 1997 (AR 185/97) is amended by

repealing

section 33(6).

Repeal

Repeal

37 The General Regulation (AR 163/84) is repealed.

Expiry

Expiry

38 For the purpose of ensuring that this Regulation is reviewed for

ongoing relevancy and necessity, with the option that it may be repassed in

its present or an amended form following a review, this Regulation expires

on December 31, 2002.

Coming into Force

Coming into force

39 This Regulation comes into force on January 1, 1998.

SCHEDULE

PRESCRIBED FEES

Fees Related to Agreements

1 Fee for processing a request to have an agreement sold at a sale by

public tender, but only if

(

a) the agreement is offered at a sale as a result of the request,

(

b) the agreement is not sold at the sale, and

(

c) payment of the fee is demanded by the Minister

$500

2 Application for an agreement, other than an application referred to in

item 3

$500

3 Application for a metallic and industrial minerals licence or a permit

to conduct surface collection of ammonite shell

$ 50

4 Issuance of a new agreement resulting from a division of an agreement

or the registration of a transfer of part of the location of an agreement

$500

5 Late application fee referred to in

section 11(3)(a)(ii) or

14(5)(b)(iii) or (6)(c)(ii) of the Petroleum and Natural Gas Tenure

Regulation (AR 263/97)

$5000

6 Acceptance fee referred to in

section 17(5)(c)(ii) of the Petroleum and

Natural Gas Tenure Regulation (AR 263/97)

$25 per hectare, subject to a $1600 minimum

7 Reinstatement of an agreement pursuant to

section 8(1)(

e) of the Act

$5000

Registration Fees

8(1) Registration of a security notice, a notice of the assignment of all

or part of the security interest that is the subject of a registered

security notice, or a notice of the postponement of a registered security

interest, for each agreement against which the notice is registered

$50

(2) Registration of a notice referred to in

section 141(1)(

a) or (

d) of

the Act

Nil

(3) Registration of a transfer

Nil

9(1) Registration under the Builders' Lien Act of a statement of lien or

certificate of lis pendens, for each agreement against which the document

is registered

$50

(2) Registration under the Builders' Lien Act of a discharge of a

registered statement of lien or certificate of lis pendens

Nil

Fees for Searches and Information

10(1) Written search of an agreement or other non-confidential document

(2) Surcharge for each agreement or document searched, where the search is

requested and provided on a rush basis

$10

11 Ad hoc report from the Land Status Automated System

$30

12 Surcharge for an electronic disc containing a search referred to in

item 10(1) or a report referred to in item 11

$20

13 Written search of a mineral township register, for each township

researched

$20

14 Historical search of agreements

$40 per hour,

$40 minimum

15 Electronic data respecting agreements and other non--onfidential

documents and derived from the Land Status Automated System:

(

a) test tape

$500

(

b) complete tape containing data as of month-end

$1250

(

c) supplementary updated tape, available every 2 weeks

$500

(

d) access to daily electronic files

$650 per month

Miscellaneous Fees

16 Certified copy of a document

$10

17 Provision of a copy of a Department Information Letter or Information

Bulletin to a person to whom a copy had been previously provided without

charge

18 Copy of mylar base map

$20

Alberta Regulation 263/97

Mines and Minerals Act

PETROLEUM AND NATURAL GAS TENURE REGULATION

Filed: December 17, 1997

Made by the Lieutenant Governor in Council (O.C. 643/97) pursuant to

sections 5 and 93 of the Mines and Minerals Act.

Table of Contents

Interpretation

Definitions 1

Interpretation provisions related to wells 2

Crown spacing units 3

Rights Granted

Rights granted by an agreement 4

Part 1

Petroleum and Natural Gas Licences

Term of licence 5

Initial term of licence 6

Maximum area of location 7

Location in more than one Region 8

Validating wells 9

Grouping of licences 10

Selection and validation of location for intermediate term 11

Licence continuation and offset requirements 12

Waiver of rental for licences under former Regulation 13

Part 2

Petroleum and Natural Gas Leases

Continuation of Leases

Application for continuation of lease 14

Qualifications for continuation 15

Continuation by reason of drilling 16

Continuation as to potentially productive part of the location 17

Notice respecting non-productivity 18

Offset Requirements

Interpretation of offset requirement provisions 19

Offset notice 20

Review of offset notice 21

Liability to pay offset compensation 22

Calculation and payment of offset compensation 23

Part 3

General

Withdrawal of Crown from unit agreement 24

Proof of ownership of freehold rights 25

Time extensions related to drilling problems 26

Transitional

Interpretation of transitional provisions 27

Licences under former Regulation 28

Pre-1998 leases 29

Continuation under

section 96 of the Act 30

Continuation under

section 97 of the Act 31

Non-productivity notices 32

Offset drilling obligations 33

Variation of transition rules 34

Repeal, Expiry and Coming into Force

Repeal 35

Expiry 36

Coming into force 37

Schedules

Interpretation

Definitions

1 In this Regulation,

(a) "Act" means the Mines and Minerals Act;

(b) "Board" means the Alberta Energy and Utilities Board;

(c) "Crown spacing unit" means a spacing unit that qualifies as a

Crown spacing unit by reason of

section 3;

(d) "deepest productive zone", with reference to a spacing unit

containing all or part of a location approved for continuation pursuant to

section 15(1), means the deepest of the zones in the spacing unit to which

the approval extends under

section 15(2);

(e) "former Regulation" means the Petroleum and Natural Gas

Agreements Regulation (AR 188/85);

(f) "freehold spacing unit" means,

(

i) in relation to Alberta, a spacing unit that is not

a Crown spacing unit, or

(ii) in relation to a jurisdiction adjoining Alberta,

the area allocated to a well drilled in land in that jurisdiction for the

purpose of drilling that well or producing petroleum or natural gas from

that well;

(g) "freehold well" means

(

i) in relation to Alberta, a well the spacing unit for

which is a freehold spacing unit;

(ii) in relation to a jurisdiction adjoining Alberta, a

well drilled in land in that jurisdiction;

(h) "gas storage agreement" means a contract or agreement referred

to in

section 54.1(5)(

b) or (

c) of the Act;

(i) "lease" means a lease of rights to petroleum or natural gas or

both issued pursuant to the Act or the former Act;

(j) "licence" means a petroleum and natural gas licence issued by

the Minister under the former Regulation or this Regulation;

(k) "licensee" means the holder of a licence according to the

records of the Department;

(l) "location", in relation to a licence or lease, means

(

i) the subsurface underlying the surface area of the

tract described in the licence or lease as its location, or

(ii) where the licence or lease grants rights to

petroleum or natural gas or both in some but not all of the subsurface, the

subsurface area or areas underlying the surface area of the tract described

in the licence or lease as its location and in respect of which the rights

are granted;

(m) "measured depth", in relation to a well, means the measured

length of the well-bore of the well;

(n) "offset zone" means

(

i) in relation to a freehold spacing unit, a zone

underlying the freehold spacing unit and identified in an offset notice in

accordance with

section 20(2)(a), or

(ii) in relation to a Crown spacing unit laterally

adjoining a freehold spacing unit that is the subject of an offset notice,

the zone underlying the Crown spacing unit that is the same as the zone

identified in the offset notice in accordance with

section 20(2)(a);

(o) "Plains Region", "Northern Region" and "Foothills Region" mean

the respective areas of Alberta described in

Schedule 1;

(p) "prescribed", in relation to a fee or rental, means prescribed

by the Mines and Minerals Administration Regulation (AR 262/97);

(q) "producing well" means a well that is considered by the

Minister to be a producing well on the basis of the records of the Board

and other information available to the Minister;

(r) "productive", in relation to a well or zone, means capable, in

the opinion of the Minister, of producing petroleum or natural gas from the

well or zone in paying quantity;

(s) "Region" means the Plains Region, the Northern Region or the

Foothills Region;

(t) "rig release date", with respect to a well, means the rig

release date for the well according to the records of the Board;

(u) "spacing unit" means

(

i) in relation to a well drilled or being drilled,

(

A) the drilling spacing unit for the well

prescribed by or pursuant to the Oil and Gas Conservation Regulations (AR

151/71), or

(

B) where the Board has issued an order

suspending the operation of

Part 4 of the Oil and Gas Conservation

Regulations (AR 151/71) in respect of the area in which the well is drilled

or being drilled, the area that was, immediately before the effective date

of the order, the drilling spacing unit prescribed for the well by or

pursuant to those Regulations,

(ii) the area that would be the drilling spacing unit

prescribed for a well by or pursuant to those Regulations if the well were

drilled and in the absence of any order of the Board suspending the

operation of

Part 4 of those Regulations in respect of that area;

(v) "unit agreement", except in

section 24, includes a unit

operation order;

(w) "validating well" means a well that qualifies as a validating

well under

section 9;

(x) "zone" means a stratum or series of strata considered by the

Minister to be a zone for the purposes of this Regulation.

Interpretation provisions related to wells

2 For the purposes of this Regulation,

(

a) a reference to "petroleum and natural gas rights" in the

location of a licence or lease means petroleum or natural gas or both in

the location, the rights to which are granted by the licence or lease;

(

b) a reference to a well that will evaluate or has evaluated

petroleum and natural gas rights in the location of a licence or lease

means a well whose results are expected to provide or have provided, as the

case may be, evidence of the presence or absence of petroleum or natural

gas in the location, the rights to which are granted by the licence or

lease;

(

c) a well is in the location of a licence or lease or is drilled

or has been drilled in the location of a licence or lease if the well is

drilled under the authority of the licence or lease and all or any part of

the well-bore is situated in the location of the licence or lease;

(

d) where the location of a licence or lease consists of some but

not all of the subsurface areas underlying the surface area of the tract

described in the licence or lease as its location, a well is being drilled

in the location of that licence or lease if

(

i) the well is being drilled under the authority of

the licence or lease with the intention of penetrating the location, and

(ii) the well licence issued pursuant to the Oil and Gas

Conservation Act for the well authorized the drilling of the well to a zone

in the location;

(

e) a well is outside the location of a licence or lease if no part

of the well-bore is situated in the location or any other subsurface area

underlying the surface area of the tract described in the licence or lease

as its location;

(

f) if a well is productive from more than one spacing unit, each

of those spacing units shall be deemed to have a separate productive well

in it;

(

g) if a producing well produces petroleum or natural gas from more

than one spacing unit, each spacing unit shall be deemed to have a separate

producing well in it.

Crown spacing units

3(1) For the purposes of this Regulation, a spacing unit is a Crown

spacing unit in respect of petroleum or natural gas if the title to the

petroleum or natural gas, as the case may be, in 50% or more of the area

of the spacing unit, as determined under subsection (2), is owned by the

Crown in right of Alberta.

(2) Where the Crown owns the title to the petroleum or natural gas in less

than 100% of the area of a spacing unit, the determination of whether or

not the spacing unit is a Crown spacing unit shall be made in accordance

with the following:

(

a) if the spacing unit consists of a section, quarter-section or

legal subdivision of land, the whole of the area of the spacing unit shall

be deemed to contain 256, 64 or 16 hectares respectively;

(

b) if the spacing unit does not consist of the whole of a section,

quarter-section or legal subdivision of land, the area of the spacing unit

shall be the area determined by the Minister for the purposes of this

section;

(

c) for the purposes of this subsection, the "Crown portion" of a

spacing unit is the portion of the area of the spacing unit in respect of

which the Crown in right of Alberta owns the title to petroleum or natural

gas or both, calculated in accordance with this subsection;

(

d) if the Crown portion of a spacing unit consists of the whole of

the location of a licence or lease, the area of the Crown portion is the

number of hectares shown in the description of the location in the licence

or lease;

(

e) if the Crown portion of a spacing unit consists of a part only

of the location of a licence or lease, the area of the Crown portion of the

spacing unit is the number of hectares in that part of the location used by

the Minister in the calculation of the total area shown in the description

of the location in the licence or lease;

(

f) if the number of hectares in the Crown portion of the spacing

unit, as determined under clauses (

d) and (e), equals 50% or more of the

whole of the area of the spacing unit, the spacing unit is a Crown spacing

unit under subsection (1).

Rights Granted

Rights granted by an agreement

4(1) Subject to subsection (2) and any terms, conditions or exceptions

contained in the agreement, an agreement granting rights to petroleum or

natural gas or both conveys

(

a) the exclusive right to drill for and recover petroleum and

natural gas in the location of the agreement in respect of which rights are

granted by the agreement, and

(

b) the right to remove from the location any petroleum and natural

gas recovered pursuant to clause (a).

(2) An agreement referred to in subsection (1) does not grant the right to

(

a) oil sands, or

(

b) natural gas in a coal seam that the Minister has authorized the

lessee of a coal lease to recover under

section 65(2) of the Act.

PART 1

PETROLEUM AND NATURAL GAS LICENCES

Term of licence

5(1) For the purposes of this Regulation,

(

a) the initial term of a licence is the initial term of the

licence referred to in

section 6(1), and includes any extension of that

term under this Regulation or

section 8(1)(

h) of the Act,

(

b) the intermediate term of a licence is the 5-year period

beginning on the commencement date prescribed under subsection (2), and

includes any extension of that term under this Regulation or

section

8(1)(

h) of the Act, and

(

c) the combined periods referred to in clauses (

a) and (

b) are

prescribed as the term of a licence for the purposes of sections 92 and 93

of the Act.

(2) The commencement date of the intermediate term of a licence is

(

a) subject to clause (b), the date of the expiration of the

initial term of the licence as shown in the licence, or

(

b) the most recent anniversary of that expiration date, if the

initial term, as shown in the licence, is extended for a period of more

than one year.

Initial term of licence

6(1) A licence shall be issued for an initial term of

(a) 2 years, if the location is in the Plains Region,

(b) 4 years, if the location is in the Northern Region, or

(c) 5 years, if the location is in the Foothills Region.

(2) If

(

a) the drilling of a validating well is commenced in the location

of a licence before the expiration of the initial term of the licence,

(

b) the rig release date for the well occurs after the expiration

of the initial term of the licence, and

(

c) the drilling operations for the well are conducted diligently

and continuously to the satisfaction of the Minister,

the initial term of the licence is extended to the expiration of the

one-month period following the rig release date for the well.

(3) If a licensee commences the drilling of any other well in the

location of the licence during the period of any extension of the term

under subsection (2), except a well that is, by reason of

section 26,

deemed to be the continuation of the drilling of a well referred to in

subsection (2), the well does not qualify as a validating well.

Maximum area of location

7 The maximum area of the location of a licence is

(a) 15 sections in the Plains Region,

(b) 32 sections in the Northern Region, and

(c) 36 sections in the Foothills Region.

Location in more than one Region

8(1) Where the location of a licence lies within more than one of the

Regions, then, for the purposes of this Regulation, the location is deemed

to be in the Region in which the greatest part of the location is situated.

(2) Subject to subsection (1), if the location of a licence

(

a) lies within 2 or 3 Regions and the parts of the location within

each of the Regions are equal in area, or

(

b) lies within 3 Regions and the parts within 2 of the Regions are

equal in area,

then, for the purposes of this Regulation, the location shall be deemed to

be wholly within whichever of those Regions would result in the longest

term for the licence by reason of

section 6(1) if the whole of the location

were in that Region.

Validating wells

9(1) Subject to

section 6(3) and subsection (5) of this section, the

following qualify as validating wells in respect of a licence:

(

a) a well that is drilled in the location of the licence during

its initial term to a measured depth of at least 150 metres for the purpose

of evaluating petroleum and natural gas rights in the location of the

licence;

(

b) a well drilled in the location of the licence if

(

i) the well is re-entered during its initial term,

(ii) the well is either

(

A) drilled to a measured depth of at least

150 metres beyond the total measured depth of the well prior to the

re-entry, or

(

B) whipstocked from a point in the

well-bore and drilled beyond that point to a measured depth of at least 150

metres,

and

(iii) the well is drilled for the purpose of evaluating

petroleum and natural gas rights in the location of the licence;

(

c) a well drilled outside the location of the licence in a spacing

unit only part of which is in the location of the licence if

(

i) no part of the remainder of the area of the spacing

unit is within the location of any other licence that is still in its

initial term,

(ii) the well is drilled during the initial term of the

licence to a measured depth of at least 150 metres, and

(iii) the well, in the opinion of the Minister, will

evaluate petroleum and natural gas rights in the location of the licence;

(

d) a well approved by the Minister as a validating well pursuant

to subsection (2), (3) or (4).

(2) The Minister may approve a well as a validating well in respect of a

licence if

(

a) the licensee applies for the approval before the drilling of

the well is commenced,

(

b) the well is drilled during the initial term of the licence in a

spacing unit no part of which is within the location of the licence, and

(

c) the Minister is of the opinion that the well will evaluate

petroleum and natural gas rights in the location of the licence.

(3) The Minister may approve a well as a validating well in respect of a

licence if

(

a) the well was drilled in the location of the licence and is

re-entered during the initial term of the licence,

(

b) the well does not otherwise qualify as a validating well under

subsection (1)(b), and

(

c) the Minister is of the opinion that the well, by reason of the

drilling operations, provides significant new information relating to the

evaluation of petroleum and natural gas rights in the location of the

licence.

(4) The Minister may approve a well as a validating well in respect of a

licence if

(

a) the well was drilled in the location of the licence and is

re-entered during the initial term of the licence,

(

b) the well does not otherwise qualify as a validating well under

subsection (1)(

b) or (3), and

(

c) the well becomes a productive well.

(5) If a well referred to in subsection (1)(

b) is re-entered more than

once during the initial term of a licence, the well may qualify as a

validating well under subsection (1)(

b) only on the basis of one re-entry

operation.

Grouping of licences

10(1) In this

section and

section 11, "grouping well", in relation to a

group of licences approved under this section, means a well that

(

a) is drilled in the location of either of the grouped licences,

if the drilling of the well commenced while the group was in effect, and

(

b) in the opinion of the Minister, evaluates petroleum and natural

gas rights in the locations of both licences.

(2) The Minister may, on application, approve the grouping of a licence

with one other licence if

(

a) both licences are in their initial terms when the application

is received by the Minister,

(

b) the application states that

(

i) the drilling of a well in one of the grouped

locations will be commenced after the receipt by the Minister of the

application and before the earlier of the expiration dates of the initial

terms of the licences to be grouped, and

(ii) the well will evaluate petroleum and natural gas

rights in the locations of both licences,

(

c) the distance between the locations of the licences to be

grouped is 3.2 kilometres or less, and

(

d) neither licence is part of any other group then in effect under

this section.

(3) An application under subsection (2) may be made only by

(

a) the designated representative for the licences sought to be

grouped, where both licences have the same designated representative, or

(

b) in any other case, a person authorized to do so by the

designated representatives for both of the licences.

(4) A group may contain land in more than one Region.

(5) When the Minister approves a group under this section, the group is

effective as of the date on which the application for the approval was

received by the Minister.

(6) A group approved under this

section terminates on the sooner of

(

a) the expiration of the initial term of either licence, and

(

b) the receipt by the Minister of a request for the termination

(

i) by the licensee, or

(ii) where the licences are held by different licensees,

by the designated representative for either licence on behalf of both

licensees or by a person authorized to do so by the designated

representatives for both licences.

(7) If

(

a) the drilling of a grouping well is commenced in the location of

one of the grouped licences before the earlier of the expiration dates of

the initial terms of the grouped licences,

(

b) the date of the expiration of the initial term of one or both

of the licences occurs before the rig release date for the well, and

(

c) the drilling operations for the grouping well are conducted

diligently and continuously to the satisfaction of the Minister,

the initial term of that licence or the initial terms of those licences, as

the case may be, are extended to the end of the one-month period following

the rig release date for the well.

Selection and validation of location for intermediate term

11(1) Subject to this Regulation, a licensee may apply to the Minister for

validation of the land qualified to remain in the location of the

licensee's licence at the commencement of the intermediate term of the

licence.

(2) An application under subsection (1) must

(

a) be received by the Minister within the 3-month period before

the expiration of the initial term of the licence,

(

b) identify the validating wells and grouping wells drilled,

(

c) provide sufficient evidence to demonstrate that each of the

wells is a validating well or grouping well, as the case may be,

(

d) show the licensee's selection of the land requested for

validation, and

(

e) be accompanied by payment of the prescribed rental for the

first year of the intermediate term.

(3) If an application has not been made pursuant to subsection (1) within

the 3-month period referred to in subsection (2)(

a) and the Minister is of

the opinion that a well has been drilled that is or might be a validating

well or grouping well in respect of the licence,

(

a) the Minister shall give a notice to the licensee

(

i) stating that no application had been received by

the Minister within the 3-month period, and

(ii) stating that the licensee may make an application

under subsection (1) within the one-month period following the date of the

notice on payment of the prescribed late application fee,

and

(

b) the licensee may make the application in accordance with the

notice.

(4) In granting an application made under subsection (1), the Minister

(

a) shall determine in accordance with

Schedule 2 the number of

sections to remain in the location of the licensee's licence at the

commencement of the intermediate term of the licence, and

(

b) may determine the configuration of the location of the licence

at the commencement of its intermediate term.

(5) An application under this

section may relate to both licences in a

group approved under

section 10 and, in that event, the following rules

apply:

(

a) if a well identified in the application is a grouping well, the

Minister's determinations under subsection (4), to the extent that they are

based on that grouping well, may relate to either or both of the locations

of the grouped licences;

(

b) if a well identified in the application is a grouping well and

the licence locations are in different Regions, the Minister's

determination under

Schedule 2, to the extent that it is based on that

grouping well, shall be made on the basis of the Region in which the well

is situated.

(6) On making a decision in respect of an application under this section,

the Minister shall give a notice of the decision to the licensee and, on

the commencement date of the intermediate term of the licence, the location

of the licence ceases to include any land that is not validated under this

section as land that qualified to remain in the location of the licence at

the commencement of its intermediate term.

(7) Where an application is made under this

section on the basis of a

validating well approved under

section 9(4) then, notwithstanding

subsection (4) of this section, the land that may be validated under this

section on the basis of that well shall consist of the part of the location

within the spacing unit for the validating well, down to the base of the

deepest zone from which the validating well is productive.

Licence continuation and offset requirements

12(1) Sections 14 to 18 apply, with the necessary changes, to licences and

for that purpose

(

a) a reference in those sections to a lessee or a lease shall be

read as a reference to a licensee or a licence respectively, and

(

b) a reference in those sections to the term of a lease shall be

read as a reference to the intermediate term of a licence.

(2) Sections 19 to 23 apply, with the necessary changes, to licences

during their intermediate terms and the period of continuation beyond their

terms, and for that purpose a reference in those sections to a lessee or a

lease shall be read as a reference to a licensee or a licence respectively.

Waiver of rental for licences under former Regulation

13(1) This

section applies only to licences issued pursuant to the former

Regulation.

(2) Subject to subsections (3) to (5), if a licensee commences the

drilling of a validating well or grouping well in the location of the

licence, no rental is payable for each year of the remainder of the initial

term of the licence, commencing with the year of the initial term following

that in which the drilling commenced, with respect to that portion of the

total area of the location of the licence that would, in the opinion of the

Minister, form the area for an application under

section 11 if the

application was made on the rig release date for the well.

(3) If the rig release date for the validating well or grouping well has

occurred and the area for which an application may be made under

section 11

is less than or greater than the portion of the total area in respect of

which no rental is payable by virtue of subsection (2), the rental shall be

adjusted by the Minister, effective as of the year of the initial term

following that in which the drilling commenced, so that the area in respect

of which no rental is payable is the actual area for which an application

may be made under

section 11 on the rig release date for the well.

(4) If an adjustment is made by the Minister pursuant to subsection (3),

the Minister or the licensee, as the case may be, shall pay to the other

the amount of the overpayment or underpayment, as the case may be, no later

than one month after the adjustment is made.

(5) This

section does not apply if the drilling of the validating well or

grouping well commences during the last year of the initial term of the

licence.

PART 2

PETROLEUM AND NATURAL GAS LEASES

Continuation of Leases

Application for continuation of lease

14(1) A lessee may, in accordance with this Regulation and

(

a) within the last year of the term of the lease, or

(

b) with the consent of the Minister, at any time before the last

year of the term of the lease,

apply to the Minister for the Minister's approval of the continuation of

the lease pursuant to

section 15, 16 or 17(2)(

a) or any combination of

them.

(2) If the Minister disagrees in whole or in part with an application made

in accordance with subsection (1), the Minister shall give a notice to the

lessee respecting the disagreement and specifying the period of time within

which the lessee is entitled to respond to the notice.

(3) The Minister shall not make a final decision in respect of an

application for continuation approval made under subsection (1)

(

a) until after the expiration of the term of the lease, or

(

b) if a notice was given under subsection (2), until after the

expiration of the term of the lease or the expiration of the period

specified in the notice, whichever event occurs last.

(4) On making a decision in respect of an application for continuation

approval, the Minister shall give a notice of the decision to the lessee

and, subject to subsections (5), (6) and (7) of this

section and

section

17, the lease after the expiration of its term ceases to include any part

of the location or any subsurface area in all or part of the location that

is not approved for continuation by reason of the decision.

(5) Where no application is made under subsection (1) in respect of a

lease before the expiration of its term or where an application is made

under subsection (1) but omits a reference to any part of the location,

(

a) the Minister shall, as soon as practicable after the expiration

date, review the Department's records respecting the lease to determine

whether all or part of the location must be approved for continuation by

reason of subsection (7) or could be approved for continuation pursuant to

(i)

section 15(1)(

a) and (2)(

a) on the basis of a

producing well,

(ii) any other provisions of

section 15 except

subsections (1)(

e) and (2)(e), or

(iii)

section 16(2) on the basis of a qualifying well

referred to in

section 16(1)(a)(i),

if the lessee were to apply for the approval in compliance with

a letter sent to the lessee under clause (b),

(

b) if the Minister determines under clause (

a) that all or part of

the location could be approved for continuation, the Minister shall send

the lessee a letter that

(

i) describes the Minister's determination,

(ii) states that the lessee may, within the one-month

period following the date of the notice, apply to the Minister for approval

of continuation of the lease in accordance with the Minister's

determination, and

(iii) states that the application must be accompanied by

payment of the prescribed rental for the first year following the

expiration of the term of the lease in respect of the part of the location

specified in the application and of the prescribed late application fee,

and

(

c) if the lessee makes an application in compliance with the

letter, the Minister shall approve the continuation of the lease in

accordance with the application.

(6) Where no application is made under subsection (1) in respect of a

lease before the expiration of its term or where an application is made

under subsection (1) but omits a reference to any part of the location,

(

a) the lessee may apply to the Minister in accordance with clauses

(

b) and (

c) for continuation of the lease after the expiration of its term

as to all or part of its location pursuant to

(i)

section 15(1)(

a) and (2)(a), or

(ii)

section 16(2) on the basis of a qualifying well

referred to in

section 16(1)(a)(iii),

except any part of the location that is referred to in the

letter sent by the Minister to the lessee pursuant to subsection (5)(b),

(

b) the application must be made before the end of the 60-day

period following

(

i) the date of the letter sent by the Minister to the

lessee pursuant to subsection (5)(b),

(ii) the date of a report sent by the Minister to the

lessee respecting the expiration of the term of the lease or the part of

the location of the lease, as the case may be, or

(iii) the date of a notification by the Minister to the

lessee indicating the Minister's intention to advise the Board of the need

to abandon a well in the location,

whichever date occurs last,

(

c) the application must be accompanied by

(

i) the rental for the first year following the

expiration of the term of the lease in respect of the part of the location

specified in the application,

(ii) the prescribed late application fee, and

(iii) evidence sufficient to demonstrate that the well

qualifies under clause (a),

and

(

d) if the lessee makes an application under this subsection in

compliance with clauses (a), (

b) and (c), the Minister shall approve the

continuation of the lease as to

(

i) the spacing unit for the well down to the base of

the productive zone that is stratigraphically the deepest in that spacing

unit, where the application is made pursuant to clause (a)(i), or

(ii) the location or the part of the location, as the

case may be, contained in the

section of land in which the qualifying well

is drilled, where the application is made pursuant to clause (a)(ii).

(7) If the Minister determines under subsection (5)(

a) that all or part of

the location or any subsurface areas in all or part of the location are

qualified for continuation

(

a) under

section 15(1)(

b) and (2)(b), or

(

b) under

section 16(2) on the basis of a qualifying well referred

to in

section 16(1)(a)(i),

the Minister shall approve that part of the location or that subsurface

area for continuation and notify the lessee accordingly.

(8) The Minister may not approve the continuation or further continuation

of a lease under this Part except on the basis of

(

a) an application authorized by and made in accordance with this

Part,

(

b) an acceptance of an offer made in accordance with

section 17,

(

c) compliance with the Minister's obligations under subsection

(7).

Qualifications for continuation

15(1) Subject to

section 14 and subsections (2) and (3) of this section,

the Minister, in accordance with this Regulation, shall approve the

continuation of a lease after the expiration of its term to the extent that

the location is within any or all of the following:

(

a) the spacing unit for a productive well;

(

b) a spacing unit all or part of which is within the unit area of

a unit agreement to which the lease is subject;

(

c) a spacing unit laterally adjoining the spacing unit for a

freehold well if the lessee, in accordance with this Regulation and before

the expiration of the term of the lease, has notified the Minister in

writing that the lessee elects to pay offset compensation in respect of

the location or the part of the location within the spacing unit;

(

d) a spacing unit all or part of which is within the area of a gas

storage agreement to which the lease is subject;

(

e) a spacing unit all or part of which is productive from a zone

in the location.

(2) The Minister's approval under subsection (1), in relation to a spacing

unit containing the location or any part of the location, shall be granted

down to the base of whichever of the zones described in the following

clauses is stratigraphically the deepest in that spacing unit:

(

a) the deepest zone from which the well is productive, if

continuation is approved under subsection (1)(

a) in relation to that

spacing unit;

(

b) the deepest zone that is subject to a unit agreement, where

continuation is approved under subsection (1)(

b) in relation to that

spacing unit;

(

c) the offset zone from which the freehold well is producing

petroleum or natural gas, if continuation is approved under subsection

(1)(

c) in relation to that spacing unit;

(

d) the deepest zone that is subject to a gas storage agreement, if

continuation is approved under subsection (1)(

d) in relation to that

spacing unit;

(

e) the deepest productive zone, if continuation is approved under

subsection (1)(

e) in relation to that spacing unit.

(3) If the Minister approves the continuation of a lease after the

expiration of its term under

section 16 as to all or part of the location,

this

section does not apply to the lease or to the part of the location, as

the case may be, while the lease is continued under

section 16.

Continuation by reason of drilling

16(1) For the purposes of this section,

(

a) a well is a "qualifying well" in relation to a lease if the

well qualifies under any of the following subclauses at the expiration of

the term of the lease or the expiration of a continuation period of the

lease, as the context requires:

(

i) a well that is being drilled in the location of the

lease or in a

section of land containing all or part of the location of the

lease;

(ii) a well that is being drilled outside the location

of the lease and, in the opinion of the Minister, will evaluate petroleum

and natural gas rights in the location of the lease;

(iii) a well that has been drilled in the location of the

lease or in a

section of land containing all or part of the location of the

lease, but in respect of which the 3-month period following the rig release

date for the well has not yet expired;

(iv) a well that has been drilled outside the location

of the lease and, in the opinion of the Minister, has evaluated petroleum

and natural gas rights in the location of the lease, but in respect of

which the 3-month period following the rig release date for the well has

not yet expired;

(

b) a well shall be construed as being drilled at the expiration of

the term of a lease or at the expiration of a continuation period of a

lease, as the context requires, if the rig release date for the well has

not yet occurred at that expiration date;

(

c) an "initial continuation period" in relation to a lease is the

period of continuation referred to in subsection (4) and includes any

extension of that period granted under subsection (8);

(

d) a "further continuation period" in relation to a lease is a

period of further continuation referred to in subsection (5) and includes

any extension of that period granted under subsection (8);

(

e) a "continuation period" in relation to a lease means the

initial continuation period of the lease or a further continuation period

of the lease.

(2) Subject to

section 14, if at the expiration of the term of a lease

there are one or more qualifying wells in relation to the lease, the

Minister shall approve the continuation of the lease after the expiration

of its term with respect to the whole or part of its location in accordance

with subsection (3).

(3) The following rules apply with respect to applications for

continuation approval under subsection (2):

(

a) subject to clause (d), the application must be made pursuant to

clause (

b) or (

c) of this subsection and not a combination of both;

(

b) where the application is based on a qualifying well referred to

in subsection (1)(a)(

i) or (iii), the lessee may apply for approval of

continuation under this clause in accordance with the following:

(

i) if the whole of the location, less any

part in

respect of which an application is made for approval of continuation under

section 15 or 17(2)(a), contains an area not exceeding 5 sections, the

lessee may apply for approval of continuation of the lease with respect to

the whole or any part of that area;

(ii) if the whole of the location, less any

part in

respect of which an application is made for approval of continuation under

section 15 or 17 (2)(a), contains an area greater than 5 sections, the

lessee may apply for approval of continuation of the lease with respect to

the portion of that area, not exceeding 5 sections, selected by the lessee

in the lessee's application;

(

c) the lessee may apply for approval of continuation as to the

whole or any part of the location, if the application is accompanied by

technical data that, in the opinion of the Minister, demonstrates that the

qualifying well will evaluate or has evaluated petroleum and natural gas

rights in the location or the part of the location of the lease sought to

be continued under this clause;

(

d) if the Minister disagrees with an application under clause (

c) and sends a notice to the lessee respecting the disagreement pursuant to

section 14(2), the lessee may, in response to that notice, apply instead

for approval of continuation under clause (b), if the lessee is eligible to

apply under clause (b).

(4) Where a lease is approved for continuation pursuant to subsection

(2) as to the whole or part of its location, the lease expires with respect to

the location or the part of the location so continued

(

a) at the end of the 6-month period following

(

i) the rig release date for the qualifying well, or

(ii) where there are 2 or more qualifying wells, the

last of the rig release dates for those wells,

(

b) at the end of any extension of that period granted pursuant to

subsection (8),

subject to being further continued pursuant to subsection (5).

(5) Where a lease is approved for continuation pursuant to subsection

(2) for its initial continuation period, the Minister shall approve one or more

further continuation periods for the lease if in the case of each further

continuation period the following requirements are met:

(

a) an application for approval of the further continuation period

must be made to the Minister before the expiration of the initial

continuation period or the expiration of the then current further

continuation period, as the case may be;

(

b) there must be at least one qualifying well in relation to the

lease at the expiration of the initial continuation period or the then

current further continuation period, as the case may be.

(6) Where the location or part of the location is approved for

continuation pursuant to subsection (2), the area so approved remains the

same during any further continuation period except to the extent that it is

reduced by reason of the approval of continuation of part of the location

pursuant to

section 15 or by reason of a surrender.

(7) Where a lease is approved for further continuation pursuant to

subsection (5), the period of further continuation expires

(

a) at the end of the 3-month period following

(

i) the rig release date for the well, or

(ii) where there are 2 or more qualifying wells, the

last of the rig release dates for those wells,

(

b) at the end of any extension of that period granted pursuant to

subsection (8).

(8) If a lease is approved for continuation for an initial continuation

period or a further continuation period, the Minister may from time to time

grant an extension of that continuation period subject in the case of each

extension to the following:

(

a) the lessee must apply to the Minister for the extension before

the continuation period expires;

(

b) the application will be granted only if the Minister considers

the extension warranted in the circumstances.

(9) If a lease is further continued pursuant to subsection (5) for one or

more further continuation periods, the lease expires at the end of the

further continuation period or the last of the further continuation

periods, as the case may be, unless it is approved for continuation under

section 15 as a result of an application under subsection (10).

(10) Before a lease expires at the end of a continuation period by reason

of subsection (4) or (9), the lessee may apply for approval of the further

continuation of the lease pursuant to

section 15 as to all or any part of

the location, as the case may be, and for that purpose

section 14 applies,

with the necessary changes, as though the expiration of the continuation

period were the expiration of the term of the lease.

Continuation as to potentially productive part of the location

17(1) In this section,

(a) "offer notice" means a notice referred to in subsection (4);

(b) "potentially productive part of the location", in relation to a

lease, means

(

i) a part of the location of the lease in which one or

more potentially productive zones occur, or

(ii) a subsurface area lying stratigraphically below the

base of the deepest productive zone in all or part of the location of the

lease and in which one or more potentially productive zones occur;

(c) "potentially productive zone" means a zone that is, in the

opinion of the Minister, potentially capable of producing petroleum or

natural gas or both in paying quantity.

(2) The Minister may approve the continuation of a lease in respect of a

potentially productive part of the location pursuant to this

section on

the basis of

(

a) an application made in accordance with subsection (3), or

(

b) an acceptance made in response to an offer notice given to the

lessee.

(3) An application referred to in subsection (2)(a)

(

a) must be made by the lessee before the expiration of the term of

the lease in accordance with

section 14(1) to (4), and

(

b) shall show the potentially productive part of the location in

respect of which the approval of continuation is sought.

(4) Where

(

a) an application is made under

section 14 before the expiration

of the term of the lease for approval of the continuation of the lease

pursuant to

section 15 or 16 or both, and

(

b) the Minister disagrees with the application in whole or in part

but considers any part of the location or any subsurface area in all or

part of the location not approved for continuation under

section 15 or 16

to be a potentially productive part of the location,

the Minister, by a notice given to the lessee in accordance with subsection

(5), may offer to approve the continuation of the lease as to the

potentially productive part of the location.

(5) An offer notice

(

a) shall contain the Minister's offer and describe the potentially

productive part of the location and the potentially productive zone or

zones in it,

(

b) shall state that the lessee may accept the Minister's offer for

the continuation of the lease in respect of all or part of the potentially

productive part of the location described in the offer notice,

(

c) shall state that the acceptance of the offer must be

accompanied by

(

i) the rental for any part of the location in respect

of which the rental has not yet been paid for the first year following the

expiration of the term of the lease, and

(ii) the prescribed acceptance fee,

(

d) may prescribe any other requirements respecting the offer or

any conditions on which the Minister may approve continuation under this

section, and

(

e) if a notice is given to the lessee pursuant to

section 14(2),

shall be included in or accompany that notice.

(6) If an application referred to in subsection (2)(

a) is granted by the

Minister or the lessee accepts the Minister's offer in accordance with the

offer notice, the Minister may approve the continuation of the lease as to

(

a) the potentially productive part of the location, or

(

b) a portion of the potentially productive part of the location

described in the offer notice, as determined by the Minister, if the

lessee's acceptance relates to less than the whole of the potentially

productive part of the location,

for a period of one year from the expiration of the term of the lease and

(7) Where an acceptance is made in response to an offer notice, an

approval of continuation granted pursuant to subsection (6) is effective as

of the expiration of the term of the lease.

(8) If a continuation approval is granted pursuant to subsection (6), the

lease expires with respect to the potentially productive part of the

location so continued at the end of the one-year period unless it is

approved for further continuation under

section 15 or 16 as a result of an

application referred to in subsection (9).

(9) Before a lease expires with respect to the potentially productive part

of the location at the end of the one-year period pursuant to subsection

(8), the lessee may apply for approval for the further continuation of the

lease pursuant to

section 15 or 16 as to all or any portion of the

potentially productive part of the location and for that purpose

section 14

applies, with the necessary changes, as though the expiration of the

one-year period were the expiration of the term of the lease.

Notice respecting non-productivity

18(1) The Minister may give a lessee written notice in accordance with

this

section if

(

a) the lease is continued pursuant to

section 15(1)(

a) or (

e) as

to all or any part of its location in a spacing unit and the Minister

considers that the deepest productive zone in the spacing unit is then no

longer productive,

(

b) the lease is continued pursuant to

section 15(1)(

b) as to all

or part of its location in a spacing unit and the deepest productive zone

in the spacing unit is then no longer subject to a unit agreement,

(

c) the lease is continued pursuant to

section 15(1)(

c) as to all

or part of its location in a Crown spacing unit and the freehold well

concerned has, for a continuous 6-month period, ceased to produce petroleum

or natural gas from the zone that is the same as the deepest productive

zone in the Crown spacing unit, and the Minister considers the zone in the

freehold spacing unit to be no longer productive, or

(

d) the lease is continued pursuant to

section 15(1)(

d) as to all

or part of the location in a spacing unit and the deepest productive zone

in the spacing unit is then no longer subject to a gas storage agreement.

(2) In this section, "subsurface portion", in relation to a location or

part of a location of a lease contained in a spacing unit referred to in a

notice given under this section, means the portion of the subsurface in

that spacing unit that lies stratigraphically between

(

a) the base of the zone specified in the notice and within that

spacing unit, and

(

b) the base of the deepest productive zone in that spacing unit.

(3) Subject to subsection (4), a notice under this

section shall relate to

(

a) the location or the part of the location contained in the

spacing unit referred to in subsection (1)(a), where the notice is given

pursuant to subsection (1)(a),

(

b) the location or the part of the location contained in the

spacing unit referred to in subsection (1)(b), where the notice is given

pursuant to subsection (1)(b),

(

c) the location or the part of the location contained in the Crown

spacing unit referred to in subsection (1)(c), where the notice is given

pursuant to subsection (1)(c), or

(

d) the location or the part of the location contained in the

spacing unit referred to in subsection (1)(d), where the notice is given

pursuant to subsection (1)(d).

(4) A notice under this

section may be confined to a subsurface portion of

the location or part of the location to which the notice relates by reason

of subsection (3).

(5) A notice under this

section shall state that, after the expiration of

one year following the date on which the notice is given, the lease will

expire as to the whole or part of the location to which the notice relates

or the subsurface portion to which the notice relates, as the case may be,

except to the extent that it is continued by reason of subsection (9).

(6) The Minister may from time to time extend the one-year period under a

notice given pursuant to subsection (1) if

(

a) the lessee applies for the extension before the expiration of

the one-year period or of the previous extension, as the case may be, and

(

b) the Minister considers the extension to be warranted in the

circumstances,

and, on the granting of the extension, a reference in subsection (8) or

(9) to a one-year period shall, in relation to the lease, be deemed to be a

reference to the extended period.

(7) The Minister may at any time withdraw a notice given under this

section

(

a) in its entirety,

(

b) with respect to one or more of the spacing units to which the

notice relates, or

(

c) with respect to all or part of the subsurface portion in one or

more of the spacing units to which the notice relates.

(8) If a notice is given to a lessee pursuant to this

section then,

subject to subsection (9), the lease expires at the end of the one-year

period referred to in the notice as to the whole or part of the location or

the subsurface portion, as the case may be, to which the notice relates.

(9) Before a lease expires in respect of all or part of its location or a

subsurface portion, as the case may be, at the end of the one-year period

pursuant to subsection (8), the lessee may apply for approval of the

continuation of the lease pursuant to

section 15 or 16 as to the location

or the part of the location or the subsurface portion, as the case may be,

or any lesser area or subsurface portion, and for that purpose

section 14

applies, with the necessary changes, as though the expiration of the

one-year period were the expiration of the term of the lease.

Offset Requirements

Interpretation of offset requirement provisions

19(1) In this

section and sections 20 to 23,

(a) "offset drilling obligation" means the requirements described

section 20(2)(

b) and contained in an offset notice;

(b) "offset notice" means a notice given pursuant to

section 20(1);

(c) "offset well" means a well required to be completed and put on

production by a lessee pursuant to an offset notice or allowed to be

completed and put on production by the lessee pursuant to

section 21(3)(d);

(d) "solution gas" means the gaseous component of petroleum that is

separated from crude oil after the recovery of the petroleum from a well;

(e) "3-month notice period", in relation to an offset notice, means

the 3-month period following the date of the notice and any extension of

that period granted under

section 21 of this Regulation or

section 8(1)(

g) of the Act.

(2) In this

section and sections 20 to 23, the

definitions of "natural

gas" and "petroleum" in

section 90(2) of the Act do not apply.

(3) Where a freehold spacing unit laterally adjoining a Crown spacing unit

has

(

a) a producing well completed in more than one zone, or

(b) 2 or more producing wells each completed in one or more zones,

an offset notice pertaining to that freehold spacing unit may relate to and

identify each of those zones and, in that case, references in this

section

and sections 20 to 23 to an offset zone shall be read as references to each

of those zones.

Offset notice

20(1) The Minister may give a notice to a lessee in accordance with this

section where

(

a) there is a producing well completed in a zone in a freehold

spacing unit laterally adjoining a Crown spacing unit containing all or

part of the location of the lessee's lease, and

(

b) there is no well producing petroleum or natural gas from the

same zone in the Crown spacing unit.

(2) An offset notice shall

(

a) identify the zone in the freehold spacing unit to which the

offset notice relates,

(

b) require the lessee to

(

i) drill a well to the offset zone in the Crown

spacing unit and determine whether or not that offset zone is productive,

and

(ii) if the offset zone in that Crown spacing unit is

productive, complete the well and commence the production of petroleum or

natural gas from that offset zone,

before the end of the 3-month notice period, and

(

c) describe the lessee's alternative course of action under

subsection (3)(

a) and the circumstances described in subsection (3)(

b) and

(

c) in which the lessee's offset drilling obligation need not be fulfilled.

(3) A lessee to whom an offset notice is given

(

a) may defer the lessee's offset drilling obligation by notifying

the Minister in writing, within the 3-month notice period, that the lessee

elects to pay offset compensation in accordance with sections 22 and 23;

(

b) need not fulfil the lessee's offset drilling obligation if,

within the 3-month notice period, the lessee surrenders the lease or the

part of the location of the lease within the Crown spacing unit, or

surrenders the lease with respect to the part of the location down to the

base of the offset zone in the Crown spacing unit, excepting

(

i) each zone in which a producing well is completed,

and

(ii) each zone that is subject to a unit agreement or a

gas storage agreement;

(

c) need not fulfil the lessee's offset drilling obligation if,

before the end of the 3-month notice period,

(

i) the freehold well is abandoned,

(ii) the freehold well is abandoned in the zone or zones

to which the offset notice relates,

(iii) the Board makes an order that reduces the size of

the spacing unit for the freehold well with the result that the reduced

spacing unit containing the freehold well no longer laterally adjoins the

Crown spacing unit, or

(iv) the offset zone underlying the location or part of

the location within the Crown spacing unit becomes subject to a unit

agreement or gas storage agreement.

(4) Where a lessee does not comply with an offset notice and the lessee's

offset drilling obligation is not deferred pursuant to subsection (3)(

a) or

need not be fulfilled by reason of subsection (3)(

b) or (c), the Minister

may, subject to subsection (5), cancel the lease with respect to the part

of the location of the lease down to the base of the offset zone within the

Crown spacing unit.

(5) The Minister may not cancel a lease under subsection (4) in respect of

any zones in the Crown spacing unit that, since the date of the notice,

either

(

a) produced petroleum or natural gas from a producing well, or

(

b) became subject to a unit agreement or a gas storage agreement.

(6) Where, after an offset notice is given, the Board makes an order that

has the effect of changing the area of the Crown spacing unit referred to

in the offset notice into smaller spacing units, the offset notice is

deemed to be amended to refer to the smaller Crown spacing unit or units

laterally adjoining the freehold spacing unit.

Review of offset notice

21(1) A lessee to whom an offset notice is given may apply to the Minister

for a review of the decision to give the notice, or of any requirement

contained in the offset notice, by filing the application with the Minister

within one month after the date of the notice.

(2) An application under this

section must show either

(

a) that the offset notice was not authorized by

section 20(1), or

(

b) the relief sought by the applicant under subsection (3)(b), (

c) or (

d) and the grounds on which the relief is sought.

(3) On concluding a review under this section, the Minister may

(

a) where the applicant claims that the giving of the offset notice

was not authorized by

section 20(1),

(

i) confirm the decision to give the offset notice, or

(ii) withdraw the offset notice,

(

b) withdraw the offset notice if the Minister is satisfied, on the

basis of the evidence provided by the applicant, that the withdrawal of the

offset notice is warranted in the circumstances,

(

c) extend the 3-month notice period where the Minister considers

the extension warranted in the circumstances,

(

d) consent to the fulfilment of the lessee's offset drilling

obligation by

(

i) completing an existing well in the offset zone in

the Crown spacing unit, and

(ii) commencing the production of petroleum or natural

gas from that offset zone,

before the end of the 3-month notice period,

(

e) consent to the fulfilment of the lessee's offset drilling

obligation by

(

i) drilling a well to the offset zone in a part of the

location other than in the Crown spacing unit and determining whether or

not the offset zone is productive, and

(ii) if the offset zone is productive, completing the

well and commencing the production of petroleum or natural gas from that

offset zone,

before the end of the 3-month notice period, or

(

f) consent to a surrender pursuant to

section 20(3)(

b) that

excepts a productive zone in addition to the excepted zones referred to in

section 20(3)(b)(

i) and (ii).

(4) A decision by the Minister under subsection (3) to withdraw an offset

notice does not preclude the Minister from giving another offset notice

relating to the same Crown spacing unit.

Liability to pay offset compensation

22(1) A lessee is liable to the Crown for the payment of offset

compensation if

(

a) the lessee is given an offset notice and notifies the Minister

in accordance with

section 20(3)(

a) of the lessee's election to pay offset

compensation, or

(

b) the Minister gives a notice to the lessee pursuant to

subsection (2) requiring the lessee to pay offset compensation.

(2) Where a lessee has fulfilled the lessee's offset drilling obligation

by completing and putting on production a well in the offset zone in the

Crown spacing unit, the Minister may give a notice to a lessee requiring

the lessee to pay offset compensation where

(

a) the offset well in the Crown spacing unit has not produced

petroleum or natural gas from the offset zone for a period of at least 3

consecutive months, or

(

b) the Minister is of the opinion that the production of petroleum

or natural gas from that well over a specified period is unduly or

unjustifiably less than the production of petroleum or natural gas from the

offset zone in the freehold spacing unit during the same period.

(3) A lessee to whom a notice is given pursuant to subsection (2) may

apply to the Minister, within the one-month period following the date of

the notice, for a review of the Minister's decision to give the notice and,

on concluding the review, the Minister may

(

a) confirm the decision,

(

b) withdraw the notice if the Minister, on the basis of the

evidence provided by the applicant, considers the withdrawal of the notice

warranted in the circumstances, or

(

c) specify a month later than the month specified in the notice

for the purposes of subsection (4)(b).

(4) The liability of a lessee to pay offset compensation commences with

(

a) the month following the month in which the 3-month notice

period expires, where the liability arises under subsection (1)(a), or

(

b) the month specified in the notice given to the lessee under

subsection (2), where the liability arises under subsection (1)(b).

(5) The liability of a lessee to pay offset compensation ends as of the

first day of the month in which any of the following dates occurs:

(

a) the date on which a well commences production of petroleum or

natural gas from the offset zone in the Crown spacing unit;

(

b) the date on which the Minister receives from the lessee a

surrender that is later accepted by the Minister and that surrenders

(

i) the lessee's lease or the part of the location of

the lease containing the Crown spacing unit, or

(ii) the part of the location of the lease within the

Crown spacing unit down to the base of the offset zone, excepting each zone

lying stratigraphically above the offset zone that is either productive or

is subject to a unit agreement or gas storage agreement;

(

c) the date specified by the Minister, where the freehold well

has, for a period of at least 6 consecutive months, ceased to produce

petroleum or natural gas, as the case may be, from the offset zone in the

freehold spacing unit if the Minister considers the offset zone to be no

longer productive;

(

d) the date on which the freehold well, according to the Board's

records, is abandoned in its entirety or in the offset zone;

(

e) the effective date of an order of the Board that reduces the

area of the spacing unit for the freehold well with the result that the

spacing unit for the freehold well no longer laterally adjoins the Crown

spacing unit;

(

f) the effective date on which the offset zone in the Crown

spacing unit becomes subject to a unit agreement or a gas storage

agreement;

(

g) the date on which the Minister receives an application under

subsection (6), if the application is approved.

(6) Notwithstanding subsection (3), the lessee may apply to the Minister,

at any time after the liability for offset compensation commences, to have

the lessee's liability terminated and, on considering the application and

the lessee's evidence, the Minister may direct that the liability be

terminated or may refuse to grant the application.

(7) If a Crown spacing unit laterally adjoins more than one freehold

spacing unit each of which contains a well producing petroleum or natural

gas from the same zone, the liability of a lessee to pay offset

compensation applies in respect of each of those freehold wells and for

that purpose a reference in this

section or

section 23 to a freehold well

shall, in relation to that Crown spacing unit, be read as referring to each

of those freehold wells.

Calculation and payment of offset compensation

23(1) Offset compensation payable by a lessee

(

a) for any month in the first 12-month period during which the

lessee's liability for offset compensation arises under

section 22(4) shall

be an amount equal to « of the value of the Crown's royalty share of

petroleum or natural gas, that would have been payable to the Crown if the

freehold well had instead produced the petroleum or natural gas during that

month from the offset zone in the Crown spacing unit,

(

b) for any month after the first 12-month period shall be an

amount equal to the value of the Crown's royalty share of petroleum or

natural gas that would have been payable to the Crown if the freehold well

had instead produced the petroleum or natural gas during that month from

the offset zone in the Crown spacing unit,

(

c) shall be reduced by the amount of any deductions allowed under

subsection (3), and

(

d) shall be paid in the manner and at the times prescribed by this

section.

(2) For the purposes of subsection (1)(

a) and (b),

(

a) the value of the Crown's royalty share of petroleum for any

month shall, in respect of crude oil, be calculated by using the new oil

par price prescribed for that month under the Petroleum Royalty Regulation

(AR 248/90), and

(

b) the value of the Crown's royalty share of natural gas and

solution gas for any month shall be calculated by using 80% of the Gas

Reference Price prescribed by the Minister pursuant to the Natural Gas

Royalty Regulation, 1994 (AR 351/93) for that month, with no deductions for

any costs or allowances incurred in gathering, processing or reprocessing.

(3) Where a lessee is liable for the payment of offset compensation in

respect of any month by reason of a notice given under

section 22(2), the

amount of the offset compensation for that month shall be reduced by the

following amounts:

(

a) the amount representing the value to the Crown, as determined

by the Alberta Petroleum Marketing Commission, of crude oil recovered from

the offset well and delivered to the Commission or its agent at a field

delivery point in that month;

(

b) the amount obtained by multiplying the quantity, in gigajoules,

of the Crown's royalty share of natural gas and solution gas recovered from

the offset well in that month by 80% of the Gas Reference Price for the

month.

(4) A lessee who is liable to pay offset compensation shall make each

payment to the Minister no later than 30 days after being sent an invoice

for the amount by the Minister.

(5) If a lessee, no later than 3 months after the date of the Minister's

invoice sent under subsection (4), provides proof satisfactory to the

Minister that the average price received in the month for crude oil

produced from the freehold well is less than the new oil par price referred

to in subsection (2)(a), the value of the Crown's royalty share of crude

oil shall be determined using the average price received in the month for

crude oil produced from the freehold well, instead of the new oil par price

referred to in subsection (2)(a).

PART 3

GENERAL

Withdrawal of Crown from unit agreement

24(1) In this section,

(a) "unit agreement" means a unit agreement as defined in the Act;

(b) "unit operations", in relation to a unit agreement, means any

operations or activities conducted for the purpose of producing petroleum

or natural gas pursuant to the unit agreement or any other operations or

activities conducted for the purpose of developing or exploiting petroleum

or natural gas pursuant to the unit agreement;

(c) "unit operator" means the person who is the unit operator under

a unit agreement according to the records of the Department.

(2) If no unit operati