British Columbia Ministry of Energy, Mines and Petroleum Resources BC Tenure Regulations CAPL October 19, 2010 October 19, 2010 Page 1

British Columbia Ministry of Energy, Mines and Petroleum Resources BC Tenure Regulations CAPL October 19, 2010 October 19, 2010 Page 1.

British Columbia Ministry of Energy, Mines and Petroleum Resources SEMINAR OUTLINE PART 1 Oil & Gas in British Columbia Legislation and Incentive Initiatives Clean Energy Act Oil and Gas Activities Act Royalty Credit Programs First Nations Engagement Relationships and Agreements Caribou Conservation and Habitat Protection Page 2.

British Columbia Ministry of Energy, Mines and Petroleum Resources SEMINAR OUTLINE (continued) PART 1 (continued) Community and Landowner Engagement Crown Sale and Referral Process Organizational Structure and Function Accomplishments and Initiatives PART 2 Tenure Resources for Tenure Managers Introduction to BCs tenure, land, and zone systems Permits Page 3.

British Columbia Ministry of Energy, Mines and Petroleum Resources SEMINAR OUTLINE (continued) PART 2 (continued) Drilling Licences Leases PART 3 Payments & Instruments e-Payments Transfers, Encumbrances, and Related Page 4.

British Columbia Ministry of Energy, Mines and Petroleum Resources Laurel Nash, Executive Director, Oil and Gas Titles Branch250-952-0335 POSTINGS, PETROLEUM TITLES ONLINE, WEBMASTER, MAPPING Chris Blaney, Manager, Crown Sale and GIS Services250-952-0344 PRE-SALE CONSULTATIONS, TENURE CAVEATS May Mah-Paulson, Director, Resource Development250-952-0709 GEOLOGY, ZONE DESIGNATION Dave Richardson, Manager, Geology 250-952-0359 DRILLING LICENCES, WORK PROGRAMS, PERMITS Terry Branscombe, Senior Tenure Management Advisor250-952-0340 DRILLING LICENCES, LEASE CONTINUATIONS Cindy Kocol, Tenure Management Advisor250-952-0342 DRILLING LICENCES, TRANSFERS, ENCUMBRANCES Christine McCarthy, Tenure Management Advisor250-952-0341 E-PAYMENTS, BCeID, PRE-AUTHORIZED DEBITS Carolyn Desjardins, Manager, Revenue Collection, Reconciliation and Reporting250-356-1059 GENERAL INQUIRIES250-952-0333 WWW: http://www.empr.gov.bc.ca/titles/[email protected] Key Contacts Page 5.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 6. OIL AND GAS IN BRITISH COLUMBIA

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 7. CURRENT MEMPR INITIATIVES

British Columbia Ministry of Energy, Mines and Petroleum Resources Clean Energy Act (2010) The Clean Energy Act, 2010, builds on the foundation of the BC Energy Plan and the Climate Action Plan Three policy goals: 1. Ensuring electricity self sufficiency at low rates; 2. Harnessing BCs clean power potential to create jobs in every region; and 3. Strengthening environmental stewardship and reducing greenhouse gases. Page 8.

British Columbia Ministry of Energy, Mines and Petroleum Resources BC Oil & Gas Activities Act (OGAA) OGAA passed in 2008; Became law October 4, 2010; See OGC website: http://www.ogc.gov.bc.ca/OGAA/ Page 9.

British Columbia Ministry of Energy, Mines and Petroleum Resources OGAA: Consolidation of legislation Tenure Admin. Explore & Develop Petroleum & Natural Gas Act Pipeline Act OGC Act Specified Enactment Powers OGAA Mediation and Arbitration Board changed to Surface Rights Board: www.surfacerightsboard.bc.ca The amended version of the P&NG Act is on the BC Laws website: http://www.bclaws.ca Page 10.

British Columbia Ministry of Energy, Mines and Petroleum Resources OGAA: Summary of Changes Modernized, consolidated regulatory framework; Flexibility & innovation; Enhanced C&E framework; Stakeholder input & comments; Protect/manage environmental values Formal review and appeal process Page 11.

British Columbia Ministry of Energy, Mines and Petroleum Resources OGAA: Summary of Changes Permitting: Consultation & notification OGC must consider Governments Environmental Objectives (GEOs) Review & appeal provisions Compliance history consideredActivities: Industry standards Results-based requirements Environmental protection & management Safety & security Page 12.

British Columbia Ministry of Energy, Mines and Petroleum Resources Targeted Royalty Programs What was the challenge?What was the solution? B.C. drilling activity very concentrated during winter months, when ground frozen Summer Royalty Credit Program Western Canada sedimentary basin deepens towards the West Deep Royalty Credit Program New, conventional wells with lower productivity Marginal Royalty Program Tight gas development Ultra-marginal (tight gas) Royalty Program Coalbed gas potential development challenges Coalbed Methane Royalty Program White spaces and areas with limited infrastructure (roads/pipes) available Infrastructure Royalty Credit Program Huge potential in new, remote, high-risk unconventional resources Net Profit Royalty Program Page 13.

British Columbia Ministry of Energy, Mines and Petroleum Resources How Can These Royalty Programs Help Develop Unconventional Resources? These programs can be combined in many cases, thus providing enough margin to move certain projects to economic territory. Example - a well that a road project (an infrastructure credit), is drilled in the summer, is deep, and is marginal can receive all the associated benefits for those programs. For more information: http://www.empr.gov.bc.ca/OG/oilandgas/royalties/Pag es/default.aspx Page 14.

British Columbia Ministry of Energy, Mines and Petroleum Resources Infrastructure Royalty Credit Program Oil and Gas Stimulus Package Infrastructure Royalty Credit Program (2010): Facilitates increased oil and gas exploration and production in under-developed areas and extends the drilling season to allow for year-round activity Issued a request for applications for road and pipeline projects in March 2010 In August 2010, $115.6 million in royalty credits were awarded to 16 companies for 21 natural gas and petroleum infrastructure projects Stimulus Package (August 2009): 4 royalty initiatives and 2 regulatory initiatives designed to address economic slowdown by generating new stimulus for drilling in B.C. Page 15.

British Columbia Ministry of Energy, Mines and Petroleum Resources Long Term Results: Becoming a Leader in North American Natural Gas Markets Second natural gas producer in Canada, after Alberta Increasing market share in Canada Potential to triple production as unconventional natural gas develops existing production 1 Tcf/year Page 16.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 17. FIRST NATION AND COMMUNITY ENGAGEMENT

British Columbia Ministry of Energy, Mines and Petroleum Resources First Nation Engagement Recent legal decisions confirm Aboriginal rights exist in B.C. Means consultation at a pre-tenure stage Aboriginal and Treaty rights are protected under section 35 of the Constitution Act 1998 Halfway (Metachia) decision confirmed government must consult Results in change in government policy dealing with First Nations and confirms need to consult at the tenures stage Page 18.

British Columbia Ministry of Energy, Mines and Petroleum Resources First Nation Engagement Assign caveats in the Notice of Public Tender that respond to First Nation comments "Oil and Gas Tenure 101" Presentations to Chief & Council and Lands Staff Responsive to First Nation comments Provide more detailed mapping and information for specific sites Meet to resolve area-specific issues Page 19.

British Columbia Ministry of Energy, Mines and Petroleum Resources New Relationship Significant steps taken by government to recognize and reconcile the gap between aboriginal people and other British Columbians Milestones reached: Improved Treaty process Reconciliation and Economic Benefit Agreement Revenue Sharing Agreements on Mine Projects Land Use Plans Language and culture preservation Support for aboriginal learners Improved health care and housing For further information visit: http://www.gov.bc.ca/themes/new_relationship.html Page 20.

British Columbia Ministry of Energy, Mines and Petroleum Resources Treaty 8 Treaty originally signed in 1899 For further information visit: http://www.ainc-inac.gc.ca/al/hts/tgu/pubs/t8/trty8- eng.asp#chp4 Page 21.

British Columbia Ministry of Energy, Mines and Petroleum Resources Economic Benefits Agreement Outlines obligations of British Columbia Outlines when benefits are paid to a band Outlines dispute resolution procedures Outlines obligations of Treaty 8 First Nations Doig River Prophet River West Moberly EBA enables resource management agreements; more specifically, the Long Term Oil and Gas Agreement. For further information visit: http://www.gov.bc.ca/arr/treaty/key/down/treaty_8_eba.pdf Page 22.

British Columbia Ministry of Energy, Mines and Petroleum Resources T8-BC Long Term Oil and Gas Agreement (LTOGA) The Ministry and the OGC signed a completed LTOGA with BC-based Treaty 8 First Nations in the Spring of 2009. LTOGA is separate from the OGCs Consultation Process Agreements The main categories of the agreement are the Crown land disposition process, emergency response management, compliance and enforcement, reclamation, collaborative projects and commitment to ongoing communication and educational opportunities. The LTOGA will be administered by an Implementation Committee that will find efficiencies by working with the CPA Implementation Committee Page 23.

British Columbia Ministry of Energy, Mines and Petroleum Resources T8-BC Long Term Oil and Gas Agreement (LTOGA): Industry Engagement During negotiations, the Ministry/OGC and Treaty 8 had a series of workshops with First Nation and Industry participation (including CAPL and CAPP representatives). A December 2008 workshop focused on identifying issues and collaborative solutions in the tenuring process. The negotiation teams used the ideas and input from the workshops in drafting the Agreement. In September 2009 the Ministry/OGC and Treaty 8 held a follow up workshop that focused on how First Nation related terms and conditions could be made more clear and transparent for First Nations, industry and Government. The Parties will continue to engage with Industry in the implementation of the Agreement. Page 24.

British Columbia Ministry of Energy, Mines and Petroleum Resources Fort Nelson First Nation Fort Nelson First Nation (FNFN) were an original signatory to the Treaty 8 Economic Benefit Agreement (EBA) and participant in the negotiation of the Collaborative Management Agreements, including the Long Term Oil and Gas Agreement. In April of 2009, FNFN voted to withdraw from the Treaty 8 EBA in favour of pursuing solutions outside of the Treaty 8 EBA framework. The Ministry and the OGC are currently working with the leadership of FNFN and the Horn River Producers Group with regard to their interests and concerns. Page 25.

British Columbia Ministry of Energy, Mines and Petroleum Resources Treaty 8 Consultation Process Agreements Treaty 8 Consultation Process Agreements (CPA) are due to expire March 31, 2011. The CPA Implementation Committee is currently undertaking a review to prepare for the renewal of these agreements. Implementation Committee is composed of Treaty 8 land managers and representatives from the OGC and MEMPR. Page 26.

British Columbia Ministry of Energy, Mines and Petroleum Resources Caribou Conservation and Habitat Protection Northeastern BC encompasses the western extent of boreal caribou in Canada, which are listed as threatened and Priority 1 species for action under the BC Conservation Framework. 500,000 hectares of boreal caribou habitat have been set aside as resource review areas (RRAs) where no natural gas and petroleum tenure requests will be accepted for 5 years. The RRAs will be revisited after five years when the effectiveness of caribou population management measures and population assessments are better understood. Government will collaborate on this step with First Nations, industry and stakeholders. Key aspects of Boreal Caribou management and recovery will be formalized and enabled through the implementation of the Oil and Gas Activity Act (OGAA) Environmental Protection and Management Regulation. Page 27.

British Columbia Ministry of Energy, Mines and Petroleum Resources Resource Review Areas (RRAs) Source: http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-10-10.aspx Page 28.

British Columbia Ministry of Energy, Mines and Petroleum Resources Community Engagement Page 29.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 30. Northeast Energy and Mines Advisory Committee - NEEMAC NEEMAC was established in 2006 to facilitate community engagement in relation to energy, mining and petroleum issues 2008 achievements: Landowner Notification Program Oil and Gas Activities Act input Coordination Agreement between OGC and Mediation and Arbitration Board Creation of Regional Executive Director position in NE British Columbia Subcommittee consisting of industry, landowners and govt., working on a Standard Surface Lease Agreement for private landowners to be included as part of LON Program For further information on NEEMAC visit: http://www.empr.gov.bc.ca/MACR/CommunityRelations/Pages/NEEM AC.aspx

British Columbia Ministry of Energy, Mines and Petroleum Resources Landowner Notification Program initiated in April 2008 Landowner Notification Program provides landowners with: information about oil and gas exploration and development, and opportunity to provide companies surface feature information. The highest bidder is provided checklist(s) with Landowner comments For further information visit: http://www.landownernotification.gov.bc.ca/ Page 31.

British Columbia Ministry of Energy, Mines and Petroleum Resources Standard Surface Lease (Voluntary) Negotiated 2007-08: CAPL, SEPAC, CAPP together with MEMPR and Land Owner groups Final Version Completed with organizational commitment: September, 2009 Included in BC Landowner Notification materials: October 2009 Page 32.

British Columbia Ministry of Energy, Mines and Petroleum Resources Surface Lease Agreement - Affirmation A surface lease between landowners and industry members is an agreement between parties, and may need to be tailored to address the specific concerns of each party. The Canadian Association of Petroleum Producers encourages its members to use appropriate clauses of the sample agreement to enter into site specific agreements. The only exception to this is clause 4. These provisions are required by the provisions of B.C. Reg.497/74 and, as such, must form a part of every surface lease in British Columbia. Page 33.

British Columbia Ministry of Energy, Mines and Petroleum Resources Farmers Advocate Office opened October 1, 2010, funded by Peace River Reg. Dist. & MEMPR Based in Dawson Creek, B.C. Provide a no-fee information service to NE B.C. rural landowners related to oil and gas development: Disseminating information Resolving problems Emphasizing facilitation and negotiation An independent, effective gateway to existing organizations For further information visit: www.farmersadvocate.ca Page 34.

British Columbia Ministry of Energy, Mines and Petroleum Resources ACQUIRING OIL AND GAS TENURE IN B.C. Page 35.

British Columbia Ministry of Energy, Mines and Petroleum Resources Subsurface Ownership Page 36. Two forms of subsurface ownership: Crown: MEMPR issues Crown-owned subsurface tenures and consults on all of these requested issuances Freehold: There are cases where subsurface is freehold and owned by the private parties. These may be for all rights or specific rights e.g. coal, phosphate and PNG OGC regulates all industry activity, whether Crown or freehold

British Columbia Ministry of Energy, Mines and Petroleum Resources Oil & Gas Tenure Page 37. Tenure does provide : exclusive rights to the subsurface resource right to apply to the Oil and Gas Commission (OGC) for activities approval Tenure does not provide: the authority to conduct any activities on lands (e.g. drilling)

British Columbia Ministry of Energy, Mines and Petroleum Resources Sale Process Monthly auctions of tenure Industry nominates parcels for each auction Internal review Proposed parcels referred to First Nations, local governments and Provincial agencies If parcel accepted for sale posting, then caveats added to proposed tenure Proposed tenure is advertised seven weeks prior to sale date Interested parties submit sealed bids If sold (bids not always accepted), highest cash offer Page 38.

British Columbia Ministry of Energy, Mines and Petroleum Resources Internal Review and Process Distribute Referrals First Nations Provincial Ministries Local/Regional Governments Returns Compiled for Analysis Monthly Rights Auction Notice of Public Tender Posting Requests Determine Crown PNG Rights Oil and Gas Posting Request and Sale Process Page 39. Landowner Notification 12 sales per year 106-day process

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 40. Posting Request Pre-tenure process is initiated by posting requests by industry for PNG rights Companies request parcels for each sale, which includes the following information: Specific formations(s) requested Parcel configuration if more than one parcel is requested Companies do not provide information on what development will take place or what resource they are targeting

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 41. Internal Review and Process Parcels are reviewed to identify if MEMPR is able and willing to send parcels out for review The Oil and Gas Commission (OGC) participates in this internal review process For example: Are the parcels configured correctly (i.e., on spacing area) Are the rights available Do the parcels overlap: Previously deferred parcel Land use planning areas (PMT) Areas which require Pre-Tenure Plan (MK)

British Columbia Ministry of Energy, Mines and Petroleum Resources Referral Process First Nations, local governments, and Crown Agencies are sent referral packages. MEMPR encourages FN to provide: Site-specific information when available: Gravesites, cabins, campsites, etc., and What current treaty activities are taking place, on what species and when these activities are occurring Page 42.

British Columbia Ministry of Energy, Mines and Petroleum Resources Referral Comments Comments requested within four weeks Comments generally focus on high level access management issues, do include some site specific information Comments are assessed to determine next steps: Proceed to disposition Not to proceed for disposition Further consultation/research Page 43.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 44. Referral Comments Provincial Ministries First Nations Local/Regional Governments Review parcels for conflict with: Official Community Plans residential areas drinking water supply areas Review parcels for conflict with: reserves sacred areas/ burial grounds hunting sites traditional use sites Review parcels for conflict with: wildlife habitats other tenure holders (e.g. grazing, forest, coal)

British Columbia Ministry of Energy, Mines and Petroleum Resources Caveats Created Where appropriate, comments are used to assign caveats to reflect issues or concerns that should be considered prior to development. Caveats identify high level issues which: The OGC should be aware of at the activity stage Proponents should be aware of when acquiring tenure Identify that potential mitigation strategies may be required at the activity stage Page 45.

British Columbia Ministry of Energy, Mines and Petroleum Resources Caveat Examples Page 46. Caveats near First Nation areas (examples) X FIRST NATION HAS REQUESTED ENGAGEMENT PRIOR TO ON-THE-GROUND ACTIVITIES. TRADITIONAL USE, ARCHAEOLOGICAL, OR WILDLIFE ASSESSMENTS AND MITIGATION PLANS MAY BE REQUESTED PRIOR TO ON-THE-GROUND ACTIVITIES. PARCEL OVERLAPS TRAPLINE REGISTERED TO FIRST NATION COMMUNITY MEMBER

British Columbia Ministry of Energy, Mines and Petroleum Resources Caveat Examples Page 47. Caveat near community/residential area (example) PARCEL CONTAINS OR IS NEAR RESIDENTIAL DEVELOPMENTS. THE OIL AND GAS COMMISSION PUBLIC ENGAGEMENT AND DISPUTE RESOLUTION MANAGER RECOMMENDS THAT OPERATORS CONSIDER REDUCING OR ELIMINATING FLARING, AND MANAGE NOISE AS PER BC NOISE CONTROL BEST PRACTICES GUIDELINES.

British Columbia Ministry of Energy, Mines and Petroleum Resources Caveat Examples Page 48. Caveats in the Horn River (examples). PARCEL IS LOCATED WITHIN HORN RIVER, MONTNEY OR CORDOVA EMBAYMENT BOUNDARIES IN WHICH SHALE GAS RECOVERY AND TECHNOLOGY IS ANTICIPATED; PARTICIPATION IN A WATER OR ACCESS PLANNING PROCESS WITH OTHER TENURE HOLDERS MAY BE REQUIRED TO COORDINATE ACTIVITIES, EXPLORATION AND DEVELOPMENT.

British Columbia Ministry of Energy, Mines and Petroleum Resources Enhanced Collaboration with the OGC We have been working with the OGC to look for opportunities to better link the MEMPR pre-tenure referral process with that of the OGC activity application referral process MEMPR assigns caveats to individual tenure parcels based on comments received through the referral process and internal analysis; this includes discussions with the OGC to ensure there is a common understanding of the intent of the assigned caveats At the activity application stage, the OGC reviews caveats assigned to the relevant PNG tenure Page 49.

British Columbia Ministry of Energy, Mines and Petroleum Resources Notice of Public Tender Prepare full parcel description for publication. Page 50.

British Columbia Ministry of Energy, Mines and Petroleum Resources Landowner Notification The Landowner Notification packages are sent out six weeks prior to the monthly rights sale by Public Auction. Package includes: Cover/information letter Oil and Gas and You Booklet Property Checklist Standard Surface Lease Agreement Map Completed property checklists are sent by the Ministry to the company that successfully acquires tenure this information is intended to assist companies to engage landowners and plan development Page 51.

British Columbia Ministry of Energy, Mines and Petroleum Resources Monthly Disposition Interested parties submit sealed bids Parcel awarded to top bidder if considered fair value Page 52.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 53. Sale Process Schedule - 2011 Source: http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-10-13.aspx Disposition DateClosing Date for Postings Withdraw,Postpone, Revise Deadline Date Notice of Public Tender Published NB or NAB Closing Date January 19, 2011October 5, 2010November 17, 2010December 2, 2010January 25, 2011 February 23, 2011November 9, 2010December 22, 2010January 6, 2011March 1, 2011 March 30, 2011December 14, 2010January 26, 2011February 10, 2011April 5, 2011 April 27, 2011January 11, 2011February 23, 2011March 10, 2011May 3, 2011 May 25, 2011February 8, 2011March 23, 2011April 7, 2011May 31, 2011 June 22, 2011March 8, 2011April 20, 2011May 5, 2011June 28, 2011 July 20, 2011April 5, 2011May 18, 2011June 2, 2011July 26, 2011 August 17, 2011May 3, 2011June 15, 2011June 30, 2011August 23, 2011 September 14, 2011May 31, 2011July 13, 2011July 28, 2011September 20, 2011 October 12, 2011June 28, 2011August 10, 2011August 25, 2011October 18, 2011 November 9, 2011July 26, 2011September 7, 2011September 22, 2011November 15, 2011 December 14, 2011August 30, 2011October 12, 2011October 27, 2011December 20, 2011

British Columbia Ministry of Energy, Mines and Petroleum Resources Crown Sales-Adjudication Province reserves the right to reject any or all bids Bid adjudication based on a technical review of: Area geology Historic prices Current bidding trends Economic climate For bids not accepted, comment in results posting will be No bid or No acceptable bid Page 54.

British Columbia Ministry of Energy, Mines and Petroleum Resources Improvements/ Initiatives Longer timeline: from 99 days to 106 days Enhanced collaboration with the OGC Increased communication/response to local government staff and First Nation land staff with regards to comments provided Increased communication with industry on expectations quarterly meetings Enhanced maps to assist local government staff and First Nation land staff in the review of the parcels Page 55.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 56. TITLES BRANCH

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 57. Ministry Structure Deputy Minister Ministry of Energy, Mines and Petroleum Resources Assistant Deputy Minister Titles, Aboriginal and Corporate Relations Division Assistant Deputy Minister Oil and Gas Division Assistant Deputy Minister Mining and Minerals Division Assistant Deputy Minister Electricity and Alternative Energy Division

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 58. Titles, Aboriginal & Corporate Relations Division Structure

British Columbia Ministry of Energy, Mines and Petroleum Resources Titles Branch Structure Page 59.

British Columbia Ministry of Energy, Mines and Petroleum Resources Titles Branch Functions Subsurface Tenuring Tenure dispositions (sales) Creation/maintenance of geological zone descriptions Land access restrictions (caveats): Client and stakeholder engagement First Nation and Community engagement Land Owner Notification Program Mapping: First Nation consultation Land Access/Land Use Resource Development Geology Special Requests Title Administration: Fees, rentals & drilling deposits Renewals, continuations, extensions Tenure conversions Cancellations Splits, transfers & encumbrances Creation/evaluation of policy and legislation re oil, gas, mineral and geothermal resources Review and update PNG Act and Regulations, Mineral Tenure Act and Regulations and Geothermal Resources Act and Regulations Page 60.

British Columbia Ministry of Energy, Mines and Petroleum Resources Resource Development First Nations and Community Engagement Lead Referral process for land sales Daily client and stakeholder engagement First Nation and Community Engagement LTOGA EBAs Official community plans Landowner Notification Program Geothermal Referral Process Coal Referral Process Links - Oil and Gas Division - Electricity and Alternative Energy Division - Aboriginal Relations Division - Oil & Gas Commission - Other agencies/levels of Government Page 61.

British Columbia Ministry of Energy, Mines and Petroleum Resources Resource Development Crown Sales and GIS Services Responsible for principle phase of Crown Sale Management Program Daily client/stakeholder engagement Mapping Offered parcels shapefiles are being posted to website as of January 2010. Ad Hoc Mapping Requests in Support of: First Nation Consultation Land access/Land use Resource Development Geology Special requests Minister Public Affairs Forecasting for Crown sales Page 62.

British Columbia Ministry of Energy, Mines and Petroleum Resources Policy and Planning Policy Review and update: PNG Act and Regulations Geothermal Act and Regulations Review and develop policy and procedures Responding to Energy Plan policy actions Updating information letters Oil and Gas Tenure 101 Geothermal Tenure 101 Links - Compliance and Administration Branch - Corporate Policy & Planning Branch - Oil and Gas Division - Alternative Energy Division - Oil and Gas Commission - Other agencies/levels of Government Page 63.

British Columbia Ministry of Energy, Mines and Petroleum Resources Policy & Planning Tenure Management Maintenance of Provincial oil and gas titles registry PTS (Petroleum Titles System is web-based application to provide direct access to Crown oil & gas titles) Daily client and stakeholder engagement : Legislation and Regulations: Review PNG Act and Regulations. E-business Ownership changes Lease continuations Conversions Permits DLs Industry training sessions CAPL Seminar Oct. 19/10 Links - Compliance and Administration Branch - Oil and Gas Commission - Oil and Gas Division Page 64.

British Columbia Ministry of Energy, Mines and Petroleum Resources GeologyGeology Creation and maintenance of system of geological zone descriptions that divide B.C. into packages which can be issued in the form of Crown PNG title Evaluates and make decisions on title continuation and maintenance Participates in creation/evaluation of policy and legislation re oil, gas, and geothermal resources Puts in place definitions that can be used in special agreements for development of unconventional gas Contributes expert advice to Ministry departments that promote development of unconventional gas Daily client and stakeholder engagement Continuations Backlog In past 6 months have reduced 6-month backlog to 45- 60 days All continuations now working on a 60-day turnaround, which is the period of application specified in the PNG Act Land Plats to be published to industry and commercial vendors Co-op bridging program, training for succession Links - Oil and Gas Division - Oil and Gas Commission - Electricity and Alternative Energy Division Page 65.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 66. TITLES ACCOMPLISHMENTS

British Columbia Ministry of Energy, Mines and Petroleum Resources AccomplishmentsAccomplishments POLICY & LEGISLATION Development of the Oil and Gas Activities Act (OGAA) Provides a streamlined and simplified regulatory framework consolidation of the Petroleum and Natural Gas Act, Oil and Gas Commission Act and Pipeline Act. Establishment of a Northern Caribou Management Strategy Established Resource Review Areas (RRAs) in a portion of the remaining untenured areas across B.C.s northern caribou range. Planning for the Management of Boreal Caribou Established Resource Review Areas (RRAs) in untenured areas across B.C.s boreal caribou range, accounting for 500,000 hectares. Identification of boreal caribou habitat for management under the OGAA. Developing mitigation practices with First Nations and industry. Review and amendment of the Drilling Licence Regulation (2009) Re-emphasized Drilling Licenses (DL) as an exploration tenure. Linked risk to reward through redefinition of earning wells and small DL grouping rules. Page 67.TITLES2010 Business AreaRecent Accomplishments

British Columbia Ministry of Energy, Mines and Petroleum Resources AccomplishmentsAccomplishments CROWN SALES & GIS SERVICES The June 2010 natural gas and petroleum rights sale was the fifth largest on record for B.C., contributing over $404 million in bonus bids to the calendar year total of over $609 million. Crown Sale Performance (calendar year) Page 68.TITLES2010 Business AreaRecent Accomplishments 20092010 (to July) # of hectares disposed 389,146281,830 Total tender bonus $892,956,403.79$662,457,744.35 Average price per hectare $2,294$2,350.56

British Columbia Ministry of Energy, Mines and Petroleum Resources AccomplishmentsAccomplishments Page 69. TITLES2010 Business AreaRecent Accomplishments RESOURCE DEVELOPMENT Completed improvements to Landowner Notification (LON) Program as per 2009 formal review. Key changes include: Notification packages revised for improved readability; Creation of automated map process; Installation of direct phone line in Titles Branch specific to LON; Follow-up phone calls with landowners initiated for each disposition; Improved data and information tracking. Improved communication and working relationship with the Oil and Gas Commission (OGC) with regards to parcel conditions/caveats. Engagement with the Ministry of Environment on streamlining the referral process for caribou habitat. Improvements to referral process with First Nations.

British Columbia Ministry of Energy, Mines and Petroleum Resources AccomplishmentsAccomplishments Page 70. TITLES2010 Business AreaRecent Accomplishments GEOLOGY Cleared the Land Plat publication backlog of more than two years. Land Plats will soon be available from Crown Publications. COMPLIANCE & ADMINISTRATION Development of IPS (Integrated Petroleum System) software, a newly integrated system designed to replace and/or streamline current software systems, including Petroleum Titles System (PTS), Petroleum Accounts Receivable System (PARS), and Sales Parcel System (SPS) design phase completed; development phase to be completed by August 31, 2011. GEOTHERMAL RESOURCES Initiated a pre-tenure referral process with First Nations, local governments, and provincial agencies for four areas of industry interest June 2009. Hosted a Crown sale for geothermal exploration rights in March 2010 for one referred area and issued a geothermal permit near Knight Inlet (central coast). Seven additional parcels sent out for pre-tenure referral June 2010. Next auction for geothermal rights expected for fall 2010.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 71. CURRENT INITIATIVES

British Columbia Ministry of Energy, Mines and Petroleum Resources Current Initiatives eBusiness Industry Engagement Lands Plats - used to continue Lease tenure are drafted and current. Queens Printer will distribute after a survey of company interest is completed by the Industry-Government Tenure Working Group. Geothermal tenure disposition Other priority initiatives are: Review of Mineral Tenure Act and regulations Review of Geothermal Resources Act Review of PNG Act and Regulations Review of PNG referral process Implementation of coal referral process Implementation of zone-specific retention Page 72.

British Columbia Ministry of Energy, Mines and Petroleum Resources eBusiness Update Integrated Petroleum System (iPS) will transition 3 legacy applications to current technology Application delivery and integration testing is scheduled to be complete in Sept 2011 UAT is scheduled for Oct 2011 Industry will have an opportunity to participate as it relates to eBidding Production launch including eBidding is Nov 2011 ePayments Submissions issues are, for the most part, resolved. Still dealing with some company specific items Automated emails will be enhanced to provide clarity for clients Some issues remain associated with refunds Page 73.

British Columbia Ministry of Energy, Mines and Petroleum Resources Industry Engagement Since May 2008, a working group has been established between industry and govt. that meets on a quarterly basis to discuss: Improved communication Legislation and Regulations Opportunities to work more efficiently and effectively Educational opportunities eBusiness Developed Shared Principles to help guide discussions around policy, legislation and regulation changes Used the Shared Principles to guide the discussions on the Drilling Licence Regulation amendments Page 74.

British Columbia Ministry of Energy, Mines and Petroleum Resources Shared Principles Ensuring the Crown, as the resource owner, receives an equitable share of economic rent (including all revenue streams). Ensuring Industry receives an economically commensurate reward and recognition for risks taken ("risk/reward"). Recognizing close linkages to environmental footprint and stakeholder considerations. Recognizing close linkage to First Nations considerations. Recognize the relationship and responsibility Industry and MEMPR have to the people of BC. Viewing tenure as an element in a continuum of the exploration and development process, rather than as a discrete compartment. Recognizing the close integration of tenure with the broader regulatory and royalty regimes. Creating and maintaining a fair, efficient, effective and transparent process for management of tenure across the province. Maintaining flexibility to address custom solutions for specific emerging play types and developing technologies. Page 75.

British Columbia Ministry of Energy, Mines and Petroleum Resources Review of PNG Act & Regulations The Petroleum and Natural Gas Act (PNG Act) has not had an overall review since the late 1980s A comprehensive review of the PNG Act is required to ensure it is responsive to both conventional and unconventional gas development and responds to government direction. Ministry/Industry working group has identified priorities for further discussion Legislation (PNGA) Expansion of Director of Petroleum Lands discretionary power Lease term lengths Fees & rentalsRegulation Tenuring process Rental rates for all tenure types Page 76.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 77. THANK YOU! Laurel Nash Executive Lead Titles Branch

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 78. PART 2 Tenure

British Columbia Ministry of Energy, Mines and Petroleum Resources Tenure Management Resources Available Information Information Letters Referral Maps, Sales Notices, Results Notices Other Publications Subscriptions by e-mail Tools PTS Web PTO: online Postings and Mapping ePayments Page 79.

British Columbia Ministry of Energy, Mines and Petroleum Resources Online Tools Titles Home Page 80. Subscription Services (e-mail) Posting Maps Sale Notices Sale Results Info Letters Acts & Regs Publications PTO & PTS Web ePayments

British Columbia Ministry of Energy, Mines and Petroleum Resources Online Resources Petroleum Titles Online (PTO) http://www.ptonline.gov.bc.ca [email protected] ePayments https://epayments.gov.bc.ca [email protected] PTS Web From PTO home, click Title Searches (PTS Web) link [email protected] Page 81.

British Columbia Ministry of Energy, Mines and Petroleum Resources Title Documents Page 82.

British Columbia Ministry of Energy, Mines and Petroleum Resources TITLE: DL 77777 - DRILLING LICENCE DESCRIPTION AMENDMENT DATE : 2006-OCT-24 AMENDED DESCRIPTION ------------------- TRACT 1 -------- NTS 094-P-10 BLK A UNITS 94 95 NTS 094-P-10 BLK H UNITS 4 5 INC : PETROLEUM AND NATURAL GAS DOWN TO BASE OF 20002 JEAN MARIE ZONE 20002 JEAN MARIE ZONE DEFINED IN THE INTERVAL 4140.2'-4222.7' ON THE BHC SONIC LOG OF THE WELL W.A. 3752 A-85-G/94-P-07. NO FURTHER TRACTS CONTAINING 260 HECTARES DATED AT VICTORIA, BRITISH COLUMBIA 2006-OCT-24 ------------------------------ THE DIRECTOR, ON BEHALF OF THE MINISTER OF ENERGY, MINES AND PETROLEUM RESOURCES Description Amendments

British Columbia Ministry of Energy, Mines and Petroleum Resources Acts and Regulations Petroleum and Natural Gas Act Grid Regulation Drilling Licence Regulation Fee, Rental and Work Requirement Regulation Storage Reservoir Regulation Page 84.

British Columbia Ministry of Energy, Mines and Petroleum Resources Tenure Management Things to Manage Land Zones Fluids Size Ownership Page 85. + Time

British Columbia Ministry of Energy, Mines and Petroleum Resources Land Survey Systems Dominion Land Survey (DLS) Petroleum Grid (NTS) Page 86.

British Columbia Ministry of Energy, Mines and Petroleum Resources DLS PNG Grid Regulation Schedule 1 Familiar divisions: LSD Section Township Range Meridian But in B.C Legal Areas (for rent) defined by published map Peace River Block Gas Spacing Units and Hectarage Map Peace River Block TWPs 76 - 88 RGEs 13 26 W6M Page 87.

British Columbia Ministry of Energy, Mines and Petroleum Resources DLS Page 88.

British Columbia Ministry of Energy, Mines and Petroleum Resources Petroleum Grid (NTS) PNG Grid Regulation Schedule 3 Applies everywhere the DLS does not Based on longitude and latitude Sub-divisions achieve oil and gas spacing areas similar in size to DLS Areas taken from lookup tables Also for geothermal and coal tenures Page 89.

British Columbia Ministry of Energy, Mines and Petroleum Resources Petroleum Grid (NTS) Page 90. 8 long. 4 lat.

British Columbia Ministry of Energy, Mines and Petroleum Resources Petroleum Grid (NTS) Page 91. Well location example: d-010-A/094-H-16 Title description example: 094-H-16 Blk A Unit 10

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 92. Normal Spacing NTS

British Columbia Ministry of Energy, Mines and Petroleum Resources Other-than-Normal Spacing Drilling and Production Regulation Administered and declared by the OGC Generally larger than normal spacing areas Some are already declared Peace River Block Petroleum Grid BC YT, NWT, AB boundaries BC USA Protected Areas 1 OTN gas spacing = 1 gas spacing for calculating earnings from Drilling LicencesAlternatives Good Engineering Practice (GEP) Page 93.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 94. Other-than-Normal Spacing

British Columbia Ministry of Energy, Mines and Petroleum Resources Decoding Wells Well Authorizations (WA) Simple 5-digit number assigned to each well license the OGC issues Well Names Consists of: Operator, (HZ), Field, Surface Location, (Exceptions) DLS sample: BRC HTR BRASSEY 02-04-077-19, A02-04-077-19 NTS sample: ECAOG HZ SPRUCE b-013-D/094-I-16, b-A013-D/094-I-16 Unique Well Identifiers (UWI) A 16-digit well identifier issued at spud New UWIs added for subsequent drilling and completion events DLS: 102041308617W603 NTS: 200D024H094H1604 Digit 1: DLS or NTS Digits 2-3: surface event sequence; see exceptions in well names Digits 4-14: Approved or actual bottom-hole location Digits 15-16: drilling or completion event sequence First completion event in a drilling event gets same UWI as its drilling event Page 97.

British Columbia Ministry of Energy, Mines and Petroleum Resources BCs PNG Zone System Page 98. Zones are packages of one or more formations Defined by specific intervals on reference well logs Zone boundaries are carefully selected to avoid disputes; widespread markers in non- productive strata 5-digit code and (often hyphenated) zone names 34002 Artex-Halfway-Doig 33012 Montney (excluding Basal Lag) 15401 Muskwa-Otter Park-Klua-Evie Zone code and name Digits 1-3: relative stratigraphic position Digits 4-5: geographic identifier Numbers increase from bottom to top Download from Other Publications page

British Columbia Ministry of Energy, Mines and Petroleum Resources Zone? Pool? Formation? Page 99. Zones are geographically constrained packages of one or more geological formations Pools are instances of specific formations Land plats depict eligible spacing areas within specific formations and tenure areas Leases Prove a formation; continue a zone Drilling Licences Evaluate a formation; earn a zone (maybe) Rights usually described in relation to a zone base, e.g.: PNG Down to Base 36002 (from surface) NG In 36002 PET From Base 38001 To Base 36002 PNG Below Base 36002

British Columbia Ministry of Energy, Mines and Petroleum Resources Tenure Size (hectares) All tenure rentals are based on area, measured in whole hectares Petroleum Grid (NTS) Unit NTS Unit Areas (download) Crown Publications map GM15 For NWT/YT and other boundary areas, call us Peace River Block (DLS) Crown Publications map GM14 (2 sheets) Includes size of fractional spacing's on NTS/DLS boundary Depicts lands in other-than-normal spacing areas Regardless of source, calculate area the same Sum individual unit areas in title, keep intermediate fractions Round sum to nearest whole hectare Page 100.

British Columbia Ministry of Energy, Mines and Petroleum Resources Tenure Size NTS Usage; find the area of units 42-47 of Block E in 094-H-06 Map94 EFGH Sheet5 to 8 BlockE F G H Unit41-50 Page 101. Total: 6 X 69.8 or 418.8 ha.

British Columbia Ministry of Energy, Mines and Petroleum Resources Tenure Size DLS Page 102. Fractional spacing areas are predefined Whole spacing areas are defined or inferred Usage; find the area inside the OTN GSA and sec 8-88-25 OTN: 19.0 + 21.4 + 39.7 + 38.0 + 66.0 + 66.0 or 250.1 ha. Sec 8-88-25: 263.9 Total: 514.0 ha.

British Columbia Ministry of Energy, Mines and Petroleum Resources Permits

British Columbia Ministry of Energy, Mines and Petroleum Resources Main Features A right to explore for oil and gas Available only by Crown sale Postings up to one NTS block accepted, with cause Requires annual exploration spending Actual exploration or cash-in-lieu payments One year initial term; renewable from 4 to 7 times Permit Class Determines work requirements, rent, and renewal options Class B most likely Page 104.

British Columbia Ministry of Energy, Mines and Petroleum Resources Permit Renewals Four to seven renewals (Class B) Annual application required to renew 3 ways to obtain renewal approval By affidavit of expenditures for work done By cash-in-lieu of work not done By refundable deposit and work commitment May surrender all or part of a Permit at renewal Payment of applicable rent, fees, deposits, and penalties within 60 days after expiry Page 105.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 106. Permits - Rent and Work Requirements

British Columbia Ministry of Energy, Mines and Petroleum Resources Permits Lease Selection Fifth year work requirement must be met (Class B) Up to 50% of the Permit area is convertible Leases must be configured, where possible, with 4 sides in 1 of 6 shapes defined by NTS units, and Shapes must coincide with gas spacing areas Leases must corner other leases, or be separated by at least 2 NTS units Exceptions made to reach 50% of Permit area No splitting of gas spacing areas Exceptions are available where Permit shape or location prevents 50% rule, but in no case will any one Lease exceed 9 GSUs Page 107.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 108. Permits Lease Selection Available lease configuration options, i.e., shapes Exceptions may be considered if 50% rule cannot be met with these configurations

British Columbia Ministry of Energy, Mines and Petroleum Resources Drilling Licences

British Columbia Ministry of Energy, Mines and Petroleum Resources Main Features A right to explore for oil and gas by drilling wells Not a right to take production; but testing OK Acquired only from Crown Sale Postings: 1 36 gas spacing areas Term is 3, 4, or 5 years; depends on Area Term may be extended, at least once, more depending on circumstances Splits not allowed; but partial surrenders OK Convertible to Lease by drilling or grouping Page 110.

British Columbia Ministry of Energy, Mines and Petroleum Resources Term Extensions Section 3(5) - Standard Extension Available after expiry or other extension Available once only Pre-requisite for some other extension types One year $500 fee; double rent ($7/ha) Application Due by expiry date Apply using ePayments Page 111.

British Columbia Ministry of Energy, Mines and Petroleum Resources Term Extensions Section 3(5.1) - Special Extension Available after term expiry or another extension Renewable, if delay persists and Director approves Requires: WA application be filed with OGC at least 30 days before expiry Start of drilling is delayed past term expiry or extension by one of: Environmental or socio-economic study Public hearing Planning or consultation process May include DLs that would otherwise be grouped One year, or less Application Application due by expiry date No extra fee Normal DL rent ($3.50/ha) Page 112.

British Columbia Ministry of Energy, Mines and Petroleum Resources Term Extensions Section 3(5.3) - Coal Bed Gas Applications must be sent before expiry Applies only to land and rights within a coalbed gas project approved by the OGC under s.75 of OGAA May be used 5 times after both the primary term and an "automatic" extension have expired Page 113.

British Columbia Ministry of Energy, Mines and Petroleum Resources Term Extensions Sections 3(7), 3(9), 3(10) - Drilling past expiry Available only after the standard extension, s.3(5) Extends term to the date a rig is released from drilling operations Drilling must be: Past 150m at midnight on expiry date Conducted diligently Rig may be withdrawn during drilling interruptions due to road bans or unsafe working conditions, e.g., avalanche hazard No other well may be started during extension, except in the event of mechanical failures in the first well Other DLs grouped with extended DL are extended to same date Page 114.

British Columbia Ministry of Energy, Mines and Petroleum Resources Grouping One Group per Earning Well Criteria for inclusion: In the opinion of the Director, an "earning" well exists or has been spudded on one of the DLs to be grouped All DLs to be grouped lie within 4 km. of the DL with the earning well Use scaled map, GIS, PTO Viewer Call to receive written verification Written application and ePayment submission sent before earliest expiring DL Written authority of one titleholder of each DL if applicant is not the Payor or a titleholder of all DLs Page 115.

British Columbia Ministry of Energy, Mines and Petroleum Resources Grouping Maximum Number of DLs in a Group Depends on number of whole gas spacing areas in DLs to be grouped at time of issue If any one DL had more than four gas spacing areas, the maximum is two DLs in the group Otherwise, number limited only by distance from DL with earning well, i.e., 4 km. rule always applies Rules aim for tighter link of risk to reward Page 116.

British Columbia Ministry of Energy, Mines and Petroleum Resources Why Small DL Grouping? Page 117. 3,500m

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 118. Grouping Distance Guide Four NTS Units or DLS quarter-sections are always less than 4 kilometres when measured directly north- south or east-west For all other circumstances, use caution, i.e. GIS: Shortest distance is a diagonal line Shortest distance is E-W or N-S, but across the DLS/NTS boundary

British Columbia Ministry of Energy, Mines and Petroleum Resources Awarded in terms of gas spacing areas and zones GSAs awarded depends on: Prescribed Area of DL When DL spans two or more Areas, earnings are based on the Area with the greatest earnings When well penetrates 2 or more DLs, applicant nominates one DL to the drilled DL for both earnings and grouping eligibility Combined length of drilling events Less any length drilled through rights held by lease that are not necessary for the purpose of evaluating the DL Zones awarded are to base of deepest zone "evaluated Evaluated = significant new geological information Verifies existence of new hydrocarbon-bearing reservoir Establish that a known reservoir is wet or absent Establish the sedimentological or structural characterization of a zone in a new area Page 119. Lease Earnings

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 120. DL Term and Earnings

British Columbia Ministry of Energy, Mines and Petroleum Resources DL Term and Earnings Page 121. Download from: Info Letter TITLES-05-03 NEBC DL Boundary.pdf Map Wall size; print with plotter

British Columbia Ministry of Energy, Mines and Petroleum Resources When is a Zone evaluated? Significance of info rises with: Quality and variety of information collected, and Proportion of zone evaluated, and Distance from comparable plays Page 122. Significant New Geological Information Collected High Low Certainty of Earning the Zone Low High

British Columbia Ministry of Energy, Mines and Petroleum Resources Earning Wells Definition before August 20, 2009 remains in force "A well drilled in a spacing area all or part of which is in a location described in a drilling licence, and includes a well redrilled in a spacing area formerly described in a (a)permit, (b)drilling licence, or (c)lease... no longer in effect" A "redrilled" well includes a "recompleted" well If the completion is over an interval not previously completed, or, if previously completed, it will provide significant new information Page 123.

British Columbia Ministry of Energy, Mines and Petroleum Resources Earning Wells Amendments of August 20, 2009 Wellbore must be first to evaluate a particular zone on at least one spacing area One well may be first to evaluate several spacing areas Evaluation is deemed to have occurred when either: 150m of wellbore has been drilled in a spacing area, or the Director is satisfied the well evaluates the zone first Page 124.

British Columbia Ministry of Energy, Mines and Petroleum Resources Earning Well Off DL Page 125. Drilling Licence Lease Yes

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 126. Earning Well Scenario A 1 1 Spacing Area 1Spacing Area 2

British Columbia Ministry of Energy, Mines and Petroleum Resources Earning Well Scenario A Page 127. 1 1 Spacing Area 1Spacing Area 2 2 2 2 2

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 128. Earning Well Scenario B ? ? 1 1 2 2 Spacing Area 1Spacing Area 2

British Columbia Ministry of Energy, Mines and Petroleum Resources Earning Well Scenario B Page 129. 1 1 Spacing Area 1Spacing Area 2 2 2

British Columbia Ministry of Energy, Mines and Petroleum Resources Earning Well Scenario C Page 130. DL 1DL 2 2 2 1 1 Wells penetrate identical zones Spacing Area 1Spacing Area 2

British Columbia Ministry of Energy, Mines and Petroleum Resources Earning Well Scenario C Page 131. DL 1DL 2 1 or 2

British Columbia Ministry of Energy, Mines and Petroleum Resources Lease Selection Applications e-Payments Submission THEN Application Letter add Letter of Authority if neither Payor nor Titleholder Include e-Payments Submission number in subject line Letter must include, for each earning well: Name and OGC Well Authorization (WA) Estimated total eligible wellbore length Enclose the directional survey where applicable Estimated earnings (gas spacing areas) Statement of deepest evaluated formation or zone Desired configuration of Leases Earnings from two or more WAs may be combined Use legal descriptions that match formats used in the Drilling Licence Page 132.

British Columbia Ministry of Energy, Mines and Petroleum Resources Lease Configuration The number and location of selected Leases are up to the applicant, except Leases must: include all spacing areas to be placed on production be located entirely within one DL contain only contiguous tracts not result in split gas spacing areas (oil wells excepted) Page 133.

British Columbia Ministry of Energy, Mines and Petroleum Resources Leases

British Columbia Ministry of Energy, Mines and Petroleum Resources Leases A right to explore for and produce oil and gas Available from Crown Sale Max. posting is 1 GSU Converting Permits and Drilling Licences Split from another Lease (transfer) May be continued beyond term Page 135.

British Columbia Ministry of Energy, Mines and Petroleum Resources Leases Term Page 136. Inside Area 1: 5 years Outside Area 1: 10 years A Lease overlapping both areas has a 5-year term Posting requests and Lease selections intersecting the boundary should be done carefully!

British Columbia Ministry of Energy, Mines and Petroleum Resources Leases Continuations Several forms Section 62 Section 61 Section 61,1 (rights revert zone specific) Section 58 (rights revert deep or specific) One year, in all cases Download from Other Publications: Lease Continuation Options "Recommended Technical Package Contents" Page 137.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 62 Continuation Continuation by payment Year 1$15.00 / Ha Years 2 or 3$25.00 / Ha Available three times for any 10-year Lease No rights reversion Need not be used in consecutive years Application made through ePayments Use the statement when no other continuation types are anticipated for the Lease, or Use submission and written application when other continuation types (splits) are anticipated or desired for the Lease Page 138.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 61 Continuation Continuation by drilling commitment Drill at least one well on location of Lease during continuation that evaluates at least one zone held by that Lease Drilling past expiry OK, but must make best effort to reach target zone(s) named in Well Authorization Available for any Lease No rights reversion May be used more than once, but spacing area(s) of successful commitment wells will be split out under s.58 Applies only to Lease(s) being drilled Applications made through e-Payments Must make Submission and written application Page 139.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 61.1 Continuation a.k.a. 61W Continues spacing areas in relation to existing and planned disposal operations e.g. water, CO 2, waste fluids Shallow and deep rights revert Spacing areas included in projects approved under s.75 of the Oil and Gas Activities Act are not eligible Written application with supporting technical material to accompany e-Payments for first approval Once approved, application is by annual rental until further notice by Director Page 140.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 58 Continuation Four types of continuation: 58(3)(a): Eligible Spacing Areas 58(3)(b): Unit agreements 58(3)(c): Work programs 58(3)(d): Establishing a well All s.58 continuations subject to rights reversion, deep or specific zones (s.59) Leases approved under two or more s.58 sub- section may have to be split Page 141.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 58 Continuation s. 58(3)(a) Eligible spacing areas are spacing areas that: Contain a petroleum or gas well Are located in a project area approved by the OGC under s.75 of the Oil and Gas Activities Act Are >50% covered by a designated EMPR pools (aka: land plat) Are being drained from an adjacent spacing area Once approved, continuation is by rental payment until further notice Page 142.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 58 Continuation Section 58(3)(b) - unit agreements Spacing areas within Unit Agreements Once approved, continuation is by rental payment until further notice Section 58(3)(c) - work programs May include multiple leases Not intended for multi-year exploration programs, depends on circumstances (e.g., access, scope) Section 58(3)(d) - incomplete drilling The drilling of, or work on the establishment of, a well is incomplete on the expiry date The Director is satisfied that the drilling or work will continue Page 143.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 58(3)(c) General Features May include multiple Leases, even multiple target zones, and different expiry dates Requires written commitment to specific work Majority are one year only; exceptions to this on a case-by-case basis, typically due to very limited access and unusually large project scope Non-performance of commitments jeopardizes future work program approvals Page 144.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 58(3)(c) Application must include: The locations to be included The formation(s) that will be delineated A firm commitment, e.g. XYZ Corp. commits to carry out the following program of work:... A clear depiction (map) of where the work will take place in relation to the locations to be included A clear explanation of how the work will delineate a hydrocarbon-bearing reservoir on each spacing area Technical package contents must demonstrate how the work will delineate a field or pool Simple notice of a new well Complex interpreted seismic, X-sections, well results, etc. Page 145.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 58(3)(c) Programs with seismic components require a geophysical report at year end Resource Document Look for Requirements for Affidavits and Reports in the chapter appendix or here: http://www.em.gov.bc.ca/Subwebs/landsale/Publications Page 146.

British Columbia Ministry of Energy, Mines and Petroleum Resources s. 58(3)(d) Designed to allow leaseholders to finish establishing a well clearly in progress Applies only to a single Lease At minimum, must have Well Authorization before expiry Estimated rig release date well past expiry 60 days to make any s. 58 application, but We encourage s. 58(3)(a) within 60 days where possible More scrutiny if well not spud by expiry All rights below the base of the deepest objective zone named in the Well Authorization (WA) are subject to rights reversion, deep or specific Page 147.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 148. PART 3 Payments & Instruments

British Columbia Ministry of Energy, Mines and Petroleum Resources ePayments Contacts: Carolyn Desjardins (250) 356-1059 [email protected] Brenda Jennings (250) 952-0331 [email protected] Shawna Logue (250) 387-5196 [email protected] Page 149.

British Columbia Ministry of Energy, Mines and Petroleum Resources ePayments Mandatory October 2009 Online statements, payments, and receipts Client initiates payment NOT Auto Debit Payments associated with Rent and Fees for lease selections, extensions, continuations and primary term annual rentals Electronic refunds Mandatory Oct. 1, 2010 NOT included in ePayments requires cheque Split Transfers Permits OIC - S 72 Agreements Underground Storage Leases/Licences Page 150.

British Columbia Ministry of Energy, Mines and Petroleum Resources BCeID is a Portal or Passport BCeID ePayments Mineral Titles Online Petroleum Titles Online Integrated Land Mgmt Registry GATOR Crown Land Corporate Registries Titles, Aboriginal & Corporate Relations Division assigns Subscription Code Page 151.

British Columbia Ministry of Energy, Mines and Petroleum Resources Obtain a BCeID Page 152.

British Columbia Ministry of Energy, Mines and Petroleum Resources BCeIDBCeID Do not share your BCeID password with anyone except the Company Administrator Sharing BCeID Passwords means you are not using the system securely You can identify who makes transactions by their BCeID for audit purposes Page 153.

British Columbia Ministry of Energy, Mines and Petroleum Resources ePayments - Next Steps You have your BCeID... Company Administrator requests subscription code Receives code then signs onto ePayments main page Enter subscription code Add other authorized users If you are going to be a payor on titles you will need to submit Pre-authorized Debit forms Rental and Fee PAD Rental and Fee PAD for refunds A BCeID, subscription code and PAD forms are required for each of your company entities Page 154.

British Columbia Ministry of Energy, Mines and Petroleum Resources ePayments User Roles BCeID Profile Manager Applies for BCeID Appointments Company Administrator Company ePayments Administrator Assigns roles to other users; can view, add or change banking information; can perform all functions Payment Administrators Make the actual payments Land Administrators Initiate submissions to continue titles beyond their primary term and convert drilling licences to lease Viewers View Only access financial and/or senior staff that are not required to conduct transactions Page 155.

British Columbia Ministry of Energy, Mines and Petroleum Resources ePayments - Designated Payor Companies will need to designate payor on all title they have ownership in Payors cannot be designated 11 days prior to the anniversary date and 60 days after Any registered owner or designated payor can nominate a designated payor Crown Sale, bid letter must include who will be the designated payor for future rental payments When a title is issued by other means, the Designated Payor is defaulted to the registered Owner with the highest interest In the case of 50/50, the decision will be made alphabetically Page 156.

British Columbia Ministry of Energy, Mines and Petroleum Resources Payment Types Primary Term ContinuationConversion Page 157.

British Columbia Ministry of Energy, Mines and Petroleum Resources All Titles Screen To view all the titles you are a registered Owner and/or Payor of, click on Titles Page 158.

British Columbia Ministry of Energy, Mines and Petroleum Resources Managing Expiring Titles Page 159.

British Columbia Ministry of Energy, Mines and Petroleum Resources Statement Types Primary Term Statement Continuation/Extension Statement Submission Request Statement Page 160.

British Columbia Ministry of Energy, Mines and Petroleum Resources Primary Term Statement Unpaid titles, Carried Forward from the Previous Statement, appear under the red heading bar. Unpaid titles that are part of the Current Statement appear under the blue heading bar. Page 161.

British Columbia Ministry of Energy, Mines and Petroleum Resources Continuation Submission From the Managing Expiring Titles screen Page 162.

British Columbia Ministry of Energy, Mines and Petroleum Resources Items to Remember Submissions should contain titles that are linked geologically or geographically and share a common technical package Confirm payment is made (Payment Acknowledgement No.) Submit letter and technical package Include submission number in your application letter Page 163.

British Columbia Ministry of Energy, Mines and Petroleum Resources Convert to Lease Submission Convert to Lease Submission From the All Titles screen 1. Check Title 2. Click on Create Pending Submission Page 164.

British Columbia Ministry of Energy, Mines and Petroleum Resources Convert to Lease Submission Your Pending Submission Number will appear All fees will be calculated You can adjust the Hectares Page 165.

British Columbia Ministry of Energy, Mines and Petroleum Resources GroupingsGroupings For each Grouping, whether 2 drilling licences or a cluster of drilling licences, they should go together in the same Submission, if theyre related If the Groupings are not related, they should be in separate Submissions. Page 166.

British Columbia Ministry of Energy, Mines and Petroleum Resources Groupings 2 DLs Two DLs grouped together should be submitted as one Submission DL 1DL 2 Page 167.

British Columbia Ministry of Energy, Mines and Petroleum Resources Groupings Cluster (all within 4 km of each other) DL 1 DL 3 DL 4 DL 5 DL 6 DL 2 Multiple DL groupings that have a DL that is used more than once should be submitted as one Submission Page 168.

British Columbia Ministry of Energy, Mines and Petroleum Resources Continuing your Tenure Continuation/Extension (Managing Expiring Titles Screen) NO Paper Application Required Types of Payments Final YearPrimary Term10 year - When applying for Section 62 58 A, B and 61.1 (repeat only) 62 (1, 2, 3) Drilling Licence Extension 3.5 Submission (All Titles Screen) Paper Application Required Types of Payments Final YearPrimary Term-5 year 58A & B 1 st year 58Ano longer eligiblecontinue under other section 58C & D, 61 DL extension 3(5.1) Environmental 1 st year DL extension 3(5.3) Coalbed Methane 1 st year Lease Selections (conversion) Page 169.

British Columbia Ministry of Energy, Mines and Petroleum Resources RECAPRECAP Continuation/Extension Submission Create from: Manage Expiring Titles ConversionSubmission Create from: All Titles Include Submission Number on Written Application Page 170.

British Columbia Ministry of Energy, Mines and Petroleum Resources Managing Rental Deadlines Default Notices eliminated July 1, 2010 Manage titles from the All Titles screen Epayments sends you a monthly reminder to view your statements Overdue titles are shown in purple and fall off ePayments on day 60 past expiry Page 171.

British Columbia Ministry of Energy, Mines and Petroleum Resources Late Penalties Late penalties are automatically calculated once the anniversary date has passed Permits (Manual Payment) Day 1-10 $100.00 Day 11-60 $500.00 Leases Day 1-30 - 1.5 % Day 31-60 3.0 % Drilling Licence Day 1-60 $500.00 Page 172.

British Columbia Ministry of Energy, Mines and Petroleum Resources CancellationsCancellations Request from All Titles screen Ministry will cancel 60 days after anniversary date and send confirmation Check title to be cancelled Can be reversed by selecting title and hitting Cancel Request Email ministry to confirm reversal Manual letters for titles not included in ePayments Page 173.

British Columbia Ministry of Energy, Mines and Petroleum Resources Letters of Authority Letter of Authorizations are needed when you are neither a owner or payor Required for Titles not covered by ePayments The registered Owners intent is implied by authorizing the Designated Payor to make decisions on the title Page 174.

British Columbia Ministry of Energy, Mines and Petroleum Resources Self-Tutoring Online: Modular Self-paced Computer-based Getting Started, Self-Tutoring, FAQs & Quick Reference Tool available online - http://www.empr.gov.bc.ca/Titles/OGTitles/ePayments/Pages/default.aspx Calgarycontact CAPLA: www.caplacanada.org Victoria - contact: [email protected] Training Information Page 175.

British Columbia Ministry of Energy, Mines and Petroleum Resources Transfers, Encumbrances and Related Transfers, Encumbrances and Related Page 176.

British Columbia Ministry of Energy, Mines and Petroleum Resources Power-of-AttorneyPower-of-Attorney No fees required Cover letter is required Power of Attorney documents should have original signatures or be a Certified True Copy The document must clearly state the types of document that the person/position is authorized to sign on behalf of the company A registration number will be assigned to the company upon the initial registration, this number will be used for all future registrations Page 177.

British Columbia Ministry of Energy, Mines and Petroleum Resources Partnerships Permitted to hold title in BC Partnership needs to provide documentation showing the partnership structure Documentation must be signed by all parties of the partnership Contact Oil & Gas Commission to confirm requirements to licence well Page 178.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 179. Title Transfers No fees required Cover letter must accompany documents Transfers are considered effective from the date received, not the execution date Stale-dated transfers are acceptable Changes are recorded against title specified in the document Only transfers of undivided interest are permissible Signatures in counterpart are acceptable Any color ink acceptable for signatures Electronic Signatures and signature stamps are not acceptable Page 179.

British Columbia Ministry of Energy, Mines and Petroleum Resources Title Transfers Transfer documents must: Be originals List all title numbers to be transferred Be executed by all transferors and all transferees Subsequent edits must be initialled by all parties A properly executed document is: Dated, and Signed by a signing officer of the firm or by a person with a Power of Attorney registered with Titles, Aboriginal and Corporate Relations Division, and Witnessed or affixed with a corporate seal Page 180.

British Columbia Ministry of Energy, Mines and Petroleum Resources Title Transfers Schedules are permitted and should include only the title number and the company reference number Transfer documents must specify interest as a percentage of the undivided interest 8 decimal places (max) Interests displayed as percentages of percentages are not acceptable: Interest amounts are not required on transfer of all a companies interest in a title Page 181.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 182. Title Transfers Sample forms available from the Division website, no prescribed form necessary Information Letter EMD-008 Must not contain implied or explicit encumbrances, eg: subject to clause Do not send title documents with your transfer request Use full legal name of companies If legal descriptions must be included for corporate reasons, they: Must be identical to registered legal description Must include complete tract rights Page 182.

British Columbia Ministry of Energy, Mines and Petroleum Resources Split Transfers A procedure to divide one lease into two or more leases Leases only $500.00 fee for each new lease to be issued Leases may be divided by: Surface hectares Stratigraphic A combination of both Page 183.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 184. Split Transfers All criteria applicable to simple transfers are applicable to split transfers, plus: in and to a portion of. must be used on the transfer documents Legal descriptions of the transferred portion, including the rights held by that portion, must be specified Must not divide gas spacing areas containing gas wells May divide gas spacing areas if: Contains an oil well; or Spacing area already split Page 184.

British Columbia Ministry of Energy, Mines and Petroleum Resources Pooling Agreements Purpose joint development of a spacing area Recorded in the Oil and Gas Titles Branch Letter contents: Name all title holders Title numbers Well authorization No. UWI of well Date of Pooling Agreement Signature of all title holders Page 185.

British Columbia Ministry of Energy, Mines and Petroleum Resources EncumbrancesEncumbrances Information Letter EMD02-01 A claim or lien placed on a title by a third-party NOT a legal registry; information purposes only Encumbrances do not restrict the application of any provision of the Petroleum and Natural Gas Act Examples of types of documents: Bank Act assignment Deed of Trust Debenture Mortgage Builders Lien Page 186.

British Columbia Ministry of Energy, Mines and Petroleum Resources Recording Encumbrances Requests must include: Letter of instruction and fee State the type of encumbrance State the full legal names of the companies involved Encumbrance document Original or certified true copy Document must be dated and signed by a signing officer of the company holding the encumbrance Fee: $50.00 per title per encumbrance, includes discharge Page 187.

British Columbia Ministry of Energy, Mines and Petroleum Resources Discharging Encumbrances Requests must: Be dated and signed by a signing officer of the company holding the encumbrance Include original encumbrance registration numbers State the type of encumbrance State full legal names of the companies named in the encumbrance Include the date of the original encumbrance registration Include the date of the encumbrance Indicate if the discharge is full or partial List only active title numbers to be discharged Original signatures or certified true copy Each encumbrance must be discharged with a separate document Page 188.

British Columbia Ministry of Energy, Mines and Petroleum Resources Copies of Encumbrances Requests for copies of encumbrances can be sent by fax Fax: (250) 952-0331 Send to Attention of : Diane Jensen Fees minimum charge of $10.00, or.75 cents per page whichever is greater, an invoice will be sent with the documents We copy the first 10 pages of the documents and the signature page only, due to the size of some encumbrance documents Return by fax or email up to 50 pages, by collect courier or mail include your courier name and account number with your request Page 189.

British Columbia Ministry of Energy, Mines and Petroleum Resources Name Changes & Amalgamations Requests must include: May be sent by mail, fax or email Letter or email request Copy of certificate and articles of amendment, photocopies are acceptable Email: [email protected] Changes are only recorded against active title All federal and provincial certificates are accepted where: Jurisdiction and registration numbers are included Full legal names of the parties are used Page 190.

British Columbia Ministry of Energy, Mines and Petroleum Resources Signed Title Searches Available if required Send request via fax or mail to Diane Jensen Results can be delivered by: Fax or email up to 50 pages Mail Courier (sent collect) Fees $7.50 per title number Invoice will be returned with request Page 191.

British Columbia Ministry of Energy, Mines and Petroleum Resources PTS Web Search www.ptonline.gov.bc.ca Title number and type Term and Area Key Dates: Issuance, Effective, Expiry Tracts Lands and Rights held Ownership Continuation History Transfer History Encumbrance History Special Projects, Wells, Units, Groupings Page 192.

British Columbia Ministry of Energy, Mines and Petroleum Resources Page 193. THANK YOU ! Laurel Nash 952-0335 Christine McCarthy Terry Branscombe 952-0341952-0340 GENERAL INQUIRIES Phone. 250-952-0333 Phone. 250-952-0333 Email. [email protected]