British Columbia Ministry of Natural Gas Development October 22, 2013 BC Petroleum and Natural Gas Regulations Seminar Presentation to CAPL October 22,

British ColumbiaMinistry of Natural Gas DevelopmentOctober 22, 2013

BC Petroleum and Natural Gas Regulations SeminarPresentation to CAPL

October 22, 2013

BC Petroleum and Natural Gas Regulations SeminarPresentation to CAPL

October 22, 2013Geoff Turner

Terry Branscombe

Page 1.Page 1.


PART 1 – MINISTRY UPDATES

Ministry Structure / Organization Update

Acquiring Petroleum and Natural Gas (PNG) Tenure in BC

Resource Development Updates

Tenure Management Updates

Royalty Program Update

Policy and Regulatory Updates

Jobs and the Economy

Page 2.

SEMINAR OUTLINESEMINAR OUTLINE

Page 2.


PART 2 – TENURE MANAGEMENT

Resources for administrators

General framework for tenureLand systems

Spacing

Rentals

Geological zones in BC

TenuresPermits (Features)

Drilling Licences (Features, Extensions, Earnings, Groupings)

Leases (Features, Continuation Options, Land Plats)

Page 3.



PART 3 – GENERAL ADMINISTRATION

e-PaymentsTraining Resources

Payment Types and when to use them

Tenure Cancellation

Letters of Authority

Instruments Affecting TitleTransfers (assignments)

Encumbrances

Pooling Agreements

Name Changes/Amalgamation

Page 4.



Garth Thoroughgood, Executive Director, Tenure and Geoscience Branch 250-952-6382

POSTINGS, PETROLEUM TITLES ONLINE, WEBMASTER, MAPPINGElle Bardol, Manager, Crown Sale and GIS Services 250-952-0344

PRE-TENURE REFERRALS, TENURE CAVEATSMatt Austin, Director, Resource Development 250-787-3426

GEOLOGY, ZONE DESIGNATIONDave Richardson, Manager, Geology 250-952-0359

LEGISLATION AND POLICY DEVELOPMENTGeoff Turner, Director, Policy & Planning 250-952-0709DRILLING LICENCES, WORK PROGRAMS, PERMITSTerry Branscombe, Senior Tenure Management Advisor 250-952-0340

DRILLING LICENCES, LEASE CONTINUATIONSCindy Kocol, Tenure Management Advisor 250-952-0342

DRILLING LICENCES, TRANSFERS, ENCUMBRANCES, LEASE CONTINUATIONS,CANCELLATIONSChristine McCarthy, Tenure Management Advisor 250-952-0341

E-PAYMENTS, BCeID, PRE-AUTHORIZED DEBITSCarolyn Desjardins, Manager, Revenue Collection, Reconciliation and Reporting 250-356-1059

GENERAL INQUIRIES 250-952-0333www.empr.gov.bc.ca/Titles/OGTitles [email protected]

Page 5.

KEY CONTACTSKEY CONTACTS


MINISTRY STRUCTUREMINISTRY STRUCTURE

Page 6.

Deputy MinisterMinistry of

Natural Gas Development

Assistant Deputy MinisterLiquefied Natural Gas Initiatives

Assistant Deputy MinisterUpstream Development Division

Assistant Deputy MinisterOil and Strategic Initiatives

Division


UPSTREAM DEVELOPMENT DIVISIONUPSTREAM DEVELOPMENT DIVISION

Page 7.

Assistant Deputy MinisterUpstream

Development Division

Policy and Royalty Branch

Tenure and Geoscience Branch


Page 8.

TENURE AND GEOSCIENCE BRANCHTENURE AND GEOSCIENCE BRANCH

Garth ThoroughgoodExecutive Director

Tenure and Geoscience Branch

Terry Branscombe

Senior Tenure Management

Advisor

Debbie FischerDirectorTenure & Revenue

Management

Matt AustinDirectorResource

Development

Dave Richardson

ManagerGeology

Elle BardolManager

Crown Sale & GIS Services

Geoff TurnerDirectorPolicy & Planning

Fil FerriDirector

Petroleum Geology


ACQUIRING PNG TENURE IN BCACQUIRING PNG TENURE IN BC

Page 9.


Page 10.

PNG TENUREPNG TENURE

Tenure does provide:exclusive rights to the subsurface resourceright to apply to the OGC for activities approval

Tenure does not provide:the authority to conduct any activities on lands (e.g., drilling)


Page 11.

DISPOSITION PROCESSDISPOSITION PROCESS

12 sales per year

106 day process


Posting Requests http://www.empr.gov.bc.ca/Titles/OGTitles/SalesNotices/Pages/Instructions.aspx

Submitting a Bid

Link to Bidding and Disposition Guide

Disposition Dates for 2014-2015

http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/OGD-13-03.aspx

Page 12.

ADDITIONAL INFORMATION SOURCESADDITIONAL INFORMATION SOURCES


First Nations Engagement

Community Engagement

Caribou

Page 13.

RESOURCE DEVELOPMENT UPDATESRESOURCE DEVELOPMENT UPDATES


Role of the CrownThe Crown has a fiduciary duty to consult First Nations about decisions which may impact their rights and, where possible, accommodate their interests.

Role of the proponentBuild and maintain good relationships with First Nations in the areas you operate.

Page 14.

FIRST NATIONS ENGAGEMENTFIRST NATIONS ENGAGEMENT


Monthly Referral ProcessInitial Impact Assessments Responsive to First Nation comments

Deferred ParcelsMeet to resolve area-specific issues – FSJ staffExample: Old Man Lily ParcelsShapefile and PDF map of currently deferred parcels: www.empr.gov.bc.ca/Titles/OGTitles/SalesNotices/Pages/default.aspx

Strategic First Nations NegotiationsConsultation Agreements Strategic Engagement Agreements

Page 15.



Emerging Issues

Opportunities to build landscape level impacts/Cumulative Effects into decisions

Outcome of the Dene Tha’ Judicial Review

Page 16.



Referral packages and discussions on deferred parcels with local government

Landowner Notification Program

Farmers’ Advocacy Office renewed

Page 17.

COMMUNITY ENGAGEMENTCOMMUNITY ENGAGEMENT


Page 18.

CARIBOUCARIBOU


BOREAL CARIBOU RRAsBOREAL CARIBOU RRAs

In June 2010, 500,000 hectares of boreal caribou habitat were set aside as “resource review areas” (RRAs) where no PNG tenure requests would be accepted for a minimum of five years

For more information, see Information Letter TACRD-10-10

http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-10-10.aspx

Page 19.


Radio collaring underway funded in part by industry

New ungulate winter ranges and wildlife habitat areas designated in May 2013 (Chinchaga herd)

Establishment of operating practices to be applied to oil and gas activities within designated caribou habitat management polygons

Consultation completed with First Nations and stakeholders on the “Implementation Plan for the Ongoing Management of Boreal Caribou”

Page 20.

BOREAL CARIBOU – UPDATESBOREAL CARIBOU – UPDATES


Provincial implementation plan has been completed for Peace Northern Caribou

Established RRAs for high elevation winter ranges for Peace Northern Caribou Herds

Planning requirements have been established for activities taking place in high elevation winter ranges

Work underway to establish operating practices for low elevation habitat for the Peace Northern Caribou

Page 21.

PEACE NORTHERN CARIBOUPEACE NORTHERN CARIBOU


TENURE MANAGEMENT UPDATESTENURE MANAGEMENT UPDATES

Page 22.


Integrated Petroleum System (iPS)

iPS will transition 3 legacy applications to current technology

Petroleum Titles System (PTS)

Petroleum Accounts Receivable System (PARS)

Sales Parcel System (SPS)

Launch has been postponed to make minor changes and fixes

eBidding will be offered once industry consultation has taken place (expected in the new calendar year)

Page 23.

eBUSINESSeBUSINESS


ROYALTY PROGRAMSROYALTY PROGRAMS

Page 24.


Page 25.

TARGETED ROYALTY PROGRAMSTARGETED ROYALTY PROGRAMS

Challenge Solution

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

tpetrini

Is there more current info on Targeted Royalty Programs


These programs can be combined in many cases, thus providing enough margin to move certain projects to economic territoryExample - a well that:

is a road project (an infrastructure credit), is deep, and is marginal

can receive all the associated benefits for those programsMore information:

www.empr.gov.bc.ca/OG/oilandgas/royalties/Pages/default.aspx

Page 26.

TARGETED ROYALTY PROGRAMS TARGETED ROYALTY PROGRAMS


Changes Announced as Part of Budget 2013Deep Well Credit – minimum 3% royalty payableSummer Drilling Credit Program cancelledMore information: www.sbr.gov.bc.ca/business/Natural_Resources/Oil_and_gas_royalties/bulletins.htm

2013 Infrastructure Royalty Credit Program$115.8 million in royalty credits supporting 12 new infrastructure projects in northeast BC, which will help the advancement of an LNG industryThe 2013 credits are expected to generate about $445 million in revenues for the province and over $320 million in new capital spending by industry

Page 27.

ROYALTY PROGRAMS UPDATEROYALTY PROGRAMS UPDATE


POLICY & REGULATORY UPDATESPOLICY & REGULATORY UPDATES

Page 28.

BC Tenure Working Group

Review of the PNG Act & Regulations

New Policy Guides


The BC Tenure Working Group continues to meet regularly to discuss:

Improved communication

Legislation and Regulations

Opportunities to work more efficiently and effectively

Educational opportunities

eBusiness

Recent meetings included discussions about:Posting and bidding processes

Foundational concepts for tenure reform

Tenure terms and continuation

Page 29.

BC TENURE WORKING GROUPBC TENURE WORKING GROUP


Comments received in response to the Discussion Paper on the tenure provisions helped inform analysis and recommendations

Proposed changes are intended to modernize the Act, streamline tenure administration and improve management of unconventional resource development within the tenure system

In March 2012 the Ministry issued a report on progress for tenure holders regarding potential changes

Consultations with industry, First Nations and other government agencies continued in 2012

Page 30.

REVIEW OF THE PNG ACT & REGULATIONSREVIEW OF THE PNG ACT & REGULATIONS


Feedback on the proposed changes from the Tenure Reform Task Group informed further analysis and consultation with the BC Tenure Working Group

In addition to reviewing the tenure provisions, the Ministry is working on a framework for the management of carbon capture and storage

The Ministry is awaiting a decision on if and when changes will be made

Ongoing consultation and analysis regarding some details that would be introduced through the regulations

Page 31.

REVIEW OF THE PNG ACT & REGULATIONSREVIEW OF THE PNG ACT & REGULATIONS


Policy guides will replace info letters as the main source of detailed information on BC tenure policy and legislation

Guides are updated each time there is a change eliminating the need to refer to multiple info letters

Guides available online: www.empr.gov.bc.ca/Titles/OGTitles/OtherPublications

Info letters will still be used for announcements

Subscribers will receive notifications when a guide is issued or updated (to subscribe, send a request to [email protected])

Page 32.

NEW POLICY GUIDESNEW POLICY GUIDES


Recently issued guides:

Guidelines for Registering a Transfer of Subsurface Interest in Title

Guide to BC Petroleum and Natural Gas Act Lease Continuations

Upcoming guides include:

Guide to Bidding and Disposition of Crown Petroleum and Natural Gas Rights

Guide to the Petroleum and Natural Gas Drilling Licence Regulation

Natural Gas and Oil Tenure Rents, Fees and Penalties

Page 33.

NEW POLICY GUIDESNEW POLICY GUIDES


JOBS & THE ECONOMYJOBS & THE ECONOMY

Page 34.


Page 35.

CROWN SALESCROWN SALES

2013 (to Sept)

2012 (Calendar) 2011 (Calendar)

# parcels offered 184 217 326 # parcels disposed 145 171 274 # hectares offered 105,290 169,533 243,730 # hectares disposed 83,846 136,521 191,534 Total tender bonus $157,897,419.95 $ 139,262,098.12 $ 222,682,988.67 Average price/hectare $1,883.18 $ 1,020.08 $ 1,162.63


Ensure an effective royalty regime

Ensure Infrastructure is available to encourage investment

Amend the Petroleum and Natural Gas Act and regulations

New Jobs for BC

Engaging with First Nations and Communities

Ensuring environmental responsible development

Page 36.

NATURAL GAS STRATEGYNATURAL GAS STRATEGY


In September 2011, the Premier confirmed Provincial commitment to the development of LNG export capacity in BC

The announcement included commitments in four areas:

Greater emphasis on the permitting and decision making processes

Skills training and development

Investment and attraction

International marketing

Page 37.

LIQUEFIED NATURAL GAS (LNG)LIQUEFIED NATURAL GAS (LNG)


The Premier made two trade missions to Asia to promote trade and cultivate business relationships

BC hosted Canada’s first international LNG conference in February 2013

The NEB has issued export licences to three LNG proponents and additional applications are before the NEB for review

Several proponents have come forward with proposals for LNG facilities and transportation systems

Most recently, in response to the Province’s request for expressions of interest, four proponents submitted proposals for an LNG plant and marine export terminal at Grassy Point near Prince Rupert

Page 38.

LNG UPDATELNG UPDATE


Continue to develop and implement strategies to make PNG tenure available

Continue to create and implement progressive and innovative strategies and approaches for effective policy, legislation and regulations that support a modernized tenure issuance and management system

Continue to provide an attractive investment environment through royalty and infrastructure programs

Page 39.

PNG OPPORTUNITIESPNG OPPORTUNITIES


QUESTIONS?QUESTIONS?

Page 40.


Page 41.

PART 2

Tenure

Management


Resource ListTenure and Geoscience Branch homepage• Legislation• Information Letters• Other Publications (Guides and reference material)• Links to:

– Petroleum Titles Online (PTO)» Submit posting requestes for Crown disposition» Online title searches

– e-Payments

DataBC/GeoBC• http://www.data.gov.bc.ca/dbc/geographic/view_and_analyze/imapbc

• Map Viewer (iMap 2.0)– Complete data warehouse of provincial GIS data– Tenure in context of other geographic and land use information

Page 42.

Tenure ManagementTenure Management


Page 43.

Start HereStart Here

http://www.empr.gov.bc.ca/Titles/OGTitles


Page 44.

Online Title SearchesOnline Title Searches

Getting there:

Navigate to PTO main page from the Branch homepage, or dial in: https://www.ptonline.gov.bc.ca

On PTO main page, click “PTS Web” in left sidebar

Support: [email protected]

Content:

Up-to-the minute title status and descriptions for active titlePrimary Term (years), Area (hectares), Key Dates: Issuance, Effective, ExpiryTracts – Lands and Rights heldGroupings (Drilling Licences)Ownership profileRental & Continuation HistoryTransfers and EncumbrancesSpecial Projects (OGC), Wells (UWIs), Unit Agreements


Petroleum Titles Online (PTO)http://www.ptonline.gov.bc.ca

File posting requests


e-Paymentshttps://epayments.gov.bc.ca


Page 45.

Online Tools and SupportOnline Tools and Support


Petroleum and Natural Gas ActGrid Regulation

Drilling Licence Regulation

Fee, Rental and Work Requirement Regulation

Storage Reservoir Regulation

Page 46.

Key Acts and RegulationsKey Acts and Regulations


Dominion Land Survey (DLS)

Petroleum Grid (NTS)

Spacing Areas

Well Locations

Stratigraphy & Zones

Page 47.

Geography and GeologyGeography and Geology


PNG Grid Regulation Schedule 1Limited to Peace River Block

TWPs 76 - 88RGEs 13 – 26 W6M

Section size is as surveyed, not standard like Alberta

Refer to downloadable map entitled “Peace River Block Gas Spacing Units and Hectarage Map”• Location: PNG Titles Branch > Other

Publications

Page 48.

DLSDLS


PNG Grid Regulation Schedule 3

Applies everywhere the DLS does not

Based on longitude and latitude, but customized for oil and gas management

Sub-divisions achieve oil and gas spacing areas similar in size to DLS

Unit areas defined in downloadable lookup tables• Location: PNG Titles Branch > Other

PublicationsGeothermal and coal tenures are also managed with Petroleum Grid system

Page 49.

Petroleum Grid (NTS)Petroleum Grid (NTS)


Page 50.


8° long.

4° lat.

Well location example:d-010-A/094-H-16

Title description example:094-H-16 Blk A Unit 10


Page 51.


Well location example:d-010-A/094-H-16

Title description example:094-H-16 Blk A Unit 10


Page 52.

1 10 1 10 1 10 1 10 1 10

91 100 91 100 91 100 91 100 91 100

X

1 10 1 10 1 10 1 10 1 10

91 100 91 100 91 100 91 100 X 91 100

1 10 1 10 1 10 1 10 1 10

91 100 91 100 91 100 91 100 91 100

D C B A

L K J

Normal Spacing – NTSNormal Spacing – NTS


OGAA: Drilling and Production RegulationOTN’s are an OGC approval

PNG Act – section 65.1

Generally larger than normal spacing areasSome are already declared

Peace River Block – Petroleum GridBC – YT, NWT, AB boundariesBC – USAProtected Areas

1 OTN gas spacing = 1 gas spacing for calculating earnings from Drilling Licences

Page 53.

Other-than-Normal SpacingOther-than-Normal Spacing


Page 54.

OTN – Peace River BlockOTN – Peace River Block


Page 55.

41

50

31

40

21

30

11

20

1

10

1

91

100

9 1

81

90

71

80

61

70

51

60

OTN – Alberta boundaryOTN – Alberta boundary


Page 56.

91 100

91 100

1 10

1 10

91 100

91 100

J I L

G H E

YT / NWT

X X X X X X

X X X X X X

X X X X X X

X X X X X X

X X X

X X X

X X X

X X X

X X X

X X X

X X X

X X X X X X X X X

X X X X X X X X X

X X X X X X X X X

X X X

X X X

X X X

X X X

OTN – NWT / Yukon boundariesOTN – NWT / Yukon boundaries

Portions above 60° North


All tenure rentals are based on area, measured in whole hectaresPetroleum Grid (NTS) Unit

“NTS Unit Areas” (Excel workbook; download)For NWT/YT and other boundary areas, call us

Peace River Block (DLS)“Gas Spacing and Hectarage Map for the PRB” (PDF; download)• Includes size of fractional spacing's on NTS/DLS boundary• Depicts lands in other-than-normal spacing areas

Regardless of source, calculate area the sameSum individual source valuesKeep intermediate fractionsRound sum for entire title to nearest whole hectare

Page 57.

Tenure Size (hectares)Tenure Size (hectares)


Tenure Size – NTSTenure Size – NTS

Exercise; find the combined area of NTS Units 42-47 of Block E in 094-H-06

Map

94 EFGH

Group

5 to 8

Block

E F G H

Unit

41-50Page 58.

Total6 X 69.8 or 418.8

Rental Size: 419 ha.


Page 59.

Tenure Size – DLSTenure Size – DLS

Exercise; find the total area of the two gas spacing areas outlined at right

OTN: 19.0 + 21.4 + 39.7 + 38.0 + 66.0 + 66.0 = 250.1 ha.

Sec 8-88-25: infer 263.9

Total250.1 + 263.9 = 514.0Rental Size: 514 ha.


Well Authorization (WA)Simple 5-digit number assigned to each OGC well permitPlease use wherever possible in correspondence

Unique Well Identifier (UWI)16-digit code issued at spudExamples• DLS: 102041308617W603• NTS: 200D024H094H1604

Digit 1: DLS (1) or NTS (2)Digit 2: Always zeroDigit 3: Sequence of the well at that bottom-hole location

• Value of 1 never used

Digits 4-14: Approved (then actual) bottom-hole locationDigits 15-16: drilling or completion event sequence

• First CE gets same code as its DE

Well NameOperator(s), HZ, and surface location

Page 60.

Well IDs and LocationsWell IDs and Locations


Page 61.

Zone Designation SystemZone Designation SystemZones are packages of one or more formations (marked in white on diagram)

Defined by specific intervals on specific logs of a reference well

Zone boundaries carefully selected to avoid disputes; primarily widespread markers in non-productive strata

5-digit codeDigits 1-3: Zone seriesDigits 4-5: Geographic IDCode value increases as age decreases

Available for download as a PDF wall chart


Page 62.

STRATIGRAPHIC CHART


The Stratigraphic Chart illustrates standard geological formation names used in British Columbia

Overlaid on the Stratigraphic Chart are major horizontal intervals, lying between white lines, each containing from one to several major geological formations. These horizontal bands represent slices of rock that are used in the standard Zone Designation System. Some intermediate or alternate bands are left out for readability

Standard reference descriptions of geological intervals (“Zone Designations”) with well-chosen type wells are used to ensure consistency in the administration of rights

Page 63.

Zone Designation SystemZone Designation System


In a petroleum and natural gas Lease, when hydrocarbons are found in any part of a standard Zone Designation layer, then the entire layer is eligible for lease continuation

The boundaries between layers are chosen at points where geological correlations are clear. Conflicts between companies over geological correlations, rights held, and vertical pooling are eliminated

Page 64.

Zone Designation SystemZone Designation System



Page 65.


Permits

Drilling Licences

Leases

Page 66.

BC’s Oil and Gas TenuresBC’s Oil and Gas Tenures


Underground Storage LeasePNG Act sections 126 – 132

Special AgreementPNG Act section 72

Requires Order-in-Council (cabinet)

Geothermal Resources ActPermits

Leases

Page 67.

Other Tenure We ManageOther Tenure We Manage


Permits

Page 68.


A right to explore for oil and gas

Available only by Crown salePostings up to one NTS block accepted, with cause

One year primary term

Term renewal requires annual exploration spendingActual exploration spending or cash-in-lieu paymentRates defined in Fee, Rental and Work Req. Reg.Renewal options and work requirements vary by class

Page 69.

Permits - Main FeaturesPermits - Main Features


Drilling Licences

Page 70.


A right to explore for oil and gas by drilling wells

Not a right to take production (for sale); testing OK

Acquired only from Crown SalePostings: 1 – 36 gas spacing areas

Term is 3, 4, or 5 years; “Prescribed Area” (Schedule 2 of the DL Regs)

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

May convert some GSAs to Lease for production and defer any unused entitlement to later in DL term

Page 71.

DL - Main FeaturesDL - Main Features


Section 3(5) - “Standard Extension”One year period

Available once - only at end of primary term

Pre-requisite for some other extension types

$500 fee; double rent ($7/ha)

Written application not required• Apply from e-Payments Statement; do not use Submission

• Available only up to expiry date (NO GRACE PERIOD)

Page 72.

DL - Term ExtensionsDL - Term Extensions


Section 3(5.1) - “Special Extension”

Available after term expiry or another extension

Renewable for one year or less, by application

Approval is discretionary• Decisions will be based on policies in Information Letter TACRD-11-02

Requires:• Application submitted to the Director before expiry

• WA application filed with OGC at least 30 days before expiry

• Start of drilling is delayed by one of:

– Environmental or socio-economic study

– Public hearing

– Planning or consultation process

Application• Standard DL rental ($3.50/ha) by ePayments Submission (not Statement)

Page 73.



Section 3(5.3) - “Coal Bed Gas Extension”Applies only to land and rights within a coalbed gas project approved by the OGC under s.75 of OGAA

Available only after standard extension

May be used up to 5 times

Requires:• Application submitted to the Director before expiry

• Lands and zones remain subject to OGC special project

Application• Standard DL rental ($3.50/ha) by ePayments Submission (not Statement)

Page 74.



Sections 3(7) – “Drilling past expiry”

Available only after the “standard” extension

Term extended to the rig release date (for drilling operations)

Requires:• Drilling has reached 150m (from surface) at midnight on expiry date

• Drilling is being conducted “diligently”

– Drilling interruptions may be allowed depending on circumstances

Section 3(10): Other DLs expiring after standard extension may be extended to the same rig release date by grouping with the DL extended under 3(7).

Section 3(9): No other well may be started during extension, except in the event of mechanical failures in the first well.

Page 75.



Section 4.1One DL must have, in the Director’s opinion, an earning well not previously used as an earning well for grouping or selection

Any number of qualified DLs may now be grouped

To qualify, a DL must lie within 4 km. of the DL to which the grouping well is associated.• Verify using GIS measurement tools: DataBC, PTO Viewer, or

contact us for written confirmation.

Application:Submitted to Director before earliest expiry date of the DLs to be grouped.

Written authority of one titleholder of each DL to be grouped when the applicant is neither the Payor nor a titleholder of all DLs in the proposed group.

Page 76.

DL - GroupingDL - Grouping



Page 78.


Awarded in terms of gas spacing areas (GSA) and “zones”GSAs awarded depends on:

Prescribed Area 1, 2, or 3• When DL spans two or more Areas, earnings are based on the

Area with the greatest earnings• Information Letter TITLES-05-03

Combined lengths of drilling events• Less any length drilled through rights held by lease that are

not necessary for the purpose of evaluating the DL

Licensee must designate one of the GSAs the earning well evaluatesA GSA may only be designated once during the life of the DL.

Page 79.

Lease EarningsLease Earnings


Zones awarded are to the base of the deepest zone "evaluated”If the well penetrates 2 or more DLs

Licensee must nominate one to be the ‘drilled’ DLEarnings and grouping rights attach to ‘drilled’ DL only

Page 80.

Lease EarningsLease Earnings


Page 81.

DL Term – Prescribed AreasDL Term – Prescribed Areas

Download from link in “Info Letters”

Info Letter TITLES-05-03

Link: “NEBC DL Boundary .pdf Map”

Primary TermMeasured Wellbore

Length (meters)Column 2

3 yearsColumn 3

4 yearsColumn 4

5 years

less than 1001

2 2 3

1 001 to 1 300 3 3 41 301 to 1 500 4 5 61 501 to 1 800 5 6 81 801 to 2 100 6 7 92 101 to 2 400 7 8 102 401 to 2 600 8 9 112 601 to 2 800 9 10 122 801 to 3 000 10 12 143 001 to 3 200 11 13 163 201 to 3 400 12 14 183 401 to 3 600 13 15 203 601 to 3 800 14 16 223 801 to 4 000 15 18 244 001 to 4 200 16 20 264 201 to 4 400 17 22 284 401 to 4 800 18 24 304 801 to 5 200 18 25 31Over 5 200 18 25 32


Definition:3.1(1) A licensee may apply to the director to have a well designated as an earning

well for a gas spacing area if another well has not been designated as an earning well for that gas spacing area.

3.1(2) On application under subsection (1), the director may designate a well as an earning well for a gas spacing area if the well

a) is drilled in a spacing area all or part of which is in a location described in a drilling licence that is either in effect on the date of designation or ceased to be in effect not more than 60 days before the date of the designation, or is a well re-drilled in a spacing area formerly described in a permit, drilling licence or lease no longer in effect.

b) Has generated well reports and well data, as defined in section 14 of the Oil and Gas Activities Act General Regulation, B.C. Reg. 274/2010, that, in the opinion of the director, sufficiently evaluate a zone in the gas spacing area.

Page 82.

Earning WellsEarning Wells


A "redrilled" well refers to a “re-entered” well, so the work carried out may consist of one or more of:

deepening the existing well to evaluate one or more underlying zonescompleting a previously uncompleted interval in the wellre-completing one or more intervals in the well in a manner that provides significant new information about the formation

The total wellbore length for re-entered wells is measured from surface to the base of the new bottom-hole location or from surface to the base of the deepest new completion interval, whichever is applicable

Page 83.

Earning WellsEarning Wells


Page 84.

Earning Well Scenario AEarning Well Scenario A

1

GSA 1

2

Zone A

Zone B

1st 2nd

Drilling order does not matter

Each well evaluates the same zones

One well not an earning well; choice is applicant’s

Applicant designates GSA1/ZoneA


Page 85.

Earning Well Scenario BEarning Well Scenario B

1

GSA 1

2

Zone A

Zone B

Upper leg

Lower leg

1st 2nd

Drilling order does not matter

Each well drills a distinct ‘formation’, but in same zone

Applicant designates which well is the earning well

Applicant designates GSA1/ZoneA


Page 86.

Earning Well Scenario CEarning Well Scenario C

1

GSA 1

2

Zone A

Zone B

Drilling order does not matter; both wells qualify as earning wells

Well #1 designates GSA/ZoneB

Well #2 designates GSA/ZoneA

1st 2nd


Page 87.

Earning Well Scenario DEarning Well Scenario D

1 2

GSA 1

Zone A

Zone BGSA 2

Drilling order does not matter; both wells qualify as earning wells

Well #1 designates GSA1/ZoneA

Well #2 designates GSA2/ZoneA

1t 2nd


Page 88.

Earning Well – Off DLEarning Well – Off DL

Drilling Licence Lease


A selected Lease may include rights down to the base of the deepest geological zone “evaluated” by the earning well

This standard is applied in a broad, exploratory sense The well must at least drill into and find significant or substantial new geological information about a zone. Typically, the information could establish that the well encountered a:

wet reservoir; or

tight reservoir; or,

hydrocarbon-bearing reservoir

Page 89.

Earning Wells – “Evaluation”Earning Wells – “Evaluation”


Alternately, evaluation may also mean determiningThe definitive absence of a reservoir; or,

The geological character of a zone in a new area

The existing state of exploration of a zone in a particular geographic area is an important factor, for example:

If drilling takes place in a remote or wildcat exploratory area, or if little is known about the zone of interest, then smaller amounts of new information will be considered significant in the evaluation of the zone

Similarly, a zone known to have a great degree of local geological variability will require only a small amount of new significant drilling information in order to be considered evaluated

Page 90.

Earning Wells – “Evaluation”Earning Wells – “Evaluation”


First, e-Payments Submission; then Application Letter

Create a Conversion type of Submission

If a grouping is needed, add each DL to be grouped to the Sub

For each DL, create a row for each new Lease to be issued from that DL, with its expected area, in hectares

Application Letter must include:The e-Payments Submission number in subject line

Page 91.

Lease Selection ApplicationsLease Selection Applications


Application Letter (continued)

Include a table with rows for each earning well, containing:• OGC Well Permit (WA)

• Rig release date (from drilling operations)

• Estimated total length of all eligible wellbore segments– Do not include lengths drilled after leaving the Drilling Licence rights

• Expected number of GSAs earned

• Name of the deepest formation “evaluated” by the well

• Designated GSA – location and zone

Desired configuration of Leases• Use legal descriptions that match formats used in the Drilling Licence

• Use separate tracts for lands of different rights

Page 92.

Lease Selection ApplicationsLease Selection Applications


Basic restrictions on selected Leases:

Must include all spacing areas to be placed on production

Each Lease must be located entirely within one DL

Must not result in new split gas spacing areas, unless you have an oil well and want to split the gas spacing area

Options for selected Leases:

So long as leases share a common issuance date, and are selected simultaneously, earnings from two or more WAs may be combined, regardless of zones earned, or the originating DL

Page 93.

Lease ConfigurationLease Configuration



Page 94.


Leases

Page 95.


A right to explore for and produce oil and gas

Available fromCrown Sale

Converting Permits and Drilling Licences

Split from another Lease (transfer)

May be continued beyond initial primary term

Page 96.

LeasesLeases


Page 97.

Leases – TermLeases – Term

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:

Term is the shorter of 5 or 10 years if Lease straddles boundary


Several forms

Section 62

Section 61

Section 61.1

Section 58

One year, in all cases

Guides available online (“Other Publications” page)

“Guide to BC Petroleum and Natural Gas Act Lease Continuations”

"Recommended Technical Package Contents for Section 58 Applications"

Page 98.

Leases – ContinuationsLeases – Continuations


Continuation by Penalty PaymentYear 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 ePaymentsUse 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 99.

s. 62 Continuations. 62 Continuation


Continuation by Drilling Commitment made Before Expiry

Drill one or more wells on Lease during continuation year, evaluating at least one zone held by that Lease

Application Must be in Writing and Must be made Prior to Expiry

Available for any Lease that is expiring

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

Director may cancel Lease for non-performance

Applications made through e-Payments

The Act requires sending written application

Page 100.



Continuation for Disposal Well and Planning Purposes

Continues spacing areas for existing disposal operations and spacing areas the Director believes will be required for effective future disposal, for example Coalbed Methane projects that advance across the land

Water, CO2, frac fluids, 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 101.

s. 61.1 Continuations. 61.1 Continuation


Four types of continuation:58(3)(a): Eligible Spacing Areas

58(3)(b): Unit and Royalty Agreements

58(3)(c): Work Programs

58(3)(d): Establishment of a Well

All s.58 continuations subject to rights reversion: deep rights or zone specific (s.59)

Leases approved under two or more s.58 sub-sections will be split accordingly

Page 102.



Section 58(3)(b) - “unit or royalty agreements”

Portions of Lease subject to Unit or Royalty Agreements

Once approved, continuation is by rental payment until further notice; subject to annual review under the Act

Section 58(3)(c) - “work programs”

Must be designed to delimit a pool or field of oil or natural gas

May include multiple Leases

Not intended for multi-year exploration programs, depends on circumstances (e.g., access, scope)

Section 58(3)(d) – “drilling incomplete”

The drilling 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 103.



s. 58(3)(a) – An Eligible Spacing Area is a spacing area that:

Contains a “petroleum well” or “gas well”

Is subject to an approved issued under s.75 of the Oil and Gas Activities Act by the Oil and Gas Commisssion

The Director believes is at least 50% covered by a designated land plat

The Director believes contains a pool that may be adequately drained by a well in an adjacent spacing area

Once approved, continuation is made by annual rental payment until further notice; subject to annual review under the Act

Page 104.

s. 58(3)(a) - Eligibilitys. 58(3)(a) - Eligibility


Depicts where the Director of Petroleum Lands recognizes that a pool of natural gas or petroleum has been delimited through the exploration and development work of industry

Illustrates, in map view, the gas or oil Spacing Areas delimited in a pool, and names the geological formation in which the pool is recognized

Referred to by combining the Tenure Area (oil or gas field name), Geological Formation, Sequence Letter, and Fluid Type (oil or gas), for example:

TA49004980DG (Inga Doig Phosphate ‘D’ Gas)

Page 105.

s. 58(3)(a) – Land Platss. 58(3)(a) – Land Plats


Page 106.

LAND PLATS - ExampleLAND PLATS - Example


Lease continuation application process is simplified for Crown and industry

Expertise of geological staff can be focused on Spacing Areas not yet recognized

Freely availableData download; or,

View online (iMap tool at DataBC website)Pools are delimited by Control Points of hard and soft data:

Wells posting hard results at specific locations

2D Seismic line locations; 3D seismic survey grids

Known geological formation characteristics

Mid to long term production and pressure histories

Page 107.



Sources of Evidence Delimiting Land Plats:Industry applications for continuation interpreting the results of drilling, seismic and well evaluation work

Ministry evaluations of drilling, log, sample, drillstem test, completion and production results, posted at the specific well locations, combined with geophysical evidence extending pools beyond well control

Analogous wells, old and new, with similar properties

Evaluations and approvals received from the OGC

Thousands of geophysical and geological interpretations on file from all Crown title holders, representing decades of information and analysis

All Analysed Spacing Area by Spacing Area

Page 108.



Clients that only submit a land plat and no technical package with their 58(3)(a) original application, or a contingent section 58(3)(c) application, will be notified of the land plat reduction by telephone and e-mail and given one opportunity to make their case (58A or 58C) within 10 working days of that contact, regardless of how much time has elapsed after expiry.

Page 109.



Leases are now subject to one of two types of rights reversion: zone-specific or deep rights reversion. In either case, the existing Zone Designation System will be used to administer them

What is Zone-Specific Retention (ZSR)?A ZSR-subject Lease is a PNG Lease that is a member of a chain of title originating with the purchase of a PNG title through a Crown sale held on or after March 29, 2007

ZSR is designed to return to the Province, at the end of the primary term of a subject Lease, all the zones that do not contain identified oil or natural gas depositsAll other zones will revert to the Crown unless they can be continued under other applicable sections of the Act, including sections 58(3)(c) and (d) and sections 61 and 62. These sections allow continuation based on drilling, completions, work programs, delimiting pools, and the simple payment of a penalty

Page 110.

s. 58(3)(a) – Reversions. 58(3)(a) – Reversion


Benefits of Zone-Specific RetentionIncreased investment opportunities for industry

Earlier discovery and development of new oil and gas pools, leading to earlier revenues for both industry and the Province

If well, geophysical, geological or engineering data shows that a pool of oil or gas exists in a zone in any spacing area, then it qualifies for continuation. This consideration is independent of the status of a well

The zone may be behind pipe, and in some cases the well may be abandoned, but well information proves a pool exists.

Page 111.

s. 58(3)(a) – Reversions. 58(3)(a) – Reversion


Standards for Zone-Specific RetentionWell information, combined with existing geological knowledge, are usually sufficient to determine whether a zone contains hydrocarbons

Modern well evaluation technologies, properly applied, are capable, in the vast majority of cases, of demonstrating the presence of hydrocarbons

Any remaining doubts should be resolved by completing the zone

Page 112.

s. 58(3)(a) – Zone Reversions. 58(3)(a) – Zone Reversion


iMapBC 2.0Land Plats Demo

iMapBC 2.0Land Plats Demo


General FeaturesMay include multiple Leases, even multiple target zones, and with different but relatively close expiry dates

Proposed work must, in the opinion of the division head, be designed to delimit one or more pools

Approved non-optional work must be fully completed during the term of the continuation.

Contingent work must be started during the term of the continuation, e.g., contingent wells must be spudded

Majority of programs are one year only; exceptions may be considered due to very limited access or an unusually complex work program

Non-performance jeopardizes future work programs

Page 114.

s. 58(3)(c)s. 58(3)(c)


Application must include a cover letter on company letterhead, and include:

A firm work commitment, e.g. “XYZ Corp. commits to carry out the following program of work: . . .”

A clear description of where the work will take place in relation to the Leases included in the application

The locations and formation names of the pools that will be delimited by the work program

Technical package contents

Must demonstrate the current state of geologic knowledge of the pools to be delimited, and how the work is likely to further delimit those pools

May include any technical material, such as public and proprietary well data, geological x-sections, isopachs, interpreted seismic, remote sensing results, and field studies

Page 115.

s. 58(3)(c)s. 58(3)(c)


Where approved programs include seismic components (new or re-evaluated), an acceptable report of the geophysical results is required at the end of the continuation year

Refer to downloadable document entitled “Requirements for Affidavits and Reports”Location: “Other Publications” page

Reports held confidential for 10 years, then deposited with thousands of similar studies

A cumulative index is published annually and available online from the same page

Page 116.

s. 58(3)(c)s. 58(3)(c)


Designed to allow leaseholders to finish drilling or “establishing” a well that is clearly in progress

More scrutiny will be applied if the well has not been spudded by expiry

If the well drilled into or will drill into multiple Leases, all Leases may be approved

All rights below the base of the deepest objective zone corresponding with the OGC well permit’s (WA) deepest “objective” formation are not included

Page 117.

s. 58(3)(d)s. 58(3)(d)


Page 118.

PART 3

General

Administration


ePayments


Page 119.


Accepts rents, fees, and penalty payments

Requires self-managed BCeID, electronic passport to BC Gov

Mandatory

Client must initiate payment; not an auto debit system

Key components to remember: Payors, Statements, Submissions, Receipts, Refunds, Surrenders

Issues refunds electronically, also mandatorye-Payments will not accept payments related to:

Split Transfers of PNG LeasesPNG PermitsSection 72 AgreementsUnderground Storage or Geothermal tenure

Page 120.

ePayments – OverviewePayments – Overview


BCeID Profile Manager

Appointments Company Administrator for each application accessed with BCeID

Company Administrator (e-Payments)

Assigns roles to other users; can perform function of any role

Users may be assigned multiple roles

Land Adminstrator

Creates and ‘opens’ submissions

Payment Administrator

Initiates payments from Statements or Open Submissions

Viewer

Read-only access

Page 121.

ePayments – User RolesePayments – User Roles


Page 122.

Continuing your TenureContinuing your TenureStatements

• When written applications are not required

• Use one of the “Statements” screens• Primary Term• Continuation/Extension

• Leases• Section 62, or• Section 58(3)(a), 58(3)(b), or 61.1

when this would repeat the previous continuation

• Drilling Licences• Section 3(5)

Submissions

• When written applications are required or to reduce title area by partial surrender

• Use “Manage Expiring Titles” screen• Leases

• 58(3)(a),(b) – first time• 58(3)(c),(d) – each time• 61 – each time• 61.1 – first time

• Drilling Licences• Conversions to Lease• 3(5.1) – each time• 3(5.3) – each time


Distinct from payments made from a Statement

Used when written applications are required Certain DL extension and Lease continuation types

All DL groupings and lease conversions

When requested by the Crown

An electronic “bucket” to hold a group of tenures related by their inclusion in a common application for extension, continuation, or conversion

Designed to facilitate application tracking by industry and reduce need to contact Branch staff for updates

e-Payments generates a Submission ID number; please reference it in all application correspondence

Tracking with Milestones and Communication Log

Page 123.

Submission paymentsSubmission payments


Rental “Default Notices” were eliminated July 1, 2010Manage expiries from the All Titles screen

e-Payments sends a monthly e-mail reminder to view your statementsOverdue titles are shown in purple and fall off ePayments 61 days past expiry

Page 124.

Managing Rental DeadlinesManaging Rental Deadlines


Late penalties are automatically calculated once the anniversary date has passedLeases

Day 1-30 - 1.5 %Day 31-60 – 3.0 %

Drilling LicenceDay 1-60 $500.00

Page 125.

Late PenaltiesLate Penalties


Request from All Titles screen in ePaymentsMinistry will cancel 60 days after anniversary date and send confirmation

Check title to be cancelledWhile the title remains visible, the cancellation request can be reversed with the Cancel Request function button

Please use signed letters for tenure types not managed through e-Payments (may require letter of authorization from a titleholder)

CancellationsCancellations

Page 126.


Letter of Authorization’s are needed when you are neither an owner or payorRequired for Titles not covered by e-PaymentsFor e-Payments, the registered Owner’s intent is implied by authorizing the Designated Payor to make decisions on the title

Page 127.

Letters of AuthorityLetters of Authority


Online HelpFollow link in Resources slideGetting StartedSelf-TutoringFAQsQuick Reference Tool

Page 128.

Training InformationTraining Information


Other Instruments

Affecting Title

Page 129.


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 130.

Power-of-AttorneyPower-of-Attorney


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

Page 131.

PartnershipsPartnerships


New Guide available from “Other Publications” page

Guidelines for Registering a Transfer of Subsurface Interest in Title (see Information Letter OGD-13-01)

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 132.

Title TransfersTitle 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 133.



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 134.



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 135.


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 136.

Split TransfersSplit 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

Split TransfersSplit Transfers

Page 137.


Purpose – joint development of a spacing area

Recorded as an ‘encumbrance’ in the titles registry (will appear online in title searches)

Letter contents:Name all title holders

Title numbers

Well authorization No.

UWI of well

Date of Pooling Agreement

Signature of all title holders

Page 138.

Pooling AgreementsPooling Agreements


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

Builder’s Lien

Page 139.

EncumbrancesEncumbrances


Single one-time fee:

$50.00 per title per encumbrance

Includes any partial or full discharge fees

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

Page 140.

Recording EncumbrancesRecording 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 141.

Discharging EncumbrancesDischarging Encumbrances


Requests for copies of encumbrances can be sent by fax

Fax: (250) 952-0331

Fees – minimum charge of $10.00, or .75 cents per page whichever is greater, an invoice will be sent with the documents

We will copy only the first 6 pages of the document plus the signature page; additional pages may be accessed and copied on-site by an authorized agent.

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 142.

Copies of EncumbrancesCopies of Encumbrances


Requests must include:May be sent by mail, fax or email

Copy of certificate and articles of amendment

Photocopies acceptable

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 143.

Name Changes & AmalgamationsName Changes & Amalgamations


THANK YOUTHANK YOU

Page 144.

Documents

British Columbia Ministry of Natural Gas Development October 22, 2013 BC Petroleum and Natural Gas Regulations Seminar Presentation to CAPL October 22,