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OIL AND GAS CONSERVATION AMENDMENT ACT

OIL AND GAS CONSERVATION
AMENDMENT ACT

Chapter 24 (Supp)


HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Alberta, enacts as follows:

Amends RSA 2000 cO‑6

1   The Oil and Gas Conservation Act is amended by this Act.

RSA 1980 c16 (Supp) s1

2   Section 78(d) is amended by adding “or an order under section 84.1” after “section 79”.

RSA 1980 c16 (Supp) s2

3   Section 84(1)(a) and (2) are amended by adding “or order under section 84.1” after “unit agreement”.

RSA 1980 c16 (Supp) s3

4   The following is added after section 84:

Unit Operation in Field or Pool

Application for unit operation

84.1(1)  If owners in a field or pool or part of a field or pool cannot agree to consolidate, merge or otherwise combine their interests for the development, production and recovery of the oil and gas resources in the field, pool or part of the field or pool, an owner may apply to the Regulator to have the field, pool or part operated as a unit.

(2)  The Regulator shall hear an application that is made by owners of over 50% of the working interests calculated on an area basis, and may, in its discretion, hear an application made by owners of less than 50% of those interests.

(3)  Subject to section 84.2, if the Regulator, on hearing the application, is of the opinion that the unit operation of the field, pool or part of the field or pool is desirable in the interest of conservation, the Regulator may, with the approval of the Lieutenant Governor in Council, order that the field, pool or part of the field or pool be operated as a unit.

(4)  An order under subsection (3) shall set out

                                             (a)    the date on which it comes into force,

                                             (b)    a description of the unit area,

                                              (c)    a description of each unit tract,

                                             (d)    a description of the pool or pools or part of the pool or pools within the unit,

                                              (e)    a description of the operations to be conducted,

                                              (f)    an allocation, according to a formula or schedule, to each unit tract of its share of the oil and gas produced from the unit and not required, consumed or unavoidably lost in the unit operation,

                                              (g)    a provision for charging the capital investments and the expenses of the unit operation to the unit tracts, and for determining by whom the investments and expenses chargeable to a unit tract shall be paid,

                                             (h)    a provision for the establishment of an operators’ committee,

                                               (i)    a provision for determining the voting interest of each member of the operators’ committee,

                                              (j)    a provision determining the method of voting on a motion before the operators’ committee and the voting interest or percentage required to carry the motion,

                                             (k)    a provision for the appointment of a person as the unit operator and who shall

                                                        (i)    be responsible for the management and conduct of the unit operation, and

                                                       (ii)    be under the direction and supervision of the committee,

                                               (l)    a provision specifying the manner in which and the circumstances under which the unit operation shall terminate, and

                                            (m)    any further provisions, terms and conditions that may be necessary or desirable.

RSA 2000 c24(Supp) s4;2012 cR‑17.3 s98

Prerequisites to unit operation

84.2(1)  Subject to subsections (3) and (4), the Regulator shall not make an order under section 84.1(3) unless there are filed with the Regulator statements in writing agreeing to the operation of the unit as a unit and signed by

                                          (a)   persons having the right to drill for and produce the oil or gas in 85% or more of the proposed unit area, or if one person has the right to drill for and produce oil or gas in 85% or more but not all of the proposed unit area by that person and one other person having the right to drill for and produce that oil or gas, and

                                          (b)   persons having the head lessor’s royalty interest in that oil or gas if it is subject to lease, or the ownership of the oil or gas if it is not subject to lease, in 85% or more of the proposed unit area, or if one person has the head lessor’s royalty interest or ownership in 85% or more

but not all of the proposed unit area by that person and one other person having a head lessor’s royalty interest or ownership in that oil or gas.

(2)  If the Regulator, in an order made under section 84.1(3) finds that the statements filed in compliance with subsection (1) of this section agree to a unit operation on terms and conditions consistent with those prescribed by the order, the Regulator may provide that the order shall come into force at any future time.

(3)  If the Regulator, in an order made under section 84.1(3) finds

                                             (a)    that the statements filed in compliance with subsection (1) of this section agree to a unit operation on terms and conditions other than those prescribed by the order, and

                                             (b)    that there is no difference in terms and conditions that is of a substantial nature or that any difference of a substantial nature affects only the persons having the right to drill for and produce the oil or gas in the unit,

the Regulator may provide that the order shall come into force at a time not less than 60 days after the date of the order unless there are filed with the Regulator sufficient statements in writing countermanding statements filed in compliance with subsection (1) to reduce the number of statements in compliance with subsection (1) at that time filed with the Regulator to less than the number required by subsection (1).

(4)  If the Regulator, in an order made under section 84.1(3) finds that the statements filed in compliance with subsection (1) of this section agree to a unit operation on terms and conditions other than those prescribed by the order and that the difference in terms and conditions is of a substantial nature, the Regulator may

                                             (a)    require that statements in writing be filed with the Regulator, agreeing to the order and the terms and conditions thereof and signed by the proportion referred to in subsection (1) of persons having the right to drill for and produce oil or gas in the unit area and of persons having a head lessor’s royalty interest or ownership in oil or gas in the unit area, and

                                             (b)    provide that, if those statements are filed within 60 days of the date of the order, the order shall come into force at any time after that 60 day period,

but, if those statements are not filed within 60 days of the date of the order, the Regulator shall revoke the order.

RSA 2000 c24(Supp) s4;2012 cR‑17.3 s98

Effect of order under section 84

84.3   On and after the date on which an order comes into force pursuant to section 84.2 and while the order remains in force, the order and the terms and conditions thereof are binding on each owner of an interest in oil or gas in the field, pool or part of the field or pool subject to the order and on anyone entitled to a contractual benefit through an owner.

Payment of expenses

84.4(1)  An order made under section 84.1 may provide that, if the person responsible for the paying of the expenses chargeable to a unit tract fails to do so, the unit operator

                                             (a)    may appropriate and sell the share of production of oil and gas allocated to the unit tract to which the person failing to pay the expenses is entitled exclusive of,

                                                        (i)    in the case of oil or gas rights owned by the Crown, any royalty payable to the Crown, and

                                                       (ii)    in the case of freehold oil or gas rights when the owner has granted a lease thereof, the royalty specified in the lease,

                                                      to the extent necessary to recover those expenses, and

                                             (b)    shall have a first lien on the interest of the owner of the unit tract in the equipment belonging to the unit to secure the payment of the amount of expenses charged to that unit tract.

(2)  When

                                             (a)    the unit operator is authorized under this section to appropriate and sell the share of production of oil and gas allocated to a unit tract, and

                                             (b)    the person failing to pay the expenses chargeable to the unit tract is entitled under a contract to sell oil or gas, whereby the person could sell the share of production allocated to the unit tract,

the unit operator, on the giving of notice by the unit operator to the purchaser under the contract, is subrogated with respect to the contract to the person failing to pay the expenses chargeable to the unit tract, so that the unit operator may sell the share of production allocated to the unit tract in accordance with the contract.

(3)  Notwithstanding subsection (1), if an owner fails to pay the owner’s unit tract’s share of expenses and the owner had not signed a statement in compliance with section 84.2(1), the unit operator may recover those expenses only from the part of production of oil and gas allocated to the tract which the unit operator may appropriate and sell under subsection (1).

Ownership

84.5(1)  All property acquired by the unit operator of a unit area established pursuant to section 84.1 shall be held by the unit operator as trustee and agent for and on behalf of the owners of the tracts who are responsible for paying their respective tract’s share of the operating expenses of a unit.

(2)  The order providing for unit operation shall be construed as an operating arrangement and shall not be construed as affecting or transferring title to the unit operator or entitling an owner of a separately owned tract to an undivided interest in all tracts included in the unit area.

Unit operator

84.6(1)  The unit operator of a unit area established pursuant to section 84.1 shall exercise generally all the powers incidental to the proper conduct and management of the unit operation.

(2)  The unit operator may contract and may sue and be sued in the unit operator’s own name with respect to the duties, functions and powers imposed or conferred on the unit operator by or pursuant to this Act.

Rehearing of unit operation order

84.7(1)  An order under section 84.1 may provide for a rehearing by the Regulator on the application of any interested person or after a future date specified in the order.

(2)  When an order has been made under section 84.1 and whether or not the order provides for a rehearing, the Regulator, on its own motion, may hold a rehearing when in its opinion the circumstances so warrant.

(3)  Following the rehearing, the Regulator may, with the approval of the Lieutenant Governor in Council, amend or revise a unit operation order in order to vary the unit area, to supply any deficiency in the order or to meet changing conditions, and may alter or revoke any provision which is considered to be unfair or inequitable, and section 84.2 applies to the amending or revising order.

(4)  When a unit operation order is amended or revised under subsection (3) to enlarge the unit area, the Regulator, in providing for allocation of production from the enlarged unit area, shall first treat the unit area established under the original order as a single tract, and the portion of the production allocated to the unit area established under the original order then shall be allocated among the tracts in the unit area in the same proportion as specified in the original order.

RSA 2000 c24(Supp) s4;2012 cR‑17.3 s98

Unit area previously established

84.8(1)  An order under section 84.1 may provide that a unit area established by it include a unit area established by a previous order.

(2)  The order, in providing for allocation of production from the new unit area, shall first treat the previously established area as a single tract, and the portion of the production allocated to the previously established unit area then shall be allocated among the tracts included in the previously established unit area in the same proportion as specified in the previous order.

Operation of unit area

84.9   On and after the date on which a unit operation order pursuant to section 84.1 comes into force and while the order remains in force, no person shall carry on any operations within the unit area for the purpose of drilling for or producing oil or gas, except in accordance with the provisions of the order.

RSA 1980 c16 (Supp) s4

5   The Mines and Minerals Act is amended by repealing section 1(1)(ff) and substituting the following:

                                (ff)    “unit operation order” means

                                           (i)   an order under section 84.1 of the Oil and Gas Conservation Act, or

                                          (ii)   an order under the Turner Valley Unit Operations Act.

1983 c36 s43

6   This Act comes into force on Proclamation.

RSA 1980 c16 (Supp) s5