10_82 — Petroleum and Natural Gas Drilling Licence and Lease Regulation

s. 1 — Definitions

s. 1(1)

In this regulation:

s. 1(1) — 5 year lease

5 year lease means a lease that has a term of 5 years under section 5.1;

s. 1(1) — 10 year lease

10 year lease means a lease that has a term of 10 years under section 5.1;

s. 1(1) — Act

Act means the Petroleum and Natural Gas Act;

s. 1(1) — earned lease

earned lease means a lease issued under section 53 of the Act in the circumstance specified in section 4 (1) (a) (i) of this regulation;

s. 1(1) — earning well

earning well means a well designated as an earning well under section 3.1;

s. 1(1) — gas spacing area

gas spacing area means a spacing area for a natural gas well.

s. 1(2)

The definitions in section 1 of the Petroleum and Natural Gas Act Grid Regulation apply for the purposes of this regulation.

s. 1.1 — Drilling licences issued under section 71 of the Act

The following provisions apply in respect of a drilling licence issued under section 71 of the Act, unless the minister directs otherwise under that section:

s. 1.1(a)

Part 5.1 of the Act, except section 49.1 (3);

s. 1.1(b)

this regulation and the Petroleum and Natural Gas Act Fee, Rental and Work Requirement Regulation, as they relate to drilling licences.

s. 2 — Application for drilling licence

An application for a drilling licence under section 49.1 (3) of the Act must be submitted to the director and must be accompanied by all of the following:

s. 2(a)

a description and map outline of the location for the drilling licence;

s. 2(b)

the fee and rent required by section 49.1 (4) (b) of the Act;

s. 2(c)

the reinstatement fee required by section 49.2 (3) (b) of the Act, if applicable.

s. 3 — Drilling licences

s. 3(1)

Repealed. [B.C. Reg. 33/2020, App. 1, s. 4 (a).]

s. 3(1.1)

Subject to subsection (2.1), the minister may include no more than 144 units in the location of a drilling licence.

s. 3(2)

Repealed. [B.C. Reg. 33/2020, App. 1, s. 4 (a).]

s. 3(2.1)

If the location is wholly or partly in the Peace River Block, the minister may include in the location of a drilling licence no more than 144 units and quarter sections combined.

s. 3(3)

Subject to a surrender under subsection (3.01), a continuation under subsection (5), (5.1) or (5.3) or an extension under subsection (7), a drilling licence expires as follows:

s. 3(3)(a)

in the case of a drilling licence that describes a location in Area 1 of Schedule 2, on the third anniversary of the date it was issued;

s. 3(3)(b)

in the case of a drilling licence that describes a location in Area 2 of Schedule 2, on the fourth anniversary of the date it was issued;

s. 3(3)(c)

in the case of a drilling licence that describes a location in Area 3 of Schedule 2, on the fifth anniversary of the date it was issued;

s. 3(3)(d)

in the case of a drilling licence that describes a location in 2 or more of the areas referred to in paragraphs (a) to (c), on the later of the applicable anniversaries.

s. 3(3.01)

A drilling licence may be surrendered in whole or in part at any time.

s. 3(3.02)

A surrender under subsection (3.01) must not result in a spacing area being divided.

s. 3(3.1)

The holder of a drilling licence must pay the rent for the upcoming year under section 49.2 (1) of the Act on or before the anniversary of the date the drilling licence was issued.

s. 3(3.2)

For the purposes of section 49.2 (2) of the Act, a drilling licence expires 60 days after the date the rent was due.

s. 3(3.3)

Repealed. [B.C. Reg. 33/2020, App. 1, s. 4 (f).]

s. 3(4)

A drilling licence commences on the date it is issued.

s. 3(5)

A drilling licence must be continued once, for a period of one year, if the application

s. 3(5)(a)

is made before the end of the term, and

s. 3(5)(b)

is accompanied by the continuation fee and rent specified under section 6.5 (1) of the Petroleum and Natural Gas Act Fee, Rental and Work Requirement Regulation.

s. 3(5.1)

The minister may grant one or more continuations of a drilling licence each for a period of one year or less if

s. 3(5.1)(a)

an application is made to the director before the end of the current term of the licence and is accompanied by the rent specified under section 6.5 (2) of the Petroleum and Natural Gas Act Fee, Rental and Work Requirement Regulation,

s. 3(5.1)(b)

an application to drill an earning well has been made to the regulator at least 30 days before the end of the current term of the licence, and

s. 3(5.1)(c)

drilling of an earning well has been delayed pending completion of

s. 3(5.1)(c)(i)

an environmental or socioeconomic study,

s. 3(5.1)(c)(ii)

a public hearing,

s. 3(5.1)(c)(iii)

a planning or consultation process,

s. 3(5.1)(c)(iv)

a correction of unsafe conditions at the well site, or

s. 3(5.1)(c)(v)

the provision of safe access to the well site.

s. 3(5.2)

Repealed. [B.C. Reg. 189/2005, s. 3.]

s. 3(5.3)

The minister may continue a drilling licence for a period of one year if

s. 3(5.3)(a)

the drilling licence has previously been continued under subsection (5),

s. 3(5.3)(b)

the application for the continuation is made during the term of a current continuation of the licence under

s. 3(5.3)(b)(i)

subsection (5),

s. 3(5.3)(b)(ii)

subsection (5.1), or

s. 3(5.3)(b)(iii)

this subsection,

s. 3(5.3)(c)

the application for the continuation is accompanied by the rent specified under section 6.5 (2) of the Petroleum and Natural Gas Act Fee, Rental and Work Requirement Regulation, and

s. 3(5.3)(d)

the drilling licence is included in a special project designated under section 75 of the Energy Resource Activities Act for the development or production of coalbed gas.

s. 3(5.4)

A continuation under subsection (5.3) must not

s. 3(5.4)(a)

apply to a zone that does not include the coal-bearing stratum or strata subject to the special project referred to in subsection (5.3) (d),

s. 3(5.4)(b)

be given if 5 continuations under subsection (5.3) have been given previously for the same drilling licence, or

s. 3(5.4)(c)

include land that is not included in the special project referred to in subsection (5.3) (d).

s. 3(6)

A licensee may assign or sublet all or a portion of the licensee's interest in a drilling licence but may not assign or sublet that interest on the basis of all or a portion of any area in the location.

s. 3(7)

The expiry date of a drilling licence is extended to the date the drilling of a well eligible for designation as an earning well is completed if

s. 3(7)(a)

the drilling licence would otherwise expire before the drilling of the well is completed,

s. 3(7)(b)

drilling of the well has reached at least 150 metres on the date the drilling licence would otherwise expire,

s. 3(7)(c)

drilling of the well is being diligently conducted, and

s. 3(7)(d)

the drilling licence has previously been continued under subsection (5).

s. 3(8)

If an expiry date is extended under subsection (7), no other well may be commenced in the location of the drilling licence after the expiry date that applied immediately before the extension under subsection (7) except as provided under subsection (9).

s. 3(9)

If the expiry date of a drilling licence is extended under subsection (7) and drilling of the well must be discontinued for mechanical reasons, a new well may be commenced in its place during the period of the extension under subsection (7).

s. 3(10)

The expiry date of a drilling licence that has been grouped, under section 4.1, with another drilling licence extended under subsection (7) is extended to the expiry date of that other drilling licence if the first licence

s. 3(10)(a)

would otherwise expire before the drilling of the well is completed, and

s. 3(10)(b)

has previously been continued under subsection (5).

s. 3.01 — Normal spacing must be assumed

Despite any applicable order made under section 65.1 (2) of the Act and unless the director specifies otherwise, the location of a drilling licence must be considered to be divided into normal spacing areas for natural gas wells in accordance with section 65 of the Act for the purposes of

s. 3.01(a)

designating an earning well for a gas spacing area under section 3.1, and

s. 3.01(b)

determining the maximum number of gas spacing areas that may be included in the location of an earned lease under section 4.01.

s. 3.1 — Earning wells

s. 3.1(1)

A licensee may apply to the director to have a well designated as an earning well for a zone in a gas spacing area if another well is not already designated as an earning well for the zone in the gas spacing area.

s. 3.1(2)

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

s. 3.1(2)(a)

either

s. 3.1(2)(a)(i)

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 that ceased to be in effect not more than 60 days before the date of designation, or

s. 3.1(2)(a)(ii)

was drilled in a spacing area, all or a part of which was in a location described in a that is not in effect and the well is re-entered and reworked under a drilling licence that is in effect or that ceased to be in effect not more than 60 days before the date of designation, and

s. 3.1(2)(a)(ii)(A)

permit,

s. 3.1(2)(a)(ii)(B)

drilling licence, or

s. 3.1(2)(a)(ii)(C)

lease

s. 3.1(2)(b)

has generated well reports and well data, as defined in section 14 of the Energy Resource Activities General Regulation, B.C. Reg. 274/2010, that, in the opinion of the director, sufficiently evaluate the zone.

s. 4 — Conversion of drilling licence to lease

s. 4(1)

For the purposes of section 49.3 of the Act, the minister may issue a lease under section 53 of the Act in respect of a location comprising one or more zones in one or more gas spacing areas included in the location of a drilling licence if

s. 4(1)(a)

one or both of the following circumstances apply:

s. 4(1)(a)(i)

the director has, under section 3.1 of this regulation, designated an earning well in the location of the drilling licence;

s. 4(1)(a)(ii)

all or part of the location of the drilling licence is included in a unitization agreement under section 114 of the Act, and

s. 4(1)(b)

the holder of the drilling licence makes an application in accordance with subsection (2) of this section.

s. 4(2)

An application for a lease under section 53 of the Act must

s. 4(2)(a)

be made to the director no later than 60 days following the expiry of the drilling licence, and

s. 4(2)(b)

in the case of an application for an earned lease, specify

s. 4(2)(b)(i)

the earning well used to earn the lease under section 4.01, and

s. 4(2)(b)(ii)

subject to section 4.01, which gas spacing areas and which zones in the gas spacing areas the holder of the drilling licence selects to include in the location of the lease.

s. 4(3)

In issuing a lease, the minister may not divide a normal spacing area for a natural gas well unless there is a petroleum well in the location of the lease.

s. 4.01 — Earned lease dimensions

s. 4.01(1)

The maximum number of gas spacing areas that may be included in the location of an earned lease is

s. 4.01(1)(a)

based on

s. 4.01(1)(a)(i)

the length of the well bore of the earning well used to earn the lease, and

s. 4.01(1)(a)(ii)

the term of the drilling licence, as determined under section 3 (3), the location of which includes the gas spacing area for which the director designated the earning well, and

s. 4.01(1)(b)

determined as follows:

s. 4.01(1)(b)(i)

in the case of an earning well designated for a gas spacing area in the location of a drilling licence with a term determined on the basis that the location is in Area 1 of Schedule 2, the maximum number is set out in Column 2 of Schedule 1 opposite the length of the well bore, set out in Column 1, that the director determines was necessary to evaluate a zone in a gas spacing area;

s. 4.01(1)(b)(ii)

in the case of an earning well designated for a gas spacing area in the location of a drilling licence with a term determined on the basis that all or part of the location is in Area 2 of Schedule 2, the maximum number is set out in Column 3 of Schedule 1 opposite the length of the well bore, set out in Column 1, that the director determines was necessary to evaluate a zone in a gas spacing area;

s. 4.01(1)(b)(iii)

in the case of an earning well designated for a gas spacing area in the location of a drilling licence with a term determined on the basis that all or part of the location is in Area 3 of Schedule 2, the maximum number is set out in Column 4 of Schedule 1 opposite the length of the well bore, set out in Column 1, that the director determines was necessary to evaluate a zone in a gas spacing area.

s. 4.01(2)

If the director has designated more than one earning well in the location of a drilling licence, the maximum number of gas spacing areas that may be included in the location of an earned lease is the sum of the maximum number of gas spacing areas, as determined under subsection (1), for the earning wells.

s. 4.01(3)

In an application referred to in section 4 (2) (b), the holder of a drilling licence may select any zone in a gas spacing area that is in the location of the drilling licence, subject to the following restrictions:

s. 4.01(3)(a)

the number of gas spacing areas included in the location may not exceed the number specified under subsection (1) or (2), as applicable;

s. 4.01(3)(b)

the deepest zone that may be included in the location is the deepest zone evaluated by means of the earning well on the basis of which the gas spacing area is eligible for inclusion in the location.

s. 4.1 — Grouping of drilling licences

s. 4.1(1)

The director, on the written application of the licensees, must approve the grouping of 2 or more drilling licences as one drilling licence if

s. 4.1(1)(a)

one of the licensees has drilled an earning well on one of the drilling licences being grouped,

s. 4.1(1)(b)

the application is submitted to the director on or before the earliest expiry date of the drilling licences being grouped,

s. 4.1(1)(c)

the distance between the locations of the drilling licences being grouped is not more than 4 kilometres at their closest point from the location of the drilling licence that contains the spacing area for which the earning well was designated, and

s. 4.1(1)(d)

the earning well has not been used previously to group a drilling licence.

s. 4.1(1.1)

Repealed. [B.C. Reg. 226/2012, s. 3 (c).]

s. 4.1(2)

Drilling licences grouped under this section must be treated as one drilling licence for the purposes of a lease application under section 53 of the Act.

s. 4.1(3)

If any part of an earning well has been used previously to earn a lease under section 53 of the Act, the earning well may not be used to earn a lease in the location of drilling licences grouped under this section.

s. 5 — Repealed

Repealed. [B.C. Reg. 33/2020, App. 1, s. 9.]

s. 5.01 — Lease continuation

s. 5.01(1)

On application by the leaseholder, the minister may grant one or more continuations of a lease, each for a period of one year or less, if

s. 5.01(1)(a)

the leaseholder has, at least 30 days before the end of the term of the lease, applied to the regulator to drill a well, and

s. 5.01(1)(b)

drilling of a well has been delayed pending completion of any of the following:

s. 5.01(1)(b)(i)

an environmental or socioeconomic study;

s. 5.01(1)(b)(ii)

a public hearing;

s. 5.01(1)(b)(iii)

a planning or consultation process;

s. 5.01(1)(b)(iv)

a correction of unsafe conditions at the well site;

s. 5.01(1)(b)(v)

the provision of safe access to the well site.

s. 5.01(2)

An application for continuation under subsection (1) must be made to the director before the end of the term of the lease and must be accompanied by the rent specified under section 8.3 of the Petroleum and Natural Gas Act Fee, Rental and Work Requirement Regulation.

s. 5.1 — Expiry of leases

s. 5.1(1)

Subject to subsection (2), a lease expires on the tenth anniversary of the date it was issued.

s. 5.1(2)

A lease issued in respect of a location situated wholly or partly in an area described in Schedule 3 expires on the fifth anniversary of the date it was issued.

s. 6 — Lease continuation with penalty

s. 6(1)

The term of a 5 year lease may be continued under section 62 (1) of the Act in respect of all or part of its location if the leaseholder

s. 6(1)(a)

requests the continuation no later than 60 days after the expiry of the lease, and

s. 6(1)(b)

pays the penalty specified under section 8.1 of the Petroleum and Natural Gas Act Fee, Rental and Work Requirement Regulation.

s. 6(2)

A 5 year lease is eligible to be continued under section 62 (1) of the Act if it has not previously been continued under that section.

s. 6(3)

The term of a 10 year lease may be continued under section 62 (1) of the Act in respect of all or part of its location if the leaseholder

s. 6(3)(a)

requests the continuation no later than 60 days after the expiry of the lease, and

s. 6(3)(b)

pays the penalty specified under section 8.1 of the Petroleum and Natural Gas Act Fee, Rental and Work Requirement Regulation.

s. 7 — Repealed

Repealed. [B.C. Reg. 33/2020, App. 1. s. 12.]

s. 8 — Repealed

Repealed. [B.C. Reg. 60/2023.]

Schedule

Schedule 1 [en. B.C. Reg. 189/2005, s. 5; am. B.C. Regs. 226/2012, s. 4; 33/2020, App. 1, s. 13.] Lease Area Entitlements per Earning Well (section 4.01 (1))

Schedule

Schedule 2 [en. B.C. Reg. 189/2005, s. 5.] Term of Drilling Licence (section 3 (3))

Schedule

Schedule 3 [en. B.C. Reg. 33/2020, App. 1, s. 14.] 5 Year Lease Areas (section 5.1 (2))