Feedback – Proposed Indian Oil and Gas Regulations
The Government of Canada invites your feedback on proposed new regulations that would replace the existing Indian Oil and Gas Regulations, 1995. Please note that this process supplements but does not replace the regular public consultation process that accompanies regulatory development.
Background and Context:
The regime that governs the management and administration of oil and gas resources on First Nations reserve lands needed to be modernized to ensure First Nations reserve lands are competitive with surrounding regimes and to ensure oil and gas activities are regulated in an effective manner. Originally passed in the 1970's, the Indian Oil and Gas Act and Indian Oil and Gas Regulations are administered by Indian Oil and Gas Canada (IOGC), a special operating agency of Aboriginal Affairs and Northern Development Canada (AANDC), located on Tsuu T'ina Nation lands, just outside Calgary.
Legislation amending the Indian Oil and Gas Act, 1974 received Royal Assent in May 2009 resulting in the new Indian Oil and Gas Act, 2009 (IOGA, 2009). The IOGA, 2009 provided for the development of new regulations to replace the Indian Oil and Gas Regulations, 1995. The IOGA, 2009 and its associated new regulations will both become law once the new regulations are ready. Both the 2009 Act and the proposed new regulations were developed in co-operation with the Indian Resource Council, an Aboriginal organization that advocates on behalf of over 180 First Nations with oil and gas resources or the potential for such resources. During this process, the Indian Resource Council was funded for both their participation and to obtain independent legal and technical advice on both the Act and the regulations.
Proposed New Regulations:
The following is a brief summary of some of the key provisions of the new regulations.
Both Chief and Council and the Minister must approve any contract issued for the exploration or exploitation of oil and gas on First Nations reserve lands. To ensure transparency the proposed new regulations will clearly stipulate the criteria the Minister will use to evaluate a proposed contract. This transparency will ensure that First Nations know exactly what criteria must be met in order to approve a contract, which will facilitate the negotiations between Chiefs and Councils and industry.
The terms and conditions respecting leases and permits have been modernized to ensure efficiency in administration and promote timely development of resources. Leases, which are typically used for smaller dispositions of land, will have an initial term of 3 years rather than the 5 years provided in the current regulations. This gives companies 3 years to prove lands productive prior to continuance and prevents companies from holding onto lands that are not being developed. Permits, which are typically used for larger dispositions of land, have an initial term fixed between 2 and 5 years depending on the region in which the contract is located. Regions with deep drilling, complex geology and access challenges typically have longer terms while areas with shallow drilling and year-round access have shorter terms.
These timeframes are consistent with the terms of provincial contracts off reserve, which will help ensure First Nations reserve lands are competitive with off reserve lands. First Nations will be able to negotiate drilling commitments, earning provisions, and the contract depth of earning wells in order to meet specific needs and circumstances. The cumbersome lease selection process is replaced with a provision that allows production from permit lands, and earned permit lands to quality for a 3-year intermediate term. The new approach encourages companies to develop permit lands in an orderly and timely manner.
Two of the most common concerns raised by First Nations are that the current regulations do not adequately protect First Nations reserve lands from drainage and that the continuance provisions were too generous. The proposed regulations have addressed both of these concerns.
With respect to continuance, the proposed new regulations restrict the amount of land that can be continued on the basis of mapping thereby ensuring companies only can continue lands they have proven productive. The proposed new regulations allow lands to be continued indefinitely as long as they are considered productive. New non-productivity notices will be sent to the company if a well is abandoned, if a company fails to produce, or if lands are no longer considered productive. The notice gives the company one year to prove the lands productive or the lands will be returned to the First Nation.
Drainage and Compensatory Royalty:
With respect to drainage, the regulations provide for proximity-based offset notices to be issued whenever a well is producing adjacent to First Nations reserve lands. The default option of the notice will be for the company to pay a compensatory royalty in 6 months unless a well is put on production in the First Nation spacing unit or the lands are surrendered. This new provision will substantially increase the number of offset notices issued and will ensure that the First Nation is either paid compensatory royalty or wells are drilled on reserve to protect the First Nation's interests. If the offset lands are not leased, a notice will be sent to the Chief and Council and work can begin to lease the lands.
The reporting requirement provisions give IOGC the regulatory authority needed to utilize PETRINEX (PETRoleum INformation EXcellence – the industry and provincially-recognized authoritative source for oil and gas volume and pricing data). PETRINEX was created jointly by provincial governments and industry to facilitate the fast and accurate management of key volumetric and commercial information used to calculate and verify royalty. Upon IOGC's receiving full membership and informatics enhancements to exchange data with PETRINEX, the new reporting provisions and the use of PETRINEX will ensure royalties are determined quickly and accurately.
First Nation Audit:
The regulations give the First Nation the ability to enter into an agreement to conduct an audit on behalf of the Minister.
Updates to 1995 Regulations:
The regulations were updated to reflect existing regulatory authorities and to incorporate modern drafting standards. In addition, the regulations have been updated to reflect some of IOGC's current practices and policies. For example, the regulations include requirements for environmental reviews to accompany applications for exploration programs, surface agreements (wells and pipelines), and bitumen projects. The proposed regulations will provide many benefits to First Nations.
Review and Feedback:
Public input is very important to ensure that IOGC develops the best possible regulatory regime to meet stakeholder needs. You are invited to review the proposed regulations and, if desired, to provide feedback. If you choose to provide feedback, please complete the template below. We request that you:
- Include the section of the draft you are making reference to and explain your recommendation and rationale.
- If you are proposing an alternative, please ensure you provide a clear and detailed concept of what you are recommending.
- Please e-mail your completed template to email@example.com on or before June 15, 2015.
Please contact IOGC if you require further information.