2021 Report to Parliament on the Indian Oil and Gas Act, RSC 1985, c I-7

(Prepared August 1, 2021, Tabled in the House of Commons and the Senate on December 10, 2021)

Introduction

About Indian Oil and Gas Canada

Indian Oil and Gas Canada is a special operating agency within Indigenous Services Canada and manages and regulates oil and gas activities on designated First Nation reserve lands (First Nation lands).

Indian Oil and Gas Canada's jurisdiction includes oil and gas activities on designated First Nation lands across Canada, with most activity and infrastructure concentrated in the Western Canada Sedimentary Basin. There are currently 33 First Nations that produce oil or gas and an additional 17 that have non-producing or historical oil and gas infrastructure.

Indian Oil and Gas Canada's responsibilities are to:

identify and evaluate oil and gas resource potential on First Nation lands;
encourage companies to explore for, drill, and produce these resources through leasing activity;
ensure equitable production, fair prices, and proper collection of royalties on behalf of First Nations; and
secure compliance with and fairly administer the regulatory framework.

Indian Oil and Gas Canada operates pursuant to the Indian Oil and Gas Act, RSC 1985, c I-7 (Act) and Indian Oil and Gas Regulations, SOR/2019-196 (Regulations), as well as other relevant legislation. On First Nation lands, oil and gas activity is founded on joint agreements between First Nations, oil and gas companies, and Indian Oil and Gas Canada. The process for new agreements requires dual First Nation and Indian Oil and Gas Canada approval.

About the modernization of the Act and Regulations

Modernization of the Indian Oil and Gas Act, 1974 and its associated regulations was intended to:

eliminate the existing regulatory gap;
level the discrepancy between First Nation lands and equivalent provincial lands;
reduce barriers to economic development; and
assist the federal government in better fulfilling their fiduciary and statutory obligations to First Nations in relation to oil and gas resources on designated First Nations lands.

Provincial acts and regulations, governing the conservation and development of oil and gas resources have been enhanced and adapted to industry and technological developments over the past 20+ years. The equivalent federal regulatory regime, on First Nation lands, has not kept pace with their provincial counterparts resulting in an uneven playing field for oil and gas investment on First Nation lands, as compared to equivalent lands in the surrounding province.

The amendments to the Act addressed the need to legislate aspects of industry operations on First Nation lands. Regulation development was split into separate modules and will follow a phased approach of approval and implementation.^{Footnote 1} The Regulations, brought into force with the Act, include a set of core regulations. In subsequent phases, new regulations will replace existing provisions that were carried forward from the 1995 Regulations.

The Act and Regulations both came into force on August 1, 2019, and the Act made significant improvements in three broad categories:

increased legal certainty, particularly for the regulatory process governing oil and gas exploration and development on First Nations lands (i.e., clarifying powers, roles and responsibilities);
improved ability of the Government of Canada to regulate oil and gas development on First Nations lands (i.e., modern suite of regulatory tools such as a compliance and enforcement ladder); and
enhanced environmental protection and preservation of First Nation sites of cultural, historical and ceremonial significance (e.g. power to halt operations).

Specifically, the Act includes benefits for First Nations and provides Canada with new powers to:

audit companies working on First Nations lands;
set longer limitation periods;
more effectively address surface and subsurface trespass;
protect First Nation sites of cultural importance; and
expand compliance and enforcement tools.

The Regulations further include amendments to:

make them compatible with the Act;
reflect modern regulations drafting conventions; and,
include beneficial practices that had evolved over several years.

Consultation and Engagement Summary

The modernization of the Act and the Regulations was a collaborative process with extensive engagement and consultation involving First Nations, First Nation organizations, and First Nation advocacy groups.

The Indian Resource Council (the Council) is an Indigenous organization that advocates on behalf of 189 member First Nations with oil and gas or the potential for such resources. Indian Oil and Gas Canada and the Council established the Joint Technical Committee, made up of departmental subject matter experts and oil and gas technicians from some of the major oil and gas producing First Nations. The Joint Technical Committee was responsible for reviewing and providing input during the development of the Regulations. Funding was provided to the First Nation members of the Joint Technical Committee to obtain independent technical and legal advice, to review and provide feedback on the policy intent behind the regulation, on the regulatory drafting instructions, and on drafts of Regulations.

From late 1999 to early 2019, Indian Oil and Gas Canada prepared and facilitated a number of engagement and consultation activities related to the amendments to the Act and the Regulations. Indian Oil and Gas Canada facilitated multiple consultation activities to ensure First Nation stakeholders were fully aware of the proposed regulatory changes and were provided opportunities to be further informed, to receive feedback, and to provide input. In general, engagement and consultations consisted of:

Joint Decision Making

Indian Oil and Gas Canada and the Joint Technical Committee worked together on the concepts and drafting instructions. Indian Oil and Gas Canada accommodated, where possible, the Joint Technical Committee's requests related to concepts and drafting.
Where accommodation was not possible, Indian Oil and Gas Canada provided rationale and worked with the Joint Technical Committee to come to an agreement on concepts and drafting instructions acceptable to both parties.

Information Sharing

First Nation stakeholders such as Chief and Councils received one-on-one, face-to-face sessions; direct letters including updates; quarterly newsletters; presentations at ten technical symposiums and the Council's annual general meeting every year since 1999^{Footnote 2}.
First Nation stakeholders such as the Council's Joint Technical Committee, the Federation of Sovereign Indigenous Nations, and Confederacy of Treaty Six First Nations participated in the review and input into drafts of proposed legislation, policy objectives, regulatory drafting instructions and drafts of proposed Regulations.
First Nation oil and gas companies received quarterly newsletters with updates on regulation development and presentations at industry conferences.

Feedback and Input

Indian Oil and Gas Canada conducted ongoing consultation and engagement with First Nations, and any feedback and input received was taken into consideration and accommodated, where possible, in subsequent drafts^{Footnote 3}.

In 2015, Indigenous and Northern Affairs Canada (predecessor of Indigenous Services Canada) provided funding to Loon River First Nation, White Bear First Nation, and Frog Lake First Nation, some of the top producing First Nations, to obtain independent professional, technical and legal reviews of the draft Regulations. These independent reviews were completed to complement and confirm similar reviews conducted by the Council's Joint Technical Committee. The results of all these reviews were distributed to all oil and gas producing First Nations.

Results from the consultation activities were then utilized to amend the Act and Phase I of the Indian Oil and Gas Regulations, which entirely replaced the Indian Oil and Gas Regulations, 1995, with a concerted effort to accommodate First Nations interests and values.

Statistics from Act Section 28.1

Section 28.1 states that at least every two years after the coming into force of the present section, the Minister shall prepare a report on the administration of this Act during the two preceding years and shall table a copy of the report in each House of Parliament within the first fifteen days that it is sitting after the completion of the report, which shall include a summary addressing the following matters:

Act Section 28.1(a)
"28.1(a) the progress of the consultations mentioned in paragraph 6(1.1)(a) and a list of concerns raised during such consultations;

6(1.1)(a) require that a power of the Minister under this Act in relation to first nation lands be exercised only if prior approval of the council of the first nation is obtained, if the council is first consulted or if prior notice is given to the council, as the case may be. …"

Tables 1-5 below provide detailed information and statistics for the reporting under the Act and Regulations.

Table 1: Consultation summary of when prior approval of the council is obtained for oil and gas provisions within Indian Oil and Gas Act, RSC 1985, c I-7 (Act) and the Indian Oil and Gas Regulations, SOR/2019-196 (Regulations).

Provision: Prior approval of the Council of the First Nation
Instance	Occurrences	Concerns
1. Sec 17. Person accompanying inspector For the purpose of monitoring compliance with the Act and these Regulations, a person may accompany an inspector who is inspecting a contract holder's facilities and operations on First Nation lands if the person is authorized to do so by a written resolution of the council and the person has the certifications, and complies with the occupational health and safety requirements, required or imposed by the holder or by law.	262 environment-related and 71 facilities/production-related inspections 262 environment-related inspections were conducted with First Nations representatives that accompanied officials. An additional 71 oil and gas facilities/production-related inspections were conducted. For these 71 inspections, First Nation representatives were invited to accompany and they declined. Inspection findings were shared with First Nations.	No concerns.
2. 20 (1) Amendments Any amendment to a contract or a bitumen recovery project requires the prior approval of the council and the Minister.	One (1) bitumen recovery project Consultation is underway with one First Nation as a result of their lessee/operator having recently expressed an interest in expanding the existing project, which could allow the First Nation to derive additional economic benefit from the exploration and development of their natural resources. Seven (7) subsurface contracts Seven amendments to subsurface contracts have occurred since August 1, 2019. In all cases, prior approval of Council and the Minister was obtained prior to the execution of the amendment. Prior approval of Council, the Minster and the Lessee is part of the amendment approval process. Twenty (21) surface contracts A total of 21 surface contracts have been amended.	No concerns.
3. Sec 29(5). Submission of documents To obtain the exploration licence, the applicant must, within 90 days after the day on which the reviewed application is received, submit to the Minister three copies of the environmental protection measures letter and three original copies of the application signed by the applicant, along with a written resolution of the council approving the licence.	One (1) One submission has been received and approved.	No concerns.
4. Sec. 40 (3). Publication of notice of tender The Minister must submit a copy of the proposed notice of tender to the council before publishing it and, if it is approved, must publish it.	Nil. No requests for Public Tender have been received.	No concerns.
5. Sec. 42(4). Council's decision The council may, within 15 days after the day on which the tender closes, notify the Minister by written resolution that it rejects the bid with the highest bonus. If such a notice is received, all bids must be rejected.	Nil. No cases have occurred.	No concerns.
6. Sec 46(1). Granting of contract The Minister must grant the contract if he or she receives the following within 90 days after the day on which a copy of the contract has been received by both the applicant and the council: (a) a written resolution of the council approving the terms and conditions of the contract and stating that the council has chosen to have the rights or interests described in the contract granted by way of negotiation rather than public tender;	Two (2) Two instances occurred. A written resolution respecting 46(1)(a) forms part of every subsurface contract which is approved by the First Nation prior to issuance.	No concerns.
7. Sec. 50 (1). Term exception Despite subsections 48(1) and (2) and section 49, with the consent of the applicant and the council, the Minister may fix the initial term of a permit or the term of a lease at a number of years that is greater than the number established by those provisions, to a maximum of five years.	One (1) One lease was granted a term exception from a standard three (3) year term to a five (5) year term, with consultation and consent of the applicant, council and the Minister.	No concerns.
8. Sec. 58 (1). Approval The Minister must approve the bitumen recovery project if (b) a written resolution of the council approving the project has been submitted;	One (1) Consultation is underway with one First Nation as a result of their lessee/operator having recently expressed an interest in expanding an existing project.	No concerns.
9. Sec. 61. Additional lands, wells or facilities Once a bitumen recovery project has been approved, the subsurface contract holder must obtain the approval of the Minister and the council before adding lands, wells or facilities to the project.	One (1) Consultation is underway with one First Nation as a result of their lessee/operator having recently expressed an interest in expanding an existing project.	No concerns.
10. Sec. 66 (1). Continuation requested by council The Minister may continue, for a maximum period of five years, a contract in respect of lands for which continuation was not granted under subsection 65(1) or lands for which continuation was granted under subsection 65(3) if (a) the council requests the Minister to do so in a written resolution sent to the Minister that describes the lands, including the zones, to which the request relates and the requested period of continuation;	Nil. There have been no continuations requested by council.	No concerns.
11. Sec. 75(4). Granting of contract The Minister must grant the contract if he or she receives the following: (b) a written resolution of the council approving the contract and the written consent of any First Nation member in lawful possession of lands in the contract area; and	Seventeen (17) A total of 17 new surface contracts have been issued.	No concerns.
12. Sec 77(2). Amendment of lease The Minister must amend the lease to reflect the rent renegotiated under subsection (1) if (a) a written resolution of the council approving the renegotiated rent is submitted along with the written consent of any First Nation member in lawful possession of lands in the lease area; and	Nil. Prior to the initiation of a rent renegotiation by Indian Oil and Gas Canada, a rent review is completed to assess market rates. Through the completion of regular rent reviews, Indian Oil and Gas Canada has determined that current rental rates reflect market conditions. Indian Oil and Gas Canada received an interest to initiate a rent renegotiation from two (2) First Nations and they are being processed.	No concerns.
13. Sec. 81(2) Payment in kind After giving the contract holder notice, and having regard to any obligations that the holder may have in respect of the sale of oil or gas, the Minister may, with the prior approval of the council, direct the holder to pay all or part of the royalty in kind for a specified period or until the Minister directs otherwise.	Nil. No payments in kind have been applied for or approved.	No concerns.
14. Sec 103. Service wells (3) Approval The Minister must approve the proposed uses of the service well if (b) the approval of the council has been obtained; and	Nil. No service wells have been applied for or approved.	No concerns.
15. Sec. 108 (1) Unit agreement The Minister may, with the prior approval of the council, enter into a unit agreement.	Nil. No unit agreement has been entered into during the subject time period.	No concerns.

Table 2: Consultation summary of instances when council was first consulted first under of oil and gas provisions within Indian Oil and Gas Act, RSC 1985, c I-7 (Act) and the Indian Oil and Gas Regulations, SOR/2019-196 (Regulations).

Provision: Council is consulted first
Instance	Occurrences	Concerns
1. Sec. 12(2). Unsurveyed lands If the lands in a contract area are surveyed during the term of the contract, the Minister must, after consulting with the holder and the council, amend the contract so that the description of the contract area complies with subsection (1).	Nil. No incidents of unsurveyed lands have occurred during the term of subsurface contract.	No concerns.
2. Sec. 38. Fair value In determining the fair value of the rights or interests to be granted under a subsurface contract, the Minister must, in consultation with the council, consider the bonuses paid for grants of oil and gas rights or interests in other lands, which may be adjusted to take into account the following factors: (a) the size of the other lands and their proximity to the First Nation lands; (b) the time when the rights or interests in the other lands were granted; (c) current oil and gas prices and the prices when the rights or interests were granted; (d) the results of recent drilling operations in the vicinity of the other lands; (e) similarities and differences in the geological features of the other lands and the First Nation lands; and (f) any other factors that could affect the fair value of the rights or interests.	Five (5) determinations made. Fair value determination consultation with council and approval of council in consideration of bonuses paid occurred in five instances as part of the approval process and was documented in the final subsurface contract.	No concerns.
3. Sec. 40(1). Minister's duties When oil and gas rights or interests are to be granted by way of public tender, the Minister must, after consulting with the council, prepare a notice of tender.	Nil. There have been no requests for public tender.	No concerns.
4. Schedule 5, 2(2). Factors to consider In determining the fair value of oil or gas, the Minister, in consultation with the council, must take into account the following factors: (a) any applicable reference price; (b) in the case of gas, transportation cost, volume of fuel gas and heat value; (c) in the case of oil, transportation cost, quality adjustment for sulphur content and density; (d) whether the parties to the transaction are related parties within the meaning of subsection 82(4) of these Regulations; (e) the Bank of Canada's daily exchange rate for converting U.S. dollars to Canadian dollars; and (f) the factor of 6.2898 to convert barrels of oil to cubic metres of oil.	All agreements All agreements have taken these factors into account.	No concerns.

Table 3: Consultation summary of when prior notice is given to the council under oil and gas provisions within Indian Oil and Gas Act, RSC 1985, c I-7 (Act) and the Indian Oil and Gas Regulations, SOR/2019-196 (Regulations)

Provision: Prior notice is given to Council
1. Sec. 40(3). Publication of notice of tender The Minister must submit a copy of the proposed notice of tender to the council before publishing it and, if it is approved, must publish it	Nil. A Notice of Tender has not been requested or issued.	No concerns.

Provision: Prior notice is given to Council

Instance

Occurrences

Concerns

1.
Sec. 40(3). Publication of notice of tender
The Minister must submit a copy of the proposed notice of tender to the council before publishing it and, if it is approved, must publish it

Nil.

A Notice of Tender has not been requested or issued.

No concerns.

Act Section 28.1(b)
"…Any proposed regulation to be made under subsection 6(1.1); and…"

Table 4: Status of Phase II Regulations and associated modules.

Provision	Module	Status
Phase II Regulations	Environment	Three (3) reviews completed
	Surface	Not yet proposed
	Exploration (seismic)	Not yet proposed
	Royalty	Not yet proposed
	Conservation	Not yet proposed
	Moneys management	Not yet proposed
	Enforcement	Not yet proposed

The Department completed all the regulatory drafting instructions by the end of March 2013. The volume of material produced (more than 6,600 pages of drafting instructions and provincial rules to be replicated) had two important implications: 1) it would have taken considerable time for Justice Canada regulatory drafters to read, understand the complex and technical subject matter, and then draft regulations; and, 2) it would have been challenging to have meaningful consultations with First Nations given the volume of material and its technical complexity. The decision was made to separate the drafting instructions into smaller, more manageable modules. The Act would then be brought into force with a set of core regulations, known as Phase I. The remaining modules, included in the table above, are collectively known as Phase II. In subsequent phases, new regulations (Phase II) will be brought into force as they are readied to replace existing provisions that were carried forward into the Regulations from the 1995 Regulations. Below is a summary of the outreach activities that have taken place and those that are planned for 2021-2022:

In December 2016, Indian Oil and Gas Canada shared the drafting instructions for the Surface, Exploration, Environment and Moneys modules with the Joint Technical Committee.
In late 2019, following enactment of the Act and Regulations, work on the Environment, Surface and Exploration modules was initiated with the Joint Technical Committee.
Due to the COVID-19 pandemic, the Surface and Exploration modules were set aside and work on the Environment module continued.
Two meetings occurred in fall of 2020 where the Joint Technical Committee provided a discussion paper which was reviewed, discussed, clarifications provided, and questions answered.
In late 2020, a presentation was made to the Battle River Indigenous Relations Council which represents four Saskatchewan First Nations. The presentation included an Act, Regulations overview and the Phase II modules.
The Joint Technical Committee's review of the environment module will continue throughout the 2021-2022 and 2022-2023 fiscal years.
Outreach and consultation activities will continue as the opportunity arises and as requested by First Nations, First Nation organizations, and industry.

Act Section 28.1(c)
"…Any regulations made under this Act and describe any variations in the regulations from province to province."

Table 5: Comparison of oil and gas provisions within Indian Oil and Gas Act, RSC 1985, c I-7 (Act) and the Indian Oil and Gas Regulations, SOR/2019-196 (Regulations) in relation to provincial and territorial variations. Note: Provinces and territories with active or historical oil and gas development on First Nations lands include British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Northwest Territories.

Regulations Provision	Description/Variations from province to province
1. Sec. 1(1) Definitions. Horizontal well means a well that has been approved by the provincial authority or a well with a horizontal section that has been approved by the provincial authority.	Each provincial jurisdiction has its own definition and description of horizontal wells and Indian Oil and Gas Canada must align with them when First Nation lands are in that province to ensure First Nations get their equitable share of the oil or gas.
2. Sec1(1) Definitions. provincial authority means the office, department or body that is authorized by law to make decisions, grant approvals, receive information or keep records respecting the exploration for, or the exploitation or conservation of oil and gas in the province in which the relevant First Nation lands are located.	Defines provincial authority as the province in which the relevant First Nation lands are located.
3. Sec. 1(1) Definitions. Spacing unit means an area in a zone that is designated as a spacing unit, a spacing area, a drainage unit or other similar unit by the provincial authority.	Each provincial jurisdiction has its own definition and description of a spacing unit. There is alignment with provincial definitions and descriptions on First Nation lands to ensure First Nations receive their equitable share of the oil or gas.
4. Sec. 6 Eligibility. A person is eligible to be granted a contract if (a) they are a corporation that is authorized by the laws of the relevant province to carry on business in that province or an individual who has reached the age of majority in that province;	A company can be federally incorporated but they must be extra-provincially registered to do business in the province in which First Nation lands are located.
5. Sec. 12(1) Contract area boundaries. The boundaries of a contract area must correspond to the boundaries of the legal land divisions of the relevant province if the lands in the contract area have been surveyed, or to the anticipated boundaries of those divisions if the lands have not been surveyed.	Each provincial jurisdiction has its own survey plans and Indian Oil and Gas Canada must align with them when First Nation lands are in that province to ensure First Nations get their equitable share of the oil or gas.
6. Sec. 21 Well data. An operator that carries out operations in connection with a well must submit the following documents and information to the Minister and the council within the following time limits: (a)(i) a copy of the provincial licence authorizing the drilling of the well and a copy of the licence application,	Each province has its own well licensing process, and that process applies to wells being drilled on First Nation lands in each province.
7. Sec. 21 Well data. (f) within 30 days after the day on which the well is surface-abandoned, all daily operations reports of the cut and cap operation and a copy of the final abandonment report submitted to the provincial authority.	Each province has its own well licensing reporting requirements and Indian Oil and Gas Canada requires the submission of provincial reports for wells being drilled on First Nation lands.
8. Sec. 27 Compliance with laws. (1) Every contract granted by the Minister under these Regulations includes the holder's undertaking to comply with (c) the laws of the relevant province, as amended from time to time, that relate to the environment or to the exploration for, or the exploitation, treatment, processing or conservation of, oil and gas, including equitable production, if those laws are not in conflict with the Act or any regulations or orders made under that Act.	These laws vary from province to province and apply to First Nation lands in the province in which it is located.
9. Sec. 28 Authorization to explore. A person may carry out exploration work on First Nation lands if they (b) Have obtained from the provincial authority an approval that is required to carry out exploration work in the province; and	Provincial requirements apply to First Nation lands in the province where they are located.
10. Sec. 29 Application for exploration licence. (2) The application must be submitted to the Minister in the prescribed form and include (b) if the approval of the provincial authority is required to carry out exploration work, a statement that the approval has been received;	Each province has their own exploration licence application process, and that licence is required to conduct seismic on First Nation lands in that province.
11. Sec. 33(2) Content of exploration report. The report must comply with any exploration reporting requirements of the relevant province and must include, in addition to the documents and information referred to in paragraph 32(2)(f),	Each province has exploration reporting requirements and Indian Oil and Gas Canada requires the submission of provincial reports for wells being drilled on First Nation lands.
12. Sec. 48 Initial term of permit. (1) If the lands in a permit area are located in a province set out in column 1 of the table to Schedule 2 and in a region set out in column 2, the initial terms of the permit is the term set out in column 3. Otherwise, the initial term is five years.	Each province has its own initial term provisions for subsurface permits. This provision levels the playing field between the provincial lands and First Nation lands.
13. Sec. 56(1) Application for approval. A subsurface contract holder may apply to the Minister for approval of a bitumen recovery project if they have achieved the minimum level of evaluation and have applied to the provincial authority for approval of the project.	An applicant is required to complete a sufficient evaluation to earn the right to submit an application and they must have submitted their application for the project to the provincial authority.
14. Sec. 57(1) Content of application. (c) A statement that the subsurface contract holder has applied for or received the provincial authority's approval of the project.	Each province has their own rule set for bitumen projects and First Nation lands in that province must align to attract investment.
15. Sec. 58(1) Approval. (d) The project has been approved by the provincial authority; and	Prior to review and approval of a bitumen recovery project, the applicant must have provincial approval.
16. Sec. 63(1) Qualifying lands. (b) that is subject, in whole or in part, to a unit agreement that includes lands in which a productive well is located, or to an oil or gas storage agreement that has been approved by the provincial authority;	Lands qualify for continuance if the lands 1. form part of a unit agreement and 2. are included in an oil or gas storage agreement. The rules vary by province so First Nation lands must align with the associated provincial jurisdiction.
17. Sec. 63(1). (d) that is subject to a project, other than a bitumen recovery project, that has been approved by the provincial authority and includes lands in which a productive well is located;	There are secondary and tertiary recovery methods for oil that are approved by each provincial jurisdiction and if it is, the lands in the lease qualify for continuance. This does not apply to bitumen recovery projects.
18. Sec. 77(1) Renegotiation of rent. Unless a surface lease provides otherwise, the holder must renegotiate the amount of the rent with the Minister, the council and any First Nation member in lawful possession of lands in the lease area at the end of the shorter of (b) any period fixed by the laws of the relevant province for the renegotiation of surface lease in lands that are not First Nation lands.	Surface leases are reviewed for rent increases every five years or as per provincial requirements of the province that First Nation lands are located within.
19. Sec. 94(3) Confidential information. If, on the day on which an offset notice is required to be sent, any information about a triggering well is confidential under the laws of the relevant province, the Minister	Wells are classified as developmental or confidential. Confidential wells require certain information to be kept confidential and not be included in the offset notice. The level of confidential information varies from province to province.
20. Sec. 96(1) No obligation. (b) the offset zone of the triggering well has been abandoned, as shown in the records of the provincial authority	The definition of abandoned varies from province to province, and First Nation lands must align with the province it is located in.
21. Sec. 96(1) No obligation. (f) the triggering well is subject to a storage agreement that has been approved by the provincial authority.	There is no obligation to pay compensatory royalty where the well on provincial lands (outside of First Nation lands) is part of a storage agreement project approval.
22. Sec. 96(3) Surrender. A holder is not obliged to pay a compensatory royalty if, during the offset period, they surrender their rights or interest down to the base of the offset zone in the spacing unit to which the offset notice applies, except for any rights or interests in a zone from which a well is productive or that is subject to a unit agreement or to a storage agreement that has been approved by the provincial authority.	Requirements for offset notices on First Nation lands align with the associated provincial jurisdiction.
23. Sec. 97(3) Calculation of compensatory royalty. For the purpose of calculating the monthly compensatory royalty, (a) The volume of oil, gas or condensate to be used in the royalty formula is the volume of oil, raw gas or condensate that was produced in the month by the triggering well, as shown by the records of the provincial authority; and	Provincial jurisdictions have different definitions for oil, gas, condensate and volume, and those factors apply to First Nation lands in that province when calculating compensatory royalty.
24. Sec. 97(3). (b) the price to be used, in respect of that month, is (i) in the case of oil, in Saskatchewan, the price indicated in the Monthly Crude Oil Royalty/Tax Factor History, published by the Ministry of Energy and Resources, and, in the other provinces, the monthly par price for light, medium, have or ultra heavy oil, as the case may be, published by Alberta's Department of Energy,	Each province has its own price bulletins, and this sets the Saskatchewan Bulletin and applies the Alberta Bulletin to all other provinces.
25. Sec. 97(3). (b) the price to be used, in respect of that month, is (ii) in the case of gas, in Saskatchewan, the price indicated in the Monthly Natural Gas Royalty/Tax Factor History, published by the Ministry of Energy and Resources, and, in the other provinces, the Gas Reference Price in the monthly information letter Natural Gas Royalty Prices and Allowances, published by Alberta's Department of Energy, and	Each province has its own price bulletins and this sets the Saskatchewan Bulletin and applies the Alberta Bulletin to all other provinces.
26. Sec. 97(3). (b) the price to be used, in respect of that month, is (iii) in the case of condensate, the Pentanes Plus Reference Price in the monthly information letter Natural Gas Royalty Prices and Allowances, Published by Alberta's Department of Energy.	Each province has its own price bulletins and this sets the Saskatchewan bulletin and applies Alberta bulletins to all other provinces.
27. Sec. 100 End of obligation to pay. (1) The obligation to pay a compensatory royalty ends if the subsurface contract holder, (b) surrenders their rights or interests down to the base of the offset zone in the spacing unit to which the offset notice applies, except for any rights or interests in a zone from which a well is productive or that is subject to a unit agreement or to a storage agreement that has been approved by the provincial authority.	In relation to the lands in the leases, an obligation to pay compensatory royalty would end if there is a: producing agreement, unit agreement, or storage agreement. Each agreement has its own set of rules in each province.
28. Sec. 103(2). The application for approval must be in the prescribed form be accompanied by a copy of the provincial authority's approval of the service well and include the following information: (a) a description of the well; (b) a detailed description of the proposed uses of the well and the proposed uses of any related facilities; and (c) the bonus and the annual compensation to be paid for any disposal rights.	Prior to applying to Indian Oil and Gas Canada, the initial review and approval of a well to be used as a service well is required by the provincial authority and each First Nations' lands conforms with the associated provincial jurisdiction.
29. Sec. 107(1). If a well is producing from more than one spacing unit and the lands from which it is producing are not entirely First Nation lands or are not subject to a single contract, the Minister must determine the percentage of production from the well to be allocated to the First Nation lands and to each contract, based on the criteria used by the provincial authority in making such allocations.	Each oil well and each gas well is given a production spacing unit. The lessee/contract holder company must have under lease 100% of the spacing unit. Percentages can be shared with provincial lands. This means that the Minister will use the same criteria as the associated province in which First Nation lands are located within.

Closing

As the federal regulator of oil and gas exploration and development on First Nation lands, Indian Oil and Gas Canada fulfills the Crown's fiduciary and statutory obligations to First Nations regarding their oil and gas resources. Indian Oil and Gas Canada has identified oil and gas resources may be present on approximately 300 First Nation lands in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Northwest Territories. There are currently 36 First Nations with active oil and gas exploration or production, mainly in Alberta and Saskatchewan, with an additional 18 that have non-producing or historical oil and gas infrastructure. In the fiscal year 2020-21, $51 million in oil and gas royalties, bonuses and rentals was collected by Indian Oil and Gas Canada on behalf of the producing First Nations. Although growth in the oil and gas sector on First Nations lands has contracted since the Act and Regulations have come into force, it is anticipated that there will be enhanced interest in further developing First Nations oil and gas resources as the economy recovers following the pandemic and the years ahead.

The Government of Canada has committed to support stronger Indigenous communities, economic development, appropriate regulatory oversight, and credible environmental reviews through the implementation of the modernized Act and its associated regulations. The Department and First Nations stakeholders are supportive of a modern oil and gas regulatory regime on First Nation lands with sound development of these resources, while addressing the specific needs and contexts of First Nation communities. This Act and Regulations have:

provided clear authorities and powers for the Government of Canada;
removed barriers to investment on First Nation lands through a closer alignment with provincial rules and practices; and,
reduced reliance on rules embedded in contracts so that the Government of Canada has the proper tools, equivalent to provincial regulators, to encourage industry compliance and to respond appropriately to address non-compliance.

Work on Phase II regulatory modules, to replace existing provisions that were carried forward into the Regulations from the 1995 Regulations, began upon enactment of the Act and Regulations in August 2019. Prioritization of the Environment Module has occurred over the Surface and Exploration Modules. While the pace of review of the Phase II modules has slowed due to the COVID-19 pandemic, there is continued interest by First Nations and First Nation organizations to keep the file active and moving forward for continued regulatory modernization.

Footnotes

Footnote 1

Additional details below in table 28.1(b)

Return to footnote 1 referrer

Footnote 2

The draft regulations were distributed twice as consultation drafts, in March 2014 and in May 2015, to stakeholders, including the Council of oil and gas producing First Nations, other First Nation organizations, oil and gas companies, the Canadian Association of Petroleum Producers and provincial oil and gas regulators. An advance copy of the pre-publication draft was provided at two symposiums held in early 2016 for Chiefs of oil and gas producing First Nations from British Columbia, Alberta, and Saskatchewan. Approximately 150 attendees participated in these symposiums that saw the draft reviewed clause by clause. The May 2015 and early 2016 versions were also published in the First Nations Gazette for public review and feedback.

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Footnote 3

Additional consultation activities were conducted during the 2016-17 winter and spring which resulted in several changes to the draft regulations to accommodate oil and gas producing First Nations' desire for increased participation in the management of their oil and gas resources. These changes provide First Nations with additional flexibility in approving continuances, amending drilling commitments, and dealing with assignments.

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Date modified:: 2022-02-01