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Continuance Letter

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					Indian Oil and Gas Canada

Pétrole et gaz des Indiens du Canada
Your file - Votre référence

Suite 100, 9911 Chula Boulevard, Tsuu T’ina, AB T2W 6H6 Tel.: (403) 292-5625 Fax: (403) 292-5618

March 2000

Our file - Notre référence

E-5855 -7

Information Letter Continuance of an Oil and Gas Lease
Background Continuance means the renewal of an oil and gas lease, in whole or in part, beyond its existing term and is provided for in sections 24 and 25 of the Indian Oil and Gas Regulations, 1995. The initial term of a lease or its continuance is granted for a period of five years unless a different term is provided for in a lease or by any one of the instances outlined in the ‘Exceptions’ section below. Continuance Policy A lease area will be granted continuance provided the following conditions are met: • a lessee applies for continuance in writing to the Executive Director, Indian Oil and Gas Canada (IOGC). The application and the supporting geological and technical information described below must be received prior to the end of the existing term of the lease; a Default Notice for the lease has not been issued under the Regulations by IOGC; and the lease area meets any one of the Qualifications for Continuance as described below.

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Qualifications for Continuance A lease area will qualify for continuation provided it meets any one of the following: • it is within a spacing unit, project, unit or pooled area which contains a well that is producing or is capable of producing oil or gas in paying quantity. As defined in the Regulations, paying quantity means: a) in respect of a well that has been drilled but not completed and equipped, an anticipated output from the well of a quantity of oil or gas that would reasonably warrant incurring the completion and

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equipping costs of the well, and b) in respect of a well that has been completed for the taking of production, an anticipated output from the well of a quantity of oil or gas that would reasonably warrant the taking of production from the well. For greater clarity with reference to a), the revenues should be expected to cover the costs of completing, testing and equipping the well, and paying operating costs including royalty. Also, for greater clarity with reference to b), the revenues should be expected to cover the operating costs, including the royalty. As paying quantity is based on geological, technical and financial information, the lessee’s application must include the following: a copy of the well log with formation tops and all perforated and tested intervals marked; recent production data; test data from pertinent wells; and other technical data.

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it is determined by the Executive Director, IOGC, to be within the limits of an oil or gas pool that is producing or capable of producing in paying quantity. The Lessee must submit geological and technical information to demonstrate that the lands are within a pool. Some type of pool production/test data should be submitted since geological and/or log data alone will not normally qualify the lease area for continuance. This information must relate to the period prior to the end of the lease term and may include: a) b) geological discussion of the pool; geological mapping: c) net pay with supporting cross-sections isopach with supporting cross-sections structural with supporting cross-sections

test data from pertinent wells;

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d)

seismic data including interpreted seismic mapping with supporting interpreted seismic sections, shot point maps and synthetics; discussion of seismic, if including seismic data; and other technical data.

e) f) • • •

it contains an approved service well; it is in an area for which compensatory royalty is being paid; or it was granted an extension for a period to drill a well and that well has proven to be capable of producing in paying quantity.

Continuance of Zones Continuance is restricted to all zones from the surface to the base of the deepest zone that is producing, or is capable of producing oil or gas in paying quantity. However, a lease may further restrict continuance to only those zones producing, or capable of producing, oil or gas in paying quantity. For a service well, continuance is restricted to the approved zone. Exceptions Following are the exceptions to this policy on continuance: • Continuance by reason of drilling: The Executive Director shall grant an extension for a period during which a lessee conducts drilling, provided the lessee: a) b) c) applies to the Executive Director, IOGC; commences drilling before the end of the term of the lease; and conducts drilling, completing and testing the well diligently and continuously.

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Additional information to establish qualification: If a lease area for which a lessee has applied for continuance does not meet any of the Qualifications for Continuance, the Executive Director, IOGC, after consultation with the Band Council, may extend the term of the lease to allow the lessee to develop and provide the relevant

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information in support of the application for continuance. • Failure to meet qualifications: In the case where a lease area has failed to meet any of the Qualifications for Continuance, the Executive Director, with approval from the Band Council, may extend the lease area for a period not exceeding five years. This will allow for negotiation of additional compensation for the First Nation. • Failure to apply: In the case where a lease area meets the Qualifications for Continuance but lessee has failed to apply for continuance prior to the end of the term of the lease, the Executive Director, after consultation with the Band Council, may grant a continuance for an additional five years. Geological and Technical Report Six months prior to the end of the existing term of the lease, the lessee must submit a report that contains the following information: • data that indicates any wells in the lease area that are capable of producing oil or gas in paying quantity from one or more specified zones; identification of any relevant unit operation and utilized zone underlying the lease area; geological, geophysical or engineering data that demonstrate the extent of the productive area for each zone that the lessee claims is capable of producing oil or gas in paying quantity, including; a) geological evaluation of the oil and gas potential of all prospective zones within the lease area, an estimate of the amount of original oil or gas in place, an estimate of the original recoverable oil and gas reserve, the oil and gas production values to date, and an estimate of the remaining recoverable oil and gas reserves.

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b) c) d) e) •

any future development plans; and

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identification of any service wells approved pursuant to section 36 of the Regulations and any data that demonstrates benefit to the First Nations that are attributable to those wells.

Presentation by the Lessee Before the end of the existing lease, a lessee will make a presentation to the Band Council and the Executive Director regarding the information provided in the report. This presentation will be arranged by the lessee, in consultation with the Band Council and 7 days notice of the meeting will be provided to IOGC. Regulatory Authority Indian Oil and Gas Canada (IOGC) is a regulatory agency within the Department of Indian Affairs and Northern Development responsible for the management and administration of oil and gas resources located on Indian reserve lands in Canada. The mandate of IOGC is: • to fulfil the Crown's fiduciary and statutory obligations related to the management of oil and gas resources on Indian reserve lands; and to further First Nation initiatives to manage and control their oil and gas resources.

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Enquiries Enquiries regarding this Information Letter should be made to: Senior Petroleum Geologist Indian Oil and Gas Canada Suite 100, 9911 Chula Boulevard Tsuu T'ina, AB T2W 6H6 Phone: (403) 292-5625 Fax: (403) 292-5618


				
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