BILL 56

An Act to Amend the Oil and Natural Gas Act

Her Majesty, by and with the advice and consent of the Legislative Assembly of New Brunswick, enacts as follows:

1 Section 1 of the Oil and Natural Gas Act, chapter O-2.1 of the Acts of New Brunswick, 1976, is amended

(a) by adding the following definitions in alphabetical order:

"paying quantity" means the output of a well or pool of such quantity of oil or natural gas, considering, at the relevant time, the quality of the oil or natural gas, the price to be paid for the oil or natural gas which would economically warrant the placing of the well or pool on production either initially or after any period of suspension and all capital and operating expenditures required to be expended, including all costs associated with the production, processing, transportation and marketing of the oil or natural gas;

"special spacing area" means a special spacing area determined by the Minister under section 36;

(b) by repealing the definition "commercial quantity";

(c) by repealing the definition "lease" and substituting the following:

"lease", when used as a noun, means a lease granted for oil and natural gas rights under section 27 or 27.1 and, when used as a verb, means to transfer an interest in Crown Lands;

2 Subsection 9(2) of the Act is repealed and the following is substituted:

9(2) Subject to this Act and the regulations,

(a) the holder of a licence to search, well licence or lease or the holder's agent, has the right to the use and possession of whatever part of the surface of the location that is necessary for the purpose of exploring for, winning, extracting and delivering oil or natural gas, or both, from the location, and

(b) the holder of a geophysical licence or the holder's agent has the right to the use and possession of whatever part of the surface of the location that is necessary for the purpose of exploring for oil or natural gas, or both, from the location.

3 Subsection 16(3) of the Act is repealed and the following is substituted:

16(3) A person who performs exploration activities as described in subsection (2) shall not interfere with the operations of any holder of a mining or mineral claim or mining lease under the Mining Act, any holder of a mining licence or mining lease continued under the Mining Act, any holder of a mining right granted under the Ownership of Minerals Act or section 25 of the Mining Act or any predecessor of that section or any licensee or lessee under the Bituminous Shale Act or any holder of a right under this Act for the location upon which the activities are conducted.

4 Section 18 of the Act is repealed and the following is substituted:

18 A licence area contained in one licence to search shall not exceed one hundred sections and shall not be less than a special spacing area.

5 Section 19 of the English version of the Act is amended by striking out "it" and substituting "the licence".

6 Section 20 of the Act is amended

(a) by repealing subsection (1) and substituting the following:

20(1) An on-shore licence to search is valid for a term of three years.

(b) in subsection (3) by striking out "application" and substituting "application under subsection (2)";

(c) by adding after subsection (3) the following:

20(4) Every renewal of an off-shore licence is subject to the licensee maintaining a deposit with the Minister in an amount at least equivalent to the work requirement for the term of the renewal period.

7 Section 21 of the Act is amended

(a) in subsection (2) by striking out "initial";

(b) by repealing subsection (3).

8 The Act is amended by adding after section 21 the following heading and section:

SURRENDER OF LICENCE TO SEARCH

21.1 A licence to search may be surrendered if all work requirements for the term have been met.

9 The heading "GROUPING OF LICENCES TO SEARCH" preceding section 22 of the Act is repealed.

10 Section 22 of the Act is repealed.

11 The heading "CONVERSION ON DISCOVERY" preceding section 23 of the Act is repealed.

12 Section 23 of the Act is repealed.

13 The heading "WELL LOCATION" preceding section 24 of the Act is repealed.

14 Section 24 of the Act is repealed.

15 The heading "PRODUCTION" preceding section 25 of the Act is repealed.

16 Section 25 of the Act is repealed.

17 Section 26 of the Act is amended

(a) by repealing subsection (3) and substituting the following:

26(3) A licence to search may be converted to a lease in its entirety at the end of the licence term, if in the opinion of the Minister, all exploration commitments under the licence have been met.

(b) by repealing subsection (4).

18 Section 27 of the Act is amended

(a) in subsection (1) by striking out "for Crown lands";

(b) in subsection (2) by striking out ", but each such transfer shall not be for less than one section area".

19 The Act is amended by adding after section 27 the following:

27.1 The Minister may grant a lease to a successful bidder

(a) where a call for tenders for the purchase of the lease has been made in accordance with the regulations, and

(b) where no other licence to search or lease is in force covering the same area or part of the same area.

27.2 The Minister may lease Crown Lands as provided under the Crown Lands and Forests Act.

20 Section 28 of the Act is repealed and the following is substituted:

28 A lessee may, at any time, abandon and release to the Crown any part of the demised area and shall not thereafter be bound to explore or develop such portion of the area so released.

21 The Act is amended by adding after section 28 the following:

28.1 A licensee may, at any time, abandon and release to the Crown any part of the demised area and shall not thereafter be bound to explore or develop such portion of the area so released.

22 The heading "PRODUCTION RIGHTS OF LESSEE" preceding section 29 of the Act is repealed and the following is substituted:

PRODUCTION RIGHTS

23 Section 29 of the Act is repealed and the following is substituted:

29 The licensee or the lessee, as the case may be, has the exclusive right to produce, or cause to be produced, from the respective licence area or lease area, as the case may be, oil and natural gas.

24 Section 30 of the Act is repealed and the following is substituted:

30 A lease shall be granted for a term of five years.

25 The Act is amended by adding the following heading and sections after section 30:

CONTINUANCE AND EXTENSION OF LEASE

30.1(1) The Minister may on expiry of the term of a lease continue the lease in respect of that portion of the lease area which, in the opinion of the Minister, is producing or capable of producing, in paying quantity.

30.1(2) The term of a lease shall be extended only for such period, as the lease area, in the opinion of the Minister, is producing or capable of producing, in paying quantity.

30.2(1) Where a portion of a lease area is continued under subsection 30.1(1) and drilling to delineate the extent of the pool is underway at expiry of the initial term of the lease, the Minister may continue that additional portion of the lease area if the drilling is being conducted to the satisfaction of the Minister.

30.2(2) Where the delineation referred to in subsection (1) is completed, the Minister shall continue that portion of the lease area which, in the opinion of the Minister, is producing or capable of producing, in paying quantity.

26 The heading "GROUPING OF LEASES" preceding section 33 of the Act is repealed.

27 Section 33 of the Act is repealed.

28 Section 36 of the Act is amended

(a) by adding after paragraph (g) the following:

(g.1) determine special spacing areas;

(b) in paragraph (i) by striking out "commercial quantity" and substituting "paying quantity".

29 Section 47 of the Act is repealed and the following is substituted:

47 No person shall commence exploratory work or production of oil or natural gas until the person has notified the Minister in writing of the person's intention to do so.

30 Section 59 of the Act is amended

(a) by repealing paragraph (d);

(b) by adding after paragraph (j) the following:

(j.1) respecting well locations;

(c) by repealing paragraph (k) and substituting the following:

(k) subject to section 36, respecting normal and special spacing units and areas;

SAVINGS AND TRANSITIONAL

31 In sections 32 and 33 of this amending Act

"Oil and Natural Gas Act" means the Oil and Natural Gas Act, chapter O-2.1 of the Acts of New Brunswick, 1976;

"valid and subsisting licence to search" means a valid and subsisting licence to search issued under the Oil and Natural Gas Act before the commencement of this section.

32(1) A valid and subsisting licence to search shall,

(a) in respect of the licence area, continue to be governed by section 18 of the Oil and Natural Gas Act as section 18 existed immediately before the commencement of section 4 of this amending Act, and

(b) in respect of its term and eligible renewal periods, continue to be governed by section 20 of the Oil and Natural Gas Act as section 20 existed immediately before the commencement of section 6 of this amending Act.

32(2) Section 18 of the Oil and Natural Gas Act as enacted by section 4 of this amending Act does not affect a valid and subsisting licence to search.

32(3) Section 20 of the Oil and Natural Gas Act as enacted by section 6 of this amending Act does not affect a valid and subsisting licence to search.

33(1) In this section

"pre-amendment law" means the law as it existed under the Oil and Natural Gas Act immediately before the commencement of this section;

"new law" means, subject to section 32, the law as it exists under the Oil and Natural Gas Act immediately after the commencement of this section.

33(2) Every holder of a valid and subsisting licence to search shall, before October 31, 2001, elect, on a form provided by the Minister,

(a) to be governed by the pre-amendment law; or

(b) to be governed by the new law

for the term of the valid and subsisting licence to search.

33(3) If a holder of a valid and subsisting licence to search does not make an election under subsection (2) before October 31, 2001, that holder shall be deemed to have made an election under paragraph (2)(a).

34 In sections 35, 36 and 37

"Oil and Natural Gas Act" means the Oil and Natural Gas Act, chapter O-2.1 of the Acts of New Brunswick, 1976;

"valid and subsisting lease" means a valid and subsisting lease issued under the Oil and Natural Gas Act before the commencement of this section.

35(1) Section 30 of the Oil and Natural Gas Act as enacted by section 24 of this amending Act does not apply to a valid and subsisting lease.

35(2) A valid and subsisting lease expires on the expiration of its initial term or its renewed term, as the case may be, as granted under section 30 of the Oil and Natural Gas Act as section 30 existed immediately before the commencement of this section.

36 Section 30.1 of the Oil and Natural Gas Act as enacted by section 25 of this amending Act does not affect a valid and subsisting lease.

37(1) Paragraph 1(c) and section 18 of this amending Act shall be deemed to have come into force on November 1, 1976.

37(2) Every lease granted under the Oil and Natural Gas Act before the commencement of this section is hereby ratified and confirmed and shall be deemed to have been validly granted.

38 This Act or any provision of it comes into force on a day or days to be fixed by proclamation.