The Province has not included subsurface rights in most land grants issued after 1891. As a result, the surface owner of property rarely owns underlying petroleum and natural gas rights, except in areas of early settlement such as Vancouver Island and the Fraser Valley.
The Ministry of Energy and Mines’ Petroleum Lands Branch is responsible for issuing and administering provincially-owned petroleum and natural gas rights, in an equitable manner, and collecting the associated revenues. The agreements give rights to specific areas, and may include rights to all depths, or may be restricted to certain geological formations.
Three types of agreements are used in British Columbia:
- Permits carrying an obligation to conduct exploration;
- Drilling Licenses conveying the exclusive right to drill oil and gas wells in a defined area; and,
- Leases, allowing production, in addition to providing exclusive drilling rights.
Parts of permits and drilling licenses may be converted to leases if all obligations have been met. Typically, agreements are for three to 10 years, and can be renewed or extended.
Although provincial tenure agreements contain obligations to conduct exploratory or development work, approval to carry out the work is not included. Each activity, such as a geophysical survey or drilling a well, must have specific approval from the Oil and Gas Commission. The Oil and Gas Commission is a Crown corporation responsible for regulating the exploration, development, production and pipeline transportation of oil and gas in British Columbia. The Commission conducts a review process to identify any environmental sensitivities or access issues, before approving any on-the-ground activities.
An important feature of the oil and gas rights management system in Western Canada is the protection of correlative or adjacent rights, where owners of oil and gas in a reservoir share production fairly. Equitable sharing is achieved by dividing the province into normal spacing areas and allowing, in most cases, only one well to be drilled. Production from a well, regardless of where it is drilled, must be shared among all owners of oil and gas rights within the spacing area. For gas wells, these areas are about 2.6 square kilometres.
Provincial petroleum and natural gas rights can be acquired by bidding in monthly public competitions. Interested parties request that tenures be made available; a competition is announced in local newspapers and trade journals, with details provided in the B.C. Gazette and on the ministry’s internet site. The province receives sealed bids and may award tenures to the parties who submit the highest cash bids. An inter-agency referral process allows provincial agencies, local governments, First Nations and the public to identify areas where access constraints may apply, and to have specific conditions attached to the disposition notice.
For more information, please visit the Titles and Offshore Division Page
