TITLES AND OFFSHORE DIVISION 

SUBJECT:  CLARIFICATION OF POLICIES AND PROCEDURES RELATED TO REDUCED CONTINUATION ELIGIBILITY

Section 58(3)(a) of the Petroleum and Natural Gas Act (Act) requires the Director of Petroleum Lands to continue a spacing area for one year if, in the opinion of the Director, that spacing area is "eligible".  A spacing area is deemed eligible if it meets any one of the four criteria listed in subsections (a) through (d) of section 58(1) of the Act.  One of those criteria, defined in subsection (c) of section 58(1), is that at least half of the spacing area covers a delimited pool.  The Oil and Gas Titles Branch of the Ministry maintains a set of land plats defining the boundaries of these pools.  These pool boundaries coincide with spacing area boundaries and are not the pool boundaries maintained by the Oil and Gas Commission for estimating reserves and classifying wells.  For reference, Appendix 1 contains an excerpt of section 58 of the Act.

The Branch amends its land plats as new technical information is processed.  When such amendments reduce pool size, all or some of the spacing areas held by a Lease may no longer satisfy the section 58(1)(c) criterion for continuation eligibility.  If the continuation eligibility of a spacing area depends solely on subsection 58(1)(c), the spacing area will be ineligible for section 58(3)(a) continuation at the next anniversary date of the Lease.

Continuation of the affected spacing areas beyond that anniversary date will require the submission and approval of an application under section 58(3)(a) or section 58(3)(c) of the Act by the normal deadline.  Section 58 of the Act allows applications to be made up to 60 days following the expiry date.  Failure to submit such application within this period will result in the return of the affected spacing areas to Crown reserve.

Following a land plat amendment the Branch will send a "Notice of Reduced Continuation Eligibility" ("Notice") to each titleholder of record on the date of the Notice.  The Notice will list the locations no longer deemed "eligible spacing areas" under section 58(1) of the Act and advise titleholders to submit an acceptable continuation application or surrender the locations listed.

The Branch will make every effort to send the Notices as close to the land plat amendment date as possible but no earlier than three calendar months prior to the Lease anniversary date.