BC Petroleum and Natural Gas (PNG) Regulations Seminar Presentation to CAPL October 18, 2011

1. BC Petroleum and Natural Gas (PNG) Regulations SeminarPresentation to CAPLOctober 18, 2011 May Mah-Paulson Terry Branscombe Dave Richardson Page 1.

2. SEMINAR OUTLINE PART 1 – MINISTRY UPDATES • Ministry Structure / Organization Update • Acquiring Petroleum and Natural Gas (PNG) Tenure in BC • Resource Development Updates • Tenure Management Updates • Royalty Program Update • Policy and Regulatory Updates • Jobs and the Economy Page 2.

3. SEMINAR OUTLINE PART 2 – TENURE • Resources for Tenure Managers • Introduction to BC’s land and zone systems • BC’s Tenure Options • Permits • Drilling Licences • Extensions, Groupings and Conversions • Evaluation of Zones in Earning Wells • Leases • Land Plats • Continuation Options • Zone Specific Retention

4. SEMINAR OUTLINE PART 3 – GENERAL ADMINISTRATION • e-Payments • Transfers, Encumbrances and Related Instruments

5. Deputy Minister Ministry of Energy and Mines Assistant Deputy Minister Mines and Mineral Resources Division Assistant Deputy Minister Oil and Gas Division Executive Lead Titlesand Corporate Relations Division Assistant Deputy Minister Electricity and Alternative Energy Division MINISTRY STRUCTURE

6. TITLES & CORPORATE RELATIONS DIVISION • Executive Lead • Titles and Corporate Relations Division Corporate Policy, Planning & Legislation Branch Petroleum & Natural Gas Titles Branch Corporate Services Branch

7. PNG TITLES BRANCH May Mah-Paulson Executive Director Petroleum & Natural Gas Titles Branch Debbie Fischer Director Tenure & Revenue Management Terry Branscombe Senior Tenure Management Advisor Geoff Turner Director Policy & Planning Dave Richardson Manager Geology Garth Thoroughgood Director Resource Development Chris Blaney Manager Crown Sale & GIS Services

8. ACQUIRING PNG TENURE IN BC

9. PNG TENURE • Tenure doesprovide: • exclusive rights to the subsurface resource • right to apply to the OGC for activities approval • Tenure does notprovide: • the authority to conduct any activities on lands (e.g., drilling)

10. DISPOSITION PROCESS 12 sales per year 106 day process

11. ADDITIONAL INFORMATION SOURCES • Posting Requests http://www.empr.gov.bc.ca/Titles/OGTitles/SalesNotices/Pages/Instructions.aspx • Submitting a Bid http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-11-03.aspx • Disposition Dates for 2011-2012 http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-11-06.aspx

12. RESOURCE DEVELOPMENT UPDATES • First Nations Engagement • Community Engagement • Boreal Caribou

13. FIRST NATIONS ENGAGEMENT • “PNG Tenure 101” Presentations to Chief & Council and Lands Staff • Responsive to First Nation comments • Provide more detailed mapping and information for specific sites • Meet to resolve area-specific issues

14. TREATY 8 CONSULTATION PROCESS AGREEMENTS (CPAs) • To assist in the First Nations’ capacity to review and respond to oil and gas activity referrals • A number of Treaty 8 CPAs expired March 31, 2011 • BC’s Ministry of Aboriginal Relations and Reconciliation is leading the negotiations for new Treaty 8 CPAs • The BC Oil and Gas Commission has developed Interim Consultation Procedures to guide consultation where there is no signed CPA in effect with a Treaty 8 First Nation • http://www.bcogc.ca/firstnations/consult.aspx

15. COMMUNITY ENGAGEMENT • Landowner Notification Program • Forum for community engagement • Farmers’ Advocacy Office

16. BOREAL CARIBOU

17. BOREAL CARIBOU RRAs • In June 2010, 500,000 hectares of boreal caribou habitat were set aside as “resource review areas” (RRAs) where no PNG tenure requests would be accepted for a minimum of five years • For more information, see Information Letter TACRD-10-10 http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-10-10.aspx

18. BOREAL CARIBOU – UPDATES • August 2011 • Ministry of Environment (MOE) publicly released the “Implementation Plan for the Ongoing Management of Boreal Caribou” • Province initiated engagement with First Nations to discuss implementation activities • Industry supportive of a collaborative approach in implementing the Plan, including an industry funding model • September 2011 – MOE legally established environmental objectives for boreal caribou (Wildlife Habitat Areas and Ungulate Winter Ranges) which must be considered by the BC Oil and Gas Commission when issuing a permit

19. BOREAL CARIBOU – NEXT STEPS • Consultation with First Nations and stakeholders on the “Implementation Plan for the Ongoing Management of Boreal Caribou” • Establishment of habitat management polygons for the Chinchaga boreal caribou range • Establishment of operating practices to be applied to oil and gas activities within designated caribou habitat management polygons

20. TENURE MANAGMENT UPDATES

21. ACTIVE PNG TENURE

22. GEOLOGY • Land Plats • Zone Specific Retention • New Zone Designations

23. eBUSINESS Integrated Petroleum System (iPS) • iPS will transition 3 legacy applications to current technology • Petroleum Titles System (PTS) • Petroleum Accounts Receivable System (PARS) • Sales Parcel System (SPS) • May 2012 – Completion of application delivery and integration testing • September 2012 - Production launch, including eBidding ePayments • New service provider • To enhance performance and response time, all code is being reviewed and rewritten, if necessary

24. ROYALTY PROGRAM UPDATE

25. TARGETED ROYALTY PROGRAMS

26. TARGETED ROYALTY PROGRAMS (Cont’d) • These programs can be combined in many cases, thus providing enough margin to move certain projects to economic territory • Example - a well that… • is a road project (an infrastructure credit), • is drilled in the “summer”, • is deep, and • is marginal… • …can receive all the associated benefits for those programs • For more information: http://www.empr.gov.bc.ca/OG/oilandgas/royalties/Pages/default.aspx

27. POLICY & REGULATORY UPDATES • Industry Engagement • New Policies & Information Letters • Hydraulic Fracturing & Disclosure • Review of the PNG Act & Regulations

28. INDUSTRY ENGAGEMENT • In May 2008, the BC Tenure Working Group was established with participants from both industry and government. The Working Group continues to meet regularly to discuss: • Improved communication • Legislation and Regulations • Opportunities to work more efficiently and effectively • Educational opportunities • eBusiness • Shared Principles have been developed to help guide discussions around policy, legislation and regulation changes

29. NEW - POSTING LARGERPNG LEASES • As of February 2011, the Ministry no longer limits lease posting size to an area of one gas spacing area • All posting requests will continue to be evaluated on a case-by-case basis and the Ministry may request written justification to support the request • For more information, see Information Letter TACRD-11-01 http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-11-01.aspx

30. NEW - SECTION 3(5.1) DRILLING LICENCE EXTENSION POLICY • DL Regulation, Section 3(5.1), “The minister may grant one or more extensions of a drilling licence each for a period of one year or less if • (a) an application is made to the director before the end of the current term of the licence and is accompanied by rental of $3.50 per ha a year, • (b) an application to drill an earning well has been made to the commissioner at least 30 days before the end of the current term of the licence, and • (c) drilling of an earning well has been delayed pending completion of • (i)  an environmental or socioeconomic study, • (ii)  a public hearing, or • (iii)  a planning or consultation process.” • Policy developed in February 2011 which includes a set of factors the Ministry will consider in evaluating extension requests under s3(5.1) • For more information, see Information Letter TACRD-11-02 http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-11-02.aspx

31. REVISED - BIDDING PROCEDURES • The “Bidding Procedures for Dispositions of Crown Petroleum and Natural Gas Rights” were revised in April 2011 • Bid letters must include the total amount tendered (including fee, rent and bonus) • For more information, see Information Letter TACRD-11-03 http://www.empr.gov.bc.ca/Titles/OGTitles/InfoLetters/IssueDate/Pages/TACRD-11-03.aspx

32. NEW - HYDRAULIC FRACTURING AND DISCLOSURE • The online registry, announced in September 2011, supports the Ministry’s goal of creating a more open and transparent government • It will be accessible to everyone, allowing anyone interested to search for the locations of where hydraulic fracturing activities are taking place, and for detailed information about the practices and additives used during these activities • The site will closely mirror the U.S. version known as FracFocus.org • Public disclosure will be mandatory and enforced

33. REVIEW OF THE PNG ACT & REGULATIONS • The Petroleum and Natural Gas Act (PNG Act)has not had an overall review since the late 1980s • Due to significant technological advances allowing the development of unconventional PNG resources, the implementation of the Oil and Gas Activities Act and emergent environmental issues, the Ministry has decided that a full review of the PNG tenure system within the PNG Act and regulations is warranted at this time

34. DISCUSSION PAPER • To seek input from interested parties regarding what changes to the tenure provisions of the PNG Act and regulations are required to improve the PNG tenure system • Comments received in response to the discussion paper will be used to help inform the proposal for future amendments to the PNG Act and regulations • The discussion paper was made publicly available on September 15, 2011 • http://www.empr.gov.bc.ca/Titles/OGTitles/OtherPublications/Documents/PNG%20Tenure%20Discussion%20Paper.pdf • Submission deadline for comments - October 17, 2011

35. NEXT STEPS • The Ministry will be compiling a list of suggested changes to the PNG tenure system • Analyses will be conducted on the suggested changes to assess whether they will help meet the provincial government’s direction and the Ministry’s objectives for the BC energy sector • Suggested changes to the PNG tenure system may be accommodated by a change to the PNG Act, one of its regulations or a change in Ministry policy that does not require any change to the Act or its regulations

36. JOBS & THE ECONOMY

37. CROWN SALES

38. LIQUEFIED NATURAL GAS (LNG) • In September 2011, the Premier confirmed Provincial commitment to the development of LNG export capacity in BC • The announcement included commitments in four areas: • Greater emphasis on the permitting and decision making processes • Skills training and development • Investment and attraction • International marketing

39. PNG OPPORTUNITIES • Continue to develop and implement strategies to make PNG tenure available • Continue to create and implement progressive and innovative strategies and approaches for effective policy, legislation and regulations that support a modernized tenure issuance and management system • Continue to provide an attractive investment environment through royalty and infrastructure programs

40. QUESTIONS?

41. PART 2 Tenure

42. Tenure Management • Resources Available • Published Information • Legislation and Regulations – QP • Land Plats (GIS shapefiles) – DataBC • DLS Spacing Areas and Hectares maps – QP • Branch website • Online Tools • Petroleum Titles Online (PTO) • Postings • Map creation and viewing • PTS Web – title searches – FREE • e-Payments

43. PTS Web – Title Searches • www.ptonline.gov.bc.ca • Title number and type • Term and Area • Key Dates: Issuance, Effective, Expiry • Tracts – Lands and Rights held • Ownership • Continuation History • Transfer History • Encumbrance History • Special Projects, Wells, Units, Groupings

44. Online Tools – PNG Titles Home • Subscription Services (e-mail) • Posting Maps • Sale Notices • Sale Results • Info Letters • Acts & Regs • Publications • PTO & PTS Web • ePayments

45. Acts and Regulations • Petroleum and Natural Gas Act • Grid Regulation • Drilling Licence Regulation • Fee, Rental and Work Requirement Regulation • Storage Reservoir Regulation

46. Online Resources • Petroleum Titles Online (PTO) • http://www.ptonline.gov.bc.ca • ptonline@gov.bc.ca • PTS Web (Petroleum Titles System) • From PTO, click “Title Searches (PTS Web)” link • ptsweb_support@gov.bc.ca • ePayments • https://epayments.gov.bc.ca • png.epayments@gov.bc.ca

47. BC’s Land & Rights Systems • Dominion Land Survey (DLS) • Petroleum Grid (NTS) • Spacing Areas • Well Locations • Zones, Pools, & Plats

48. DLS • PNG Grid Regulation Schedule 1 • Limited to Peace River Block • TWPs 76 - 88 • RGEs 13 – 26 W6M • Legal hectarages are as surveyed • Refer to published map entitled “Peace River Block Gas Spacing Units and Hectarage Map” available from Queen’s Printer (Crown Publications division)

49. DLS – Peace River Block Expect other-than-normal spacing areas

50. Petroleum Grid (NTS) • PNG Grid Regulation Schedule 3 • Applies everywhere the DLS does not • Based on longitude and latitude • Sub-divisions achieve oil and gas spacing areas similar in size to DLS • Areas taken from lookup tables • Download from “Other Publications” • Also for geothermal and coal tenures