Oil & Gas Tenure Update 2004

Oil & Gas Tenure Update 2004

Oil & Gas Tenure 2004 TOPICS • MISCELLANEOUS POLICY CHANGES • PERMIT, FEE AND WORK REQUIREMENT REGULATION CHANGES • DRILLING LICENCE REGULATION CHANGES • ZONE RETENTION (SHALLOW RIGHTS REVERSION) • PETROLEUM TITLES ONLINE PROJECT

Oil & Gas Tenure 2004 MISC. POLICY CHANGES • Document Execution Requirement to return executed tenure documents rescinded. • Issue date Documents now dated day after sale. • DL Term Extensions for CBG Projects 5 one-year extensions available for CBG projects • Single Tenure Issuance Fee - June 1/04 New $500 tenure issuance fee cover future transfers and miscellaneousfees

Oil & Gas Tenure 2004 PERMIT, FEE AND WORK REQUIREMENT REGULATION CHANGES • Revised rental rates in effect June 1, 04 • Revised work requirements rates under review

Oil & Gas Tenure 2004

Oil & Gas Tenure 2004 • New Permit Fees, Rental and Work Requirements New Rental Schedule Permit Years Years Class 1 – 5 6+ A,B,C,D $1.05 $1.75 (all)

Oil & Gas Tenure 2004 • Proposed Permit Work • Requirements New Work Schedule Permit Years Years Class 1 – 5 6+ A, B $5.00 $20.00 C, D $3.00 $10.00

Oil & Gas Tenure 2004 DRILLING LICENCE REGULATION CHANGES • Administration • Term • Groupings • Lease Earnings

Oil & Gas Tenure 2004 Administration • $500 reinstatement fee • Rescind requirement for a written posting request • A single late rental payment fee of $500 • Rescind requirement to publish tenure conditions in the BC Gazette • Clarify process for Production from Drilling Licence i

Oil & Gas Tenure 2004 Term (Applies to new drilling licences only) • Clarify extension provisions • 3 year term boundary - no change • 4 year term boundary – Fort Nelson - Liard • 5 year term boundary – balance of Province

Oil & Gas Tenure 2004 Grouping • Rescind requirement for oil or gas or well • Allow licences to be grouped for each qualifying well • Re-entered wells to qualify as grouping wells • Grouping distance changed from 4K to one gas spacing area

Oil & Gas Tenure 2004 Lease Earnings • Separate earning schedule for each term area scaled to recognize risk • Earnings defined as gas spacing areas • Earnings based on combined well bore length of all drilling events • Selection rules more flexible

ZONE RETENTION

Oil & Gas Tenure 2004 ZONE RETENTION Why is BC Considering Zone Specific Retention? • Acceleration of activity would lead to earlier new pool discoveries with very positive revenue implications for both industry and the province. • Larger contiguous blocks of land would become available providing economies of scale for development of marginal plays. • Accessible land tenure is a competitiveness issue. • Our tenure system must evolve in a maturing basin. • ZSR has been requested by a significant number of industry clients.

Oil & Gas Tenure 2004 Economic Considerations • BC implemented Deep Rights Reversion in 1985, following Alberta. Acknowledged benefits to industry and provinces. • Shallow Rights Reversion or Zone Specific Retention is the next logical step. • February 2003: Titles staff began first consultation with cross section of clients in Calgary. • October 2003: Brian Scarfe of BriMar Consultants completed economic analysis showing significant benefits to industry and BC.

Oil & Gas Tenure 2004 Geology • Cretaceous and Triassic zones are approaching maturity in extensively drilled areas of BC. • Significant new pools can still be discovered in these formations. • A new fiscal regime for low productivity wells adds to the incentive to find new pools.

Oil & Gas Tenure 2004 Analysis Results • Substantial benefits to industry and BC if activity is brought forward by as much as five years. Example: • Expected Net Present Values to industry for the Gething play trend would increase by 62% over the case with no ZSR (full cycle netback value to producers at 10% real discount rate). • Public NPVs for royalties, other provincial revenues and federal tax would increase by about 28% (5% public discount rate).

Oil & Gas Tenure 2004 Consultation Previous consultation showed ZSR may be acceptable to industry if implemented: • On a “go forward” basis (original proposal included current tenure); • Clear technical criteria in place to retain secondary undeveloped productive zones • Earliest implementation in 6 years • Manageable administrative burden

Oil & Gas Tenure 2004 Proposed Approach • Leases only, on a “go forward” basis. (new leases) • Implementation no sooner than six years from now. • No major changes to posting requests: New tenures would continue to convey rights to pre-specified zones, including “all available rights”. • Notification one year before end of primary term specifying zones that can be retained.

Oil & Gas Tenure 2004 Proposed Approach • Consultation with industry on technical retention criteria before implementation. • Any reasonable indication of productive potential should be acceptable to retain a specific zone – for example, log analysis, DST, mud log. • Goal is to accelerate development, not retrieve land.

Oil & Gas Tenure 2004 Next Steps • Meet with CAPP BC Committee May/04 • Review options • Final Decision on whether to proceed by June 30/04

PETROLEUM TITLES ONLINE

Oil & Gas Tenure 2004 PETROLEUM TITLES ONLINE • WEB based petroleum titles transactions • Joint Development Project MEM/MSRM • Links to New Integrated Land Registry under development

Oil & Gas Tenure 2004 PETROLEUM TITLES ONLINE Phase 1 - Web Enabled Map Viewer Phase 2 - Sale Notice Maps Phase 3 - Posting Requests Online

Oil & Gas Tenure 2004 Phase 1 Development of map query tool Petroleum Titles NE BC • Title Search Function • Title • Owner • Number • Term • Issue date • Legal Description

Find Parcels Offered for Sale • Find Petroleum Active Titles • Find Parcels Requested for Sale The Petroleum Titles On-Line Project is a joint initiative being developed by the Ministry of Energy and Mines (MEM) and the Ministry of Sustainable Resource Management (MSRM) to facilitate petroleum tenure-related transactions through the internet. Click on the links below to search for existing titles or parcels requested for sale. Petroleum Oil & Gas Tenure 2004 Petroleum Title Online

Oil & Gas Tenure 2004 Phase 2 • Web based maps for sale notice and results reports • Will display surface lots for improved land owner notification and consultation

Oil & Gas Tenure 2004 Phase 3 Posting Online

Oil & Gas Tenure 2004 Registration and Security • Only able to view own requests up to closing data of sale • Access provided through electronic registration with BCeID

Oil & Gas Tenure 2004 Vision • A spatially enabled, efficient and accessible electronic register of all legal interests in Crown and private land and resources, which serves the business needs of a diversity of users and clients. • Being Piloted in the Northeast for implementation by March 2005.

Oil & Gas Development Strategy Cameron Lewis Director Oil and Gas Policy

Oil & Gas Tenure Update 2004