Oil and Natural Gas Act ((R.S.P.E.I. 1988, c. O-5)

1. In this Act unless the context otherwise requires Definitions (a) “approved” means approved by the Minister or Chief Officer; approved (a.1) “Chief Officer” means a person appointed by the Minister to Chief Officer supervise the observance of the provisions of this Act and regulations made under it; (b) “commercial production” in reference to the output of a well, commercial shall be deemed to be such quantity of oil, or natural gas, which production after considering the cost of drilling, completion and production operations, the quantity of production and availability of markets, would, in the opinion of the Minister, economically warrant the drilling of a like well in the immediate area; (b.1) “Crown land” means any land vested in the Crown; Crown land (c) “enter and use” means the act of a permittee, or lessee, his or enter and use their servants, agents and contractors of entering into and upon and using any portion of the lands of any person within the province for the purpose of exploring and of making surveys and examinations, using water and of opening, boring, drilling, excavating, laying, erecting or building derricks, wells, slush pits, pumps, powers, surface rods, pipe lines, tanks, roads, works, drains, and other related installations and of doing all the acts or things authorized; (c.1) “field” means field (i) the surface area or areas underlaid or appearing to be underlaid by one or more pools, and (ii) the subsurface regions vertically beneath that or those surface areas; (d) “gas-oil ratio” means the ration of the number of standard cubic gas-oil ratio feet of natural gas produced to the number of barrels of oil produced; (d.1) “geophysical equipment” means equipment used for or in geophysical connection with or preparatory to geophysical exploration; equipment (e) “geophysical exploration” means the investigation of the geophysical subsurface by exploration 1 2 Cap. O-5 Oil and Natural Gas Act (i) seismic operations, (ii) gravimetric operations, (iii) magnetic operations, (iv) electric operations, (v) geochemical operations, (vi) test-hole drilling, and (vii) any other method approved by the Minister; geophysical license (e.1) “geophysical license” means a license as defined in section 25; grid area (f) repealed by 1999,c.38,s.1; holder of a location (f.1) “holder of a location” means, in accordance with the context, (i) a permittee, (ii) a lessee; lease (g) “lease” means a valid and subsisting lease issued under this Act; lessee (g.1) “lessee” means any person deriving title through a lease of the Crown; location (h) “location” means the area described in (i) a permit, or (ii) a lease; Minister (h.1) “Minister” means the Minister of the Crown for the time being charged by the Lieutenant Governor in Council with the administration of this Act; natural gas (i) “natural gas” means all fluid hydrocarbons, both before and after processing, which are not defined as oil, and includes hydrogen sulphide contained therein; office (i.1) “office” means the office of the Minister at Charlottetown; oil (j) “oil” means crude oil and other hydro-carbons, regardless of gravity, which are or can be recovered from a pool in liquid form through a well by ordinary production methods; permit (k) “permit” means a valid and subsisting permit issued under this Act; permittee (l) “permittee” means any person deriving title through a permit of the Crown; person (m) “person” includes a body corporate; pipe-line (n) “pipe-line” for the purpose of this Act, includes pipe or system or arrangement of pipes wholly within the Province of Prince Edward Island by which oil or natural gas, or water used or obtained in or by drilling for or the production of oil or natural gas, is 2 Oil and Natural Gas Act Cap. O-5 3 conveyed, and includes real or personal property used for the purpose of, in connection with, or incidental to the operation thereof, including off shore installations and vessels, but does not include a pipe or system or arrangement of pipes for distribution of natural gas within a community to ultimate consumers; (o) “pool” means an underground reservoir containing an pool accumulation of oil or natural gas, or both, separated or appearing to be separated from any other reservoir or accumulation; (p) “provincial lands” means the land mass of Prince Edward Island provincial lands and includes the seabed and subsoil off the shore of the land mass to the limits of Prince Edward Island sovereignty and to such limits as may be set by federal-provincial agreement; (q) repealed by 1999,c.38,s.1; section (r) “shot-hole” means a hole drilled for the purpose of firing an shot-hole explosive charge in connection with seismic operations; (s) “spacing area” means the drainage area defined by regulations, spacing area for or allocated by the regulations to a well for the purpose of drilling for and producing oil or natural gas, and includes at all depths the subsurface areas bounded by the vertical planes in which the surface boundaries lie; (t) “test-hole” means a hole, other than a seismic shot-hole, drilled or test-hole being drilled to a depth not exceeding two thousand feet for the purpose of obtaining geological or geophysical information; (u) repealed by 1999,c.38,s.1; unit (v) “unitized operation” means unitized operation (i) the development or production of oil and natural gas, or (ii) the implementing of a program for the conservation of oil and of natural gas or the coordinated management of interests in the oil and natural gas within, upon, or under a location, part of a location, or a number of locations that are combined for that purpose pursuant to a unitization agreement entered into under this Act; (w) “waste” in addition to its ordinary meaning, means “waste” as waste that term is understood in the oil and natural gas industry, and includes the underground or surface loss of potentially recoverable oil or natural gas and wasteful operations; (x) “wasteful operations” include wasteful operations (i) the locating, spacing, drilling, equipping, completing, operating, or producing of a well in a manner that results or tends 3 4 Cap. O-5 Oil and Natural Gas Act to result in reducing the quantity of oil or natural gas ultimately recoverable from a pool by the use of sound engineering practices and economic principles, (ii) the locating, drilling, equipping, completing, operating, or producing of a well in a manner that causes or tends to cause excessive surface loss or destruction of oil or natural gas, (iii) the inefficient, excessive or improper use or dissipation of reservoir energy however caused, (iv) the failure to use suitable and timely artificial, secondary, or supplementary recovery methods in a pool where it appears probable, on the basis of available information, that any of the methods would result in increasing the quantity of oil or natural gas ultimately recoverable from a pool by the use of sound engineering practices and economic principles, (v) the escape or flairing of natural gas if it appears that, in the public interest and by the use of sound engineering practices and in the light of economics and the risk factor involved, the natural gas could be gathered, processed if necessary, and it or the products therefrom marketed, stored for future marketing, or beneficially injected into an underground reservoir, (vi) the inefficient or improper storage of oil or natural gas on the surface or underground, (vii) the production of oil or natural gas in excess of the quantity that can be properly stored, transported, or marketed, and (viii) the use of natural gas for purposes other than gas lift, repressuring, recycling, pressure maintenance, or for fuel or electrical requirements, unless the use is efficient and in the public interest; well (y) “well” means a hole (i) made or being made by drilling, boring, or in any other manner from which any oil or gas is obtained or obtainable, or for the purpose of obtaining oil or natural gas, (ii) used, drilled, or being drilled for the purpose of obtaining water for injection or for injecting natural gas, air, water, or any other substance into an underground formation, or (iii) used, drilled, or being drilled to a depth in excess of two thousand feet for the purpose of obtaining geological or geophysical information; zone (z) “zone” means a stratum or strata designated by the Minister as a zone either generally or in respect of a designated area or a specific well or wells. R.S.P.E.I. 1974, Cap. O-3, s.2; 1999,c.38,s.1 {eff.} Nov. 14/00. 4 Oil and Natural Gas Act Cap. O-5 5 PART II GENERAL ADMINISTRATION

2. For the purpose of this Act, in the expressions “oil and natural gas” “Oil and gas” and “oil or natural gas” the word “and” includes “or” and the word “or” “Oil or gas” includes “and”. R.S.P.E.I. 1974, Cap. O-3, s.4.

3. All oil and natural gas whatsoever within and under the provincial All oil and natural lands was and is vested in Her Majesty the Queen in right of the gas property of Crown province, notwithstanding any grant of mines or minerals heretofore made in or by any Crown Grant or in or by an other deed or conveyance heretofore executed nor by whom the lands containing such oil and natural gas are held in the manner in which they were acquired, and, notwithstanding any other law, oil and natural gas, or any right in relation thereto, shall not be capable of alienation except as in this Act provided, and every grant hereafter made by the Crown shall be construed and held to reserve all oil and natural gas in the lands so granted. R.S.P.E.I. 1974, Cap. O-3, s.5; 1999,c.38,s.2 {eff.} Nov. 14/00.

4. (1) Notwithstanding section 3 or any other provision of this Act, the Alienation to Lieutenant Governor in Council may alienate its rights referred to in Crown federal section 3 to Her Majesty the Queen in right of Canada, and in any transfers of use and possession of provincial lands to Her Majesty the Queen in right of Canada under this Act, or outside this Act, the Lieutenant Governor in Council may transfer the rights of Her Majesty the Queen in right of the province under section 3 and the administration, benefit and control of such provincial lands to Her Majesty the Queen in right of Canada for the establishment or development of National Parks, National Historic Parks and National Historic Sites. (2) The provincial lands upon and after a transfer referred to in Application of Act subsection (1) cease to be subject to this Act unless such transfers after alienation otherwise provide. (3) A transfer referred to in subsection (1) may be made subject to Terms and such terms, conditions and reservations as the Lieutenant Governor in conditions of transfer Council may consider advisable. 1976, c.1, s.1.

5. A permittee or lessee under Part I of this Act shall have no right to any Entitlement to minerals as defined in the Mineral Resources Act R.S.P.E.I. 1988, Cap. minerals M-7 within the area covered by his permit or lease. R.S.P.E.I. 1974, Cap. O-3, s.6.

6. If in the exploration for, or development or production of, oil or Notice to Minister natural gas, a mineral as defined in the Mineral Resources Act, or other if minerals discovered valuable substance or deposit, is discovered, the permittee or lessee, as 5 6 Cap. O-5 Oil and Natural Gas Act the case may be, shall immediately notify the Minister. R.S.P.E.I. 1974, Cap. O-3, s.7. Permit, lease, or 7. (1) No person shall explore for oil or natural gas unless he has a valid license required and subsisting permit, lease or geophysical license issued under this Act. Drill well, permit (2) No person shall drill any well unless he has a valid and subsisting permit or lease issued under this part. R.S.P.E.I. 1974, Cap. O-3, s.8. Inspections of sites 8. At any reasonable time, persons authorized by the Minister & records (a) shall have access to all wells, equipment, plants, and records; (b) are entitled to enter upon and inspect any well or any place at which oil or natural gas is refined, handled, processed, or treated, or any place used or occupied in connection with a well or with a place at which oil or natural gas is refined, handled, processed, or treated; (c) are entitled to inspect all books, documents, records, plant, and equipment pertaining to any such well, or place, or found thereon; and (d) are entitled to take samples or particulars or to carry out any tests or examinations desired. R.S.P.E.I. 1974, Cap. O-3, s.9. Identification card, 9. A person authorized by the Minister to exercise any of the powers production of referred to in section 8 shall, prior to exercising any of such powers, produce on demand his identification card signed by the Minister. R.S.P.E.I. 1974, Cap. O-3, s.10. Prohibitions 10. No member of the department responsible for the administration and enforcement of this Act and the regulations drawn pursuant to it, and no person employed continuously by the department shall have a monetary interest of any description, directly or indirectly, in any oil or natural gas property in the province or in any business engaged in any phase of the oil and natural gas industry and carried on in the province, other than shares of a company that are regularly quoted and dealt in on a recognized stock exchange. R.S.P.E.I. 1974, Cap. O-3, s.11. Regulations 11. The Lieutenant Governor in Council may make regulations (a) respecting the disposal of drill cuttings, muds, waste products or any noxious or deleterious substances upon any lands or into any waters; (b) respecting the restoration, reclamation and rehabilitation of lands used for oil and natural gas exploration and production; (c) governing the operation of any production facilities including any well, wellhead equipment, processing equipment or place where crude oil and natural gas are extracted and processed; (d) providing for the carrying out of the operations referred to in clause (c) in a safe and efficient manner; 6 Oil and Natural Gas Act Cap. O-5 7 (e) requiring from the holder of an oil and natural gas permit or lease, statements and plans respecting work and operations; (f) defining the kind and quantities of work acceptable and the manner and form in which such work shall be submitted; (g) establishing the boundaries of oil and natural gas lands; (h) governing the survey of an oil and natural gas permit or lease; (i) prescribing forms and providing for their use; (j) prescribing fees, rentals and deposits payable under this Act; (k) respecting educational and training programs in the skills required by persons engaged in the exploration for, drilling or production of, oil or natural gas; (l) respecting investment in research and development programs in the province by producers of oil or natural gas; (m) for the prevention of discrimination against persons habitually resident in the province in employment or in the supply of goods and services required in operations for the exploration for, drilling or production of, oil or natural gas; (n) prescribing interest rates; and (o) for the better carrying out of the provisions of this Act. 1978, c.16, s.5; 1981, c.24, s.1. PART III RIGHT OF ENTRY

12. Crown lands may be entered upon and explored for oil and natural Entry on Crown gas with the consent of the Minister upon such terms and conditions as lands he may prescribe. R.S.P.E.I. 1974, Cap. O-3, s.12.

13. No permittee, lessee or geophysical licensee shall enter and use any Permission to private lands for the purpose of exploring for oil and natural gas or explore on private lands drilling wells, or for the doing of any other act thereon until he has obtained the right to enter and use the same either (a) by agreement with the owner, tenant or occupant of the lands; or (b) by obtaining a special order from the Minister under this Act. R.S.P.E.I. 1974, Cap. O-3, s.13.

14. (1) A permittee, lessee, or geophysical licensee who is unable to No agreement to make an agreement with the owner, tenant or occupant of private lands enter with owner, where for the right to enter and use the lands covered by his permit or lease, or any part thereof, may apply to the Minister, after notice to the owner, tenant, or occupant, for a special order to enter and use such lands. (2) Upon the receipt of an application and of evidence that copies of Hearing application the application have been served and delivered as required by this Act, the Minister shall fix a date for the hearing of the application, which shall not be later than twenty-one clear days after all copies of the 7 8 Cap. O-5 Oil and Natural Gas Act application have been served and delivered, and may require the applicant to give such notice of the hearing in such manner and to such persons as the Minister may direct. Date for hearing (3) After hearing the parties the Minister may grant such special order Ministerial order upon such terms and conditions as he may think proper, and may determine the amount of compensation to be paid to such owner, tenant or occupant and the manner and time of payment of the same. Security for (4) The Minister may order the giving of security for payment of the payment of compensation and may prohibit, pending the determination of the compensation proceeding or until the compensation is paid or secured, further entry or use by the permittee, lessee, geophysical licensee, or any person claiming under him. Substituted service (5) Where there are several owners, tenants or occupants of the lands sought to be entered and used and there are in the opinion of the Minister, special difficulties in effecting service of any notice under this section, the Minister may order substituted service in such manner as he may determine. No appeal from (6) There shall be no appeal from the granting by the Minister of such Ministerial order special order nor from his determination as to the amount of compensation, nor from any order for security, nor from any order or decision, or ruling in respect thereto, except to a judge of the Supreme Court upon matters of law only. R.S.P.E.I. 1974, Cap. O-3, s.14; 1975, c.27, s.5. Minister may order 15. The Minister may order arbitration under the terms of this Act of the arbitration amount of compensation to be paid by the permittee, lessee or geophysical licensee, for any damage to the lands and premises entered into or upon or used under the authority of the Minister as aforesaid. R.S.P.E.I. 1974, Cap. O-3, s.15. Notice to be served 16. If the Minister directs that any damages shall be determined by to appoint arbitration, the permittee, lessee, or geophysical licensee shall serve arbitrators notice to the owner, tenant or such person as the Minister directs to appoint an arbitrator within thirty days from the service of the notice to act with another arbitrator named by the permittee, lessee, or geophysical licensee in order to determine the amount of compensation for damages aforesaid to which the owner and tenant shall be entitled by reason of the doing of any of the acts or things authorized and contemplated by this Act. R.S.P.E.I. 1974, Cap. O-3, s.16. Service of notice

17. (1) The notice mentioned in section 16 shall, when practicable, be personally served on such owner, or his agent and tenant, of any of the said lands; if, after reasonable efforts have been made to effect such 8 Oil and Natural Gas Act Cap. O-5 9 personal service, the service cannot be effected, then the notice may be served by leaving it at the last known place of abode of the owner, or his agent or tenant. (2) If the owner resides in the county in which the land is situated, the Idem notice shall be served within ten days of the order of the Minister; if out of the county and within the province, twenty days; and if out of the province, thirty days. (3) If the owner and tenant both refuse, omit or decline to appoint an Appointment of arbitrator, or when for any other reason no arbitrator is appointed by the arbitrator owner or tenant in the time limited after service of the notice, a judge of the Supreme Court shall, on being satisfied by affidavit that such notice has come to the knowledge of the owner, agent, or tenant, or that the owner or agent or tenant wilfully evades service of the notice or cannot be found, and that reasonable effort has been made to effect such service, and that notice was left at the last known place of abode of such owner, or agent, or tenant, appoint an arbitrator on his behalf. (4) One arbitrator only shall be appointed by the owner and tenant; and Appointment of if they do not agree in the choice of an arbitrator, the one chosen by the arbitrator owner shall be entitled to act. R.S.P.E.I. 1974, Cap. O-3, s.17.

18. (1) All arbitrators appointed under the authority of this Act shall be Duties and powers sworn before a judge or a justice to the faithful discharge of the duties of arbitrators assigned them; and they shall forthwith proceed to estimate the reasonable damages which the owners and tenants of the lands, according to their several interests therein, shall respectively sustain by reason of the entry and use of such lands and of the occupation of so much of the land (how much to be determined by an officer appointed by the Minister in the event of any dispute arising in respect thereto) as the permittee, lessee, or geophysical licensee may require for all working purposes connected with the exploration for and development of oil and natural gas and the transportation of same to the most advantage thereof, including all such spaces as may be necessary from time to time for dumping ground or grounds, for depositing waste, refuse, rubbish and other material excavated by such permittee, lessee or geophysical licensee. (2) In estimating the damages the arbitrators shall determine the value Estimating damages of the land irrespective of any enhancement thereof from the existence of minerals, oil or gas therein. Selection of third (3) In case the arbitrators cannot agree they may select a third arbitrator arbitrator; and when the two arbitrators cannot agree upon a third arbitrator, a judge of the Supreme Court shall select such third arbitrator. 9 10 Cap. O-5 Oil and Natural Gas Act (4) The award of any two arbitrators made in writing shall be final. Award final R.S.P.E.I. 1974, Cap. O-3, s.18. Where owner is a 19. In case the owner or tenant is a minor, or mentally incompetent minor, mentally person, or other person under disability, a judge of the Supreme Court incompetent or under disability shall on application appoint two indifferent persons as arbitrators; and all further proceedings shall be in accordance with the provisions of this Act; and all moneys awarded in such case shall be paid to the Prothonotary. R.S.P.E.I. 1974, Cap. O-3, s.19; 2008,c.20,s.72(67). Procedure where 20. When the owner of such land shall be unknown or uncertain, the owner is unknown permittee, lessee, or geophysical licensee, shall, by advertisement or uncertain published in the Gazette for three weeks and in two daily newspapers published in the province, for at least once a week for three weeks and in which advertisement the lands shall be particularly described, call upon all persons having a right to such damages to appear before a judge of the Supreme Court, on or before a certain day therein named, to be not less than twenty days after the publication of such advertisement, to appoint an arbitrator, and if an arbitrator is not appointed on or before such day the said judge of the Supreme Court and the permittee, lessee, or geophysical licensee, shall each appoint an arbitrator, and all further proceedings shall be in accordance with the provisions of this Act; and all moneys awarded in such case shall be paid to the Prothonotary, and when the right of ownership of the land shall be in dispute, the payment for damages awarded shall be in like manner paid to the Prothonotary. R.S.P.E.I. 1974, Cap. O-3, s.20; 2008,c.20,s.72(67). Payment of 21. Payment of such damages by the party liable therefor to the person damages under designated by the award as entitled thereto or payment into any court as award in this Act provided shall discharge the party making payment; but any person subsequently claiming to have been entitled to the damages so paid may prosecute his claim by action for money had and received against persons to whom the payment shall have been made. In case the award shall not designate to whom the money is to be paid or in case the party designated shall decline to receive it, the party liable to the payment of the amount so ordered may exonerate himself from all further liability by paying the money so ordered to the Prothonotary. R.S.P.E.I. 1974, Cap. O-3, s.21; 2008,c.20,s.72(67). Disputed or 22. In case of disputed or unknown title a judge of the Supreme Court, unknown title on application, may order the damages paid into court, and in such case and in all other cases where money or damages awarded are paid into court under the provisions of this Act, the said moneys and damages shall be paid to the person who shall establish his right thereto, to the satisfaction of a judge of the Supreme Court; but no order shall be made until sufficient notice has been given in the judgment of a judge of the 10 Oil and Natural Gas Act Cap. O-5 11 Supreme Court to protect the rights of all persons who may be or who may claim to be interested. R.S.P.E.I. 1974, Cap. O-3, s.22.

23. The permittee, lessee, or geophysical licensee shall not be implicated Parties to the suit nor shall he be made a party, in any contestation between the parties, respecting the right to the damages. R.S.P.E.I. 1974, Cap. O-3, s.23.

24. In no case in which the award shall find the amount of damages with Error in name of sufficient certainty shall such award be set aside because persons entitled person entitled to damages to damages are not designated by name, or otherwise sufficiently designated, or by reason of error or irregularity as to the persons entitled, or on account of any matter of form; but a judge of the Supreme Court may rectify any error or informality and may adopt such proceedings as may be considered advisable for determining to whom the damages may be paid, or for otherwise carrying into effect the provisions and intent of this Act. R.S.P.E.I. 1974, Cap. O-3, s.24. PART IV GEOPHYSICAL EXPLORATION

25. (1) No person, on his own behalf or for or on behalf of others, shall Geophysical undertake geophysical exploration unless he is the holder of a subsisting licenses geophysical license. (2) An application for a geophysical license shall be made to the Chief Application for Officer in the prescribed form. license (3) On receipt of an application, the Chief Officer, upon approval of Issue of license the Minister, may issue a geophysical license upon payment of the prescribed fee. (4) A geophysical license shall terminate one year following the date Determination of of issue. R.S.P.E.I. 1974, Cap. O-3, s.25; 1978, c.16, s.6; 1999,c.38,s.3 license {eff.} Nov. 14/00.

26. A geophysical license is not transferable except in cases of corporate Transfer of license merger, amalgamation, or succession, and then only with the written consent of the Minister. R.S.P.E.I. 1974, Cap. O-3, s.26.

27. (1) The Minister may cancel a geophysical license for failure of the Cancellation of holder to comply with any provisions of this Act or the regulations. license Notice before (2) Except where a condition exists that in the opinion of the Minister cancellation is a danger to any person or to public or private property, the Minister shall not cancel a geophysical license under subsection (1) until he has given the holder thirty days notice, or such longer time as he considers 11 12 Cap. O-5 Oil and Natural Gas Act advisable, to rectify the default and such default is not rectified within the notice period. R.S.P.E.I. 1974, Cap. O-3, s.27. Regulations 28. The Lieutenant Governor in Council may from time to time make regulations (a) governing the methods and manner and places in which geophysical exploration may be carried out; and (b) providing for reports or returns that must be given the Chief Officer from time to time. R.S.P.E.I. 1974, Cap. O-3, s.28. Rights conferred by 29. (1) Subject to subsection (2) and to section 25, the permittee has the permits exclusive right to do geological work and geophysical exploration work and exploratory drilling for oil or natural gas or both, within the boundaries of the location of the permit. (2) Repealed by 1999,c.38,s.4. Activities Interference with (3) Repealed by 1999,c.38,s.4. R.S.P.E.I. 1974, Cap. O-3, s.29; 1999, permittee c.38,s.4 {eff.} Nov. 14/00. PART V SURVEY SYSTEM Identification and 30. The manner and system by which areas are identified and described description of areas with respect to geophysical licenses, permits and leases for the purposes of this Act shall be as prescribed by the regulations. 1999,c.38,s.5 {eff.} Nov. 14/00. Minister may grant 31. (1) Subject to this section, the Minister may grant permits in permits accordance with the regulations. Prior bids (2) A permit shall not be granted pursuant to this section unless there has been a call for bids for the permit area and acceptance of a bid, in accordance with the regulations. Permit, if any, (3) Notwithstanding subsection (1) the Minister shall not grant a within 6 months permit more than 6 months after the closing date for a call for bids respecting an area. Where no permit (4) Where subsection (3) applies, there shall be deemed to have been granted no call for bids under this section with respect to the area. Permit term, etc. (5) A permit shall be for the term, and on the terms and conditions as prescribed by the regulations. 1999,c.38,s.7 {eff.} Nov. 14/00. Revocation of permit 32. The Minister may revoke a permit in accordance with the regulations. 1999,c.38,s.7 {eff.} Nov. 14/00. 12 Oil and Natural Gas Act Cap. O-5 13

33. The permitee shall, to the satisfaction of the Minister, comply with Permitee to comply and fulfil all the terms and conditions of the permit and do or cause to be with permit done on the area for which the permit was granted, the work set out in the permit, including but not limited to, geological work, geophysical exploration, exploration drilling and such other activities as may be prescribed by the regulations. 1999,c.38,s.7 {eff.} Nov. 14/00.

34. All work pursuant to the permit shall be recorded with the Chief Work to be Officer in accordance with the regulations. 1999,c.38,s.7 {eff.} Nov. recorded with Chief Officer 14/00.

35. (1) The Minister may require a permitee to provide security for the Security performance of its obligations under this Act and the regulations. (2) The security provided by the permitee under this section may be Forfeiture of forfeit to the Minister in accordance with the regulations. 1999,c.38,s.7 security {eff.} Nov. 14/00.

36. A permitee shall not allow commencement of the drilling of a well in Drilling prohibited the permit area within the prescribed distance of an existing well in any within prescribed distance from other area. 1999,c.38,s.7 {eff.} Nov. 14/00. well

37. Except as provided in section 94, no permitee shall produce any oil No production or natural gas from a well unless the permitee has a valid lease, granted without lease pursuant to this Act, for the area on which the well is located. 1999,c.38,s.7 {eff.} Nov. 14/00.

38. (1) A permitee may, at the end of any permit term, surrender all or Surrender of permit any portion of the area included in the permit, upon giving notice in area or portion of it writing to the Minister. (2) Notwithstanding the surrender of a permit or any part of a permit or Continuing liability the revocation of a permit, the permitee and the surety of the permitee remain liable for any act, matter or thing for which they would be liable as a permitee under this Act and the regulations. 1999,c.38,s.7 {eff.} Nov. 14/00. PART VI.1 TRANSITIONAL PROVISIONS

39. (1) Subject to the regulations and to subsection (2), on the date this Permit prior to Part comes into force, a permit valid immediately prior to that date shall coming into force remain valid for the balance of the term of the permit and any renewals thereof to which the permitee would have been entitled as of March 30,1999. 13 14 Cap. O-5 Oil and Natural Gas Act (2) For the avoidance of doubt, a permitee under this section shall not No additional privileges gain any rights or privileges under this Act, without otherwise complying with all of the provisions of this Act. 1999,c.38,s.8 {eff.} Nov. 14/00. Sections 40 to 42 repealed by 1999,c.38,s.6 {eff.} Nov. 14/00. Application for 43. A permittee when drilling a well discovers oil or natural gas in lease upon commercial quantity, when instructed by the Minister to do so, shall production of oil or natural gas apply for a lease, the location of which is to include the well-site on or before a date set by the Minister, which shall not be earlier than three months after the date of the instruction. R.S.P.E.I. 1974, Cap. O-3, s.44. PART VII LEASES Right of permitee to 44. (1) The Minister shall grant a lease to a permitee who complies with lease subsection (2), in accordance with the regulations. Idem (2) A permitee who has made full compliance with the provisions of Part VI and has complied with and fulfilled all of the terms and conditions of the permit, has the exclusive right to receive a grant of lease from the Minister, covering the area specified in the permit. Term of lease (3) A lease granted under this section shall be for the prescribed term. 1999,c.38,s.9 {eff.} Nov. 14/00. Exclusive rights to 45. The lessee has the exclusive right to produce, or cause to be produce produced from the lease oil and natural gas. R.S.P.E.I. 1974, Cap. O-3, s.46. Termination of 46. The issuance of a lease, by that very fact, terminates the validity of permit any permit with respect to the lease. R.S.P.E.I. 1974, Cap. O-3, s.47. Application for 47. Application for a lease shall be made in the prescribed form to the lease Chief Officer and shall be accompanied by the prescribed fee and rental. R.S.P.E.I. 1974, Cap. O-3, s.48. Sections 48 to 55 repealed by 1999,c.38,s.10 {eff.} Nov. 14/00. Expiry of lease 56. (1) Except as otherwise provided in this Act, every lease expires at the end of the term stated. Renewal of lease (2) A lease upon the location of which is developed a commercial well shall be renewed upon the expiration of the lease for a further term and for such intervals while in production, as may be prescribed by the regulations. 14 Oil and Natural Gas Act Cap. O-5 15 (3) Where the drilling or working of a well is commenced on the Continuation of location of a lease before the expiration of the term, the term of the lease lease for well drilling continues so long as the drilling or working is being conducted to the satisfaction of the Minister. (4) Where the well referred to in subsection (3) is completed as a Renewal commercial well, the lease shall be renewed under subsection (2). (5) Where, during the period that a lease is continued under subsection Abandonment of (3), the well is abandoned, the term of the lease continues for a further well, continuation of lease period of ninety days from the date of the abandonment; and if the drilling of another well in the location is commenced before the expiration of the ninety day period, the term of the lease is further continued during the period that drilling is being conducted to the satisfaction of the Minister; and if the well is completed as a commercial well, the lease shall be renewed under subsection (2). (6) The Minister may, upon application by a lessee, increase the period Increase in period of ninety days referred to in subsection (5) where a lessee has been prevented from drilling a well as required in that subsection by extraordinary physical conditions which are completely beyond any control and could not be foreseen by the lessee. (7) The rental payable from the period during which the term of a lease Prorating rental is continued under this section shall be prorated. (8) The Minister may at any time, except during the three years next Drilling notice following the issue of a lease, order the lessee to commence and continue the drilling of a well to the satisfaction of the Minister within ninety days from the date of the order. (9) Where a well has been Further drilling (a) abandoned; or notice (b) completed and has not been declared capable of producing in a commercial quantity, the Minister may at any time, except during the year following the date of abandonment or completion, order the lessee to commence and continue the drilling of another well to the satisfaction of the Minister within ninety days from the date of order. (10) Repealed by 1999,c.38,s.11 {eff.} Nov. 14/00. Extension of permits (11) Where a lessee violates any provision of this section, the Minister, Violations and in addition to any other penalties provided for in this Act, may give cancellations of leases written notice to the lessee and unless the lessee remedies or prepares to remedy the violation, to the satisfaction of the Minister within ninety days from the date of the notice, the Minister may cancel the oil or gas 15 16 Cap. O-5 Oil and Natural Gas Act lease. R.S.P.E.I. 1974, Cap. O-3, s.58; 1978, c.16, s.15; 1999,c.38,s.11 {eff.} Nov. 14/00. Extension with 57. Where a commercial well has not been developed, the term of a lease penalty may be extended upon payment of the prescribed rental and penalty. R.S.P.E.I. 1974, Cap. O-3, s.59; 1978, c.16, s.16; 1999,c.38,s.12 {eff.} Nov. 14/00. Expiry date 58. Subject to sections 59 and 60, where a lessee fails to pay the rental the lease expires by that very fact, at the end of the first anniversary of the day upon which the rental was payable unless, on or before that anniversary (a) he pays the rental and does the work, if there has been default in both payment of the rental and the doing of the work; and (b) he pays, in addition, a penalty in a sum equal to one-tenth of the rental and the value of the work not done. R.S.P.E.I. 1974, Cap. O-3, s.60. Rental in advance 59. Repealed by 1999,c.38,s.13 {eff.} Nov. 14/00. Conditions for 60. Application for renewal of a lease shall be made to the Chief Officer renewal of leases and renewal thereof shall not be granted unless (a) the application is received by the Chief Officer prior to the expiration of the lease; and (b) there is set forth therein the name of a commercial well developed on the location, and the lease shall not be renewed until the prescribed fee and rental have been paid. R.S.P.E.I. 1974, Cap. O-3, s.62; 1978, c.16, s.17. Pooling of leases 61. (1) Where two or more lessees have locations within a spacing area, or part of a spacing area, the lessees may pool their locations for the development and operation or the operation of the spacing area; and the Minister may enter into a pooling agreement on behalf of Her Majesty in right of the province on such terms and conditions as he considers advisable, which agreement may, without limiting the generality of the foregoing, be made subject to the provisions of subsection (7). Application to (2) In the absence of a pooling agreement under subsection (1), a Minister for order lessee who is the holder of a lease within, or partly within a spacing area, to pool may apply to the Minister for an order directing the lessees who hold locations within, or partly within the spacing area, to pool those portions of the leases within the spacing area for the purposes of drilling and producing, or drilling or producing petroleum and natural gas, or either of them, from the spacing area. Hearing, before order to pool (3) Upon receipt of an application made under subsection (2), the Minister shall hold a hearing, or cause a hearing to be held by a person or 16 Oil and Natural Gas Act Cap. O-5 17 persons named by him and according to procedure that he may authorize, and at the hearing all interested parties shall be given an opportunity to be heard. (4) Subsequent to the hearing, the Minister may order the leases or Order for leases to portions thereof affected to be developed and operated or operated upon be developed the terms and conditions set out in the order. (5) The Minister shall provide in every order under subsection (4) for Order to provide (a) drilling and operation of a well on the spacing area, or, where a well that is capable of or could be made capable of production has been drilled on the spacing area before the making of the order, for the operation of the well; (b) the appointment of a person (hereinafter called the “operator”) to be responsible for the drilling, operation, or abandonment of the well, whether drilled before or after the order; (c) the allocation to each lessee of the lessee’s share of the oil and natural gas from the spacing area, which allocation shall be as prescribed unless it can be shown that such basis is inequitable in the circumstances; (d) in the event that no production of oil or natural gas is obtained, for the payment by the applicant of all costs incurred in the drilling and abandonment of the well; (e) where production has been obtained, for the payment of the actual costs of drilling the well, whether drilled before or after the making of the order, and for the payment of the actual costs of the operation and abandonment of the well, together with a penalty not exceeding one-half of the lessee's share of the actual cost of drilling and completion, payable to the operator by a lessee who does not pay the other costs attributable to him by a date specified in the order; and (f) for the sale by the operator of any oil and natural gas allocated to a lessee under clause (c) where the owner thereof does not take or dispose of such production, and for the deduction to be made by the operator out of the proceeds. (6) The share of the costs of the drilling, operating and abandonment Share of costs of the well and penalty (if any) is recoverable only out of a lessee's share recoverable from of production from the spacing area if payment is not made by him by the time specified in the order. (7) Where a pooling order has been made or the Minister has entered Effect of pooling into a pooling agreement under subsection (1) order (a) the drilling for or the production of oil or natural gas from the spacing area and all operations incidental thereto shall for all purposes be deemed to be carried on or conducted by the several 17 18 Cap. O-5 Oil and Natural Gas Act lessees respectively upon their separately owned leases in the spacing area; and (b) that portion of the allowable production allocated to each lessee shall be deemed to have been produced by a well drilled on the lease of which the lessee is the holder. R.S.P.E.I. 1974, Cap. O-3, s.63; 1999,c.38,s.14 {eff.} Nov. 14/00. Part VII.1 ROYALTIES Royalties reserved 62. (1) Royalty is reserved to Her Majesty in right of the province on oil to the province and natural gas and sulphur obtained by processing natural gas, any or all of which are obtained from any permit or lease acquired under this Act, in such amount and is payable in such manner as may from time to time be prescribed by the Lieutenant Governor in Council, but the amount thereof shall not be less than that payable immediately before the coming into effect of this Act. Failure to comply (2) Every holder of a location who fails to comply with subsection (1) with subsection (1) commits an offence and is liable to the payment of the penalty prescribed by regulation. R.S.P.E.I. 1974, Cap. O-3, s.64; 1981, c.24, s.2. Deductions when 63. (1) Deductions that may be allowed when computing the royalty on computing royalty petroleum and natural gas, other than crude oil, for the costs, charges and expenses incurred in gathering or processing shall be the deductions specified by the Minister. Agreements (2) Notwithstanding section 62, the Lieutenant Governor in Council establishing may authorize the Minister to enter into an agreement establishing the royalites amount of royalty to be paid and the method of calculating the royalty, on oil and natural gas produced from a unitized operation, or as the result of a conservation plan, scheme, or project, including, but not limited to, injection or pressurization schemes. R.S.P.E.I. 1974, Cap. O-3, s.65. PART VIII CROWN RESERVES Crown reserves of 64. The following oil and natural gas is reserved to Her Majesty in right oil and natural gas of the province; (a) all oil and natural gas within a permit area that does not become included in a lease area; (b) all oil and natural gas in cancelled, reverted, abandoned or surrendered permits or lease areas; and (c) oil and natural gas in whatever areas may from time to time be designated by regulations. R.S.P.E.I. 1974, Cap. O-3, s.66. 18 Oil and Natural Gas Act Cap. O-5 19

65. (1) The Minister may dispose of the Crown reserves of oil and Disposal of Crown natural gas under such terms and conditions as are approved by the reserves Lieutenant Governor in Council. (2) Nothing in Part VI or VII shall apply to a disposition of Crown Application of Parts reserves under subsection (1). R.S.P.E.I. 1974, Cap. O-3, s.67; 1980, VI & VII c.39, s.1; 1981, c.24, s.3. PART IX CONSERVATION

66. (1) This Part applies to every well situated in the province whenever Application of drilled. division (2) No person shall commence to drill, or drill or operate a well except Well authorization, in accordance with a valid and subsisting well authorization. R.S.P.E.I. required 1974, Cap. O-3, s.68.

67. An application for a well authorization shall be made to the Chief Applications for Officer, and is not valid unless authorization (a) it is accompanied by the prescribed fee and drilling deposit or such greater amount as may be required by the Minister where, in his opinion, special circumstances exist; (b) it is made in accordance with this Act and regulations; (c) the applicant is entitled as the lessee of the lease area upon which the well is to be drilled, or by agreement with the lessee, to drill the well for which the authorization is applied for and to produce oil or natural gas, or both, through the well; (d) there is set forth therein the number or other accurate identification of the area held by the applicant within which the well is to be drilled and, when an agreement exists, a letter of consent from the lessee; and (e) there is set forth therein a program of drilling operations proposed to be followed pursuant to the authorization. R.S.P.E.I. 1974, Cap. O-3, s.69; 1978, c.16, s.18.

68. A well authorization may be cancelled by the Minister Cancellation (a) where the drilling of the well for which the authorization was issued is not commenced within one year of the day upon which the authorization was issued; (b) at the request of the person to whom the authorization was issued; (c) where it appears to the Minister that there has been a contravention of this Act or any regulation or order made hereunder with respect to the well for which the authorization was issued; 19 20 Cap. O-5 Oil and Natural Gas Act (d) where the Chief Officer has mailed to the person to whom the authorization was issued a notice in writing requiring that person to prove to the satisfaction of the Minister he is entitled to drill the well for which the authorization was issued and to extract oil or natural gas, or both, through the well, and the person has not, on or before the thirtieth day after the day upon which the notice was mailed, complied with the requirements set forth in the notice; or (e) where the Minister is satisfied that the holder thereof is not entitled as a lessee or by agreement with the lessee to drill the well for which the authorization was issued, or to extract oil or natural gas, or both, through the well, whether or not a notice as mentioned in clause (d) has been mailed. R.S.P.E.I. 1974, Cap. O-3, s.70. Suspension of a 69. The Minister may suspend a well authorization for a definite time or well autorization indefinitely where he is satisfied that a contravention of this Act or any regulation or order made hereunder has occurred with respect to the well for which the authorization was granted. R.S.P.E.I. 1974, Cap. O-3, s.71. Suspension of a 70. A well authorization held by a person who is not entitled as a lessee, well authorization or by agreement with a lessee to drill the well for which the authorization was granted or to produce oil or natural gas, or both, through the well is null and void for all purposes, except that the person remains liable to complete or abandon any well or suspend operations in accordance with directions that may be given by the Minister. R.S.P.E.I. 1974, Cap. O-3, s.72. Test hole 71. No person shall commence to drill or drill a test-hole except in authorization accordance with a valid and subsisting test hole authorization issued under this Act. R.S.P.E.I. 1974, Cap. O-3, s.73. Application for 72. Application for a test-hole authorization shall be made to the Chief Officer and is not valid unless (a) it is accompanied by the prescribed fee; (b) it is in accordance with this Act and the regulations; (c) the applicant is the holder of a valid and subsisting geophysical license; (d) there is set forth therein a statement showing (i) the maximum number of test-holes proposed, (ii) the areas in which the test-holes are proposed to be drilled, (iii) the approximate depth of the test-holes, and (iv) the formation, stratum, or zone in which the drilling is to terminate; and (e) there is set forth therein a program of drilling operations proposed to be followed pursuant to the authorization. R.S.P.E.I. 1974, Cap. O-3, s.74; 1978, c.16, s.19. 20 Oil and Natural Gas Act Cap. O-5 21

73. A test-hole authorization may be cancelled by the Minister Cancellation (a) where the drilling of the test-holes for which the authorization is issued is not commenced within six months of the day upon which the authorization was issued; (b) at the request of the person to whom the authorization was issued; (c) where it appears to the Minister that a contravention of this Act or any regulation or order made hereunder has occurred with respect to any test-hole for which authorization was issued; or (d) if the geophysical license expires. R.S.P.E.I. 1974, Cap. O-3, s.75.

74. The Minister may suspend a test-hole authorization for a definite Suspension of a time or indefinitely where he is satisfied that a contravention of this Act test-hole authorization or of any regulation, or order made hereunder has occurred with respect to any test-hole for which the authorization was issued. R.S.P.E.I. 1974, Cap. O-3, s.76.

75. (1) No person shall operate a drilling rig, or service rig, except in Rig license accordance with a valid and subsisting rig license issued under this Act. (2) A rig license shall terminate one year from the date of issue Termination of thereof. R.S.P.E.I. 1974, Cap. O-3, s.77. license

76. Application for a rig license shall be made to the Chief Officer and is Application for not valid unless license (a) it is accompanied by the prescribed fee; (b) it is made in accordance with this Act and the regulations. R.S.P.E.I. 1974, Cap. O-3, s.78; 1978, c.16, s.20.

77. A rig license may be cancelled by the Minister Cancellation (a) at the request of the person to whom the license was issued; or (b) where it appears to the Minister that a contravention of this Act or of any regulation or order made hereunder has occurred with respect to the rig for which the license was issued. R.S.P.E.I. 1974, Cap. O-3, s.79.

78. The Minister may suspend a rig license for a definite time or Suspension of rig indefinitely where he is satisfied that a contravention of this Act, or of license any regulation or order made hereunder has occurred with respect to the rig for which the license was issued. R.S.P.E.I. 1974, Cap. O-3, s.80.

79. (1) The Minister or the Chief Officer authorized by him to do so Granting or refusing may, in his discretion, grant, subject to conditions, restrictions, and well authorization stipulations, or refuse to grant a well authorization, test-hole authorization, or a rig license. 21 22 Cap. O-5 Oil and Natural Gas Act (2) The Chief Officer shall keep a record of each well authorization, Record of well authorization test-hole authorization and rig license issued. R.S.P.E.I. 1974, Cap. O-3, s.81. Transfer of 80. (1) A well authorization, test-hole authorization or rig license shall authorization not be transferred unless (a) the Minister has consented to the transfer in writing; (b) the document that is the evidence of the transfer is filed with the Chief Officer; and (c) the fee prescribed by regulation has been paid to the Chief Officer. Record of transfers (2) The Chief Officer shall keep a record of every transfer to which the Minister has given consent. R.S.P.E.I. 1974, Cap. O-3, s.82. Well Register 81. The Chief Officer shall maintain a record of each well drilled, to be known as the “Well Register” and in which shall be entered with respect to each well (a) the name given to the well, any changes made thereto, and the location of the well; (b) the well authorization number; (c) the name of the person to whom the well authorization was issued or transferred and his agents; and (d) the name of the drilling contractor or contractors. R.S.P.E.I. 1974, Cap. O-3, s.83. Regulations and 82. The Lieutenant Governor in Council may make regulations or special special orders orders governing the drilling of wells and the production and conservation of oil and natural gas and, without limiting the generality of the foregoing, may (a.0) prescribe the manner and system by which areas are identified and described with respect to geophysical licenses, permits and leases; (a) prescribe normal spacing areas for oil and natural gas wells; (b) prescribe other than normal spacing areas in any field, pool, or other area; (c) prohibit the drilling of a well at any point within a prescribed distance of any boundary roadway, right-of-way, building of any specified type; or any specified works, either public or private; (d) prescribe and describe the part of a spacing area within which a well is to be completed, and provide penalties for and prohibitions against completing the well in other parts of the spacing area; (e) require the submission of an application and the obtaining of the approval of the Minister before (i) deepening a well beyond the formation from which production is being taken or has been taken, 22 Oil and Natural Gas Act Cap. O-5 23 (ii) recompleting a well by perforating any casing with a view to producing from any formation other than that from which production is being taken or has been taken, (iii) suspending normal drilling operations, (iv) suspending normal producing operations for a period longer than three consecutive months, (v) resuming drilling operations after a previous completion, suspension, or abandonment of a well, (vi) resuming producing operations after a previous suspension, (vii) reworking a well to alter the producing characteristics of the well, or (viii) abandoning a well, and authorizing the Minister to prescribe the conditions under which approval is granted in any such case, and prescribing the methods to be employed in any drilling or abandonment operations; (f) prescribe the conditions under which drilling operations may be carried out in water-covered areas, and any special measures to be taken in such operations; (g) prescribe the measures to be adopted to confine any oil, natural gas, or water encountered during drilling operations to its original stratum, and to protect the contents of the stratum from infiltration, inundation, and migration; (h) prescribe the minimum standards of tools, casing, equipment, and materials that may be used for drilling, development, and production of oil or natural gas; (i) govern the drilling of multi-zone wells, prohibit completion of a well as a multi-zone well without the permission of the Minister, prohibit the use of a well for the production from or injection to more than one zone without the approval of the Minister, and authorize the Minister to prescribe the terms and conditions under which he grants his approval in any such case; (j) prohibit the drilling through oil, natural gas, water, coal or other minerals without taking adequate measures to confine oil, natural gas, or water to its own stratum, and to protect any coal seam or other mineral deposit or any workings therein from injury, and prescribe the nature and extent of such measures; (k) require the provision of adequate well casing and the proper anchorage and cementation thereof; (l) require and prescribe the taking and method of taking samples of any kind and their submission to the Minister; (m) require and prescribe any tests, analyses, surveys and logs and the obtaining of other necessary information and the submission of all such records and information to the Minister; 23 24 Cap. O-5 Oil and Natural Gas Act (n) prescribe the measures to be taken before the commencement of drilling and during drilling and production to conserve any oil, natural gas or water likely to be encountered; (o) prescribe or limit the methods of operation to be observed during drilling and in the subsequent management of any well and the conduct of any operation for any purpose, including, without restricting the generality of the foregoing (i) the protection of life and property, (ii) the prevention and extinguishment of fires, (iii) the prevention of wells flowing out of control, and (iv) the prevention of pollution of water; (p) regulate the location and equipping of production batteries; (q) regulate the conditioning or reconditioning of wells by mechanical, chemical, or explosive means; (r) regulate the inspection of wells both during and after drilling; (s) provide for the capping or otherwise closing in of wells for the purpose of preventing waste; (t) prescribe the conditions under which the Minister or the Chief Officer may order the suspension of drilling or producing operations at a well; (u) require the cleaning-out of any wells; (v) regulate the unitization of a pool or field for the purpose of drilling and producing; (w) prescribe records that must be maintained and filed with the Chief Officer; (x) regulate the release of well records and well data; (y) regulate the naming of wells and batteries; (z) regulate general conservation of oil and natural gas, the waste or improvident disposition thereof, and any other matter incidental to the development and drilling of oil and natural gas wells, the operation thereof, and the production therefrom; (z.1) establish a tariff of fees for well authorizations, test-hole authorizations, and rig licenses, the transfer of same, well name changes, and for such other purposes as may be required; and (z.2) establish the amount and disposition of drilling or other deposits required under this Act; (z.3) regulate all aspects of licenses granted pursuant to this Act; (z.4) regulate all aspects of permits granted pursuant to this Act, including permits governed by section 39; (z.5) regulate all aspects of leases granted pursuant to this Act (z.6) prescribe a bidding system under this Act; (z.7) prescribing forms for the purposes of this Act. R.S.P.E.I. 1974, Cap. O-3, s.84; 1999,c.38,s.16 {eff.} Nov. 14/00. 24 Oil and Natural Gas Act Cap. O-5 25

83. The Minister may, by general or special orders Ministerial orders (a) designate a field by describing the surface area thereof; (b) designate a pool by describing the surface area vertically above the pool and by naming the geological formation and the zone in which the pool occurs; (c) determine whether a field or pool as described under clause (a) or (b) shall be operated for the production of oil or natural gas, or both; (d) designate the area that is to be allocated to a well in connection with fixing allowable production; (e) control and regulate the production of oil, natural gas, and water by restriction, proration, or prohibition; and (f) require the disposal into an underground formation or otherwise, in accordance with such terms and conditions as he may prescribe, of any water produced. R.S.P.E.I. 1974, Cap. O-3, s.85.

84. The Minister may, by general or special order, restrict the amount of Restrictions on oil or natural gas, or both, that may be produced in the province by production of oil or natural gas (a) fixing a provincial allowable rate of production for oil not exceeding the market demand as determined by him; (b) allocating the provincial allowable rate of production for oil in a reasonable manner among the producing pools in the province by fixing the amount of oil that may be produced from each pool without waste to meet the provincial allowable rate of production so determined; (c) distributing the portion of the provincial allowable rate of production allocated to a pool among the wells in the pool in such a manner that each lessee may produce or receive his fair share of the oil in the pool; (d) limiting the total amount of natural gas that may be produced from any pool without waste, having regard to the market demand for natural gas, as determined by him, to an amount required for the efficient use of natural gas for the production of oil and for the efficient utilization of the natural gas reserves of the province. R.S.P.E.I. 1974, Cap. O-3, s.86.

85. In order to prevent waste, the Minister may Prevention of waste (a) require the repressuring, recycling, or pressure maintenance of any pool or portion thereof, and for or incidental to that purpose require the introduction or injection into any pool or portion thereof of natural gas, air, water, or other substance; and (b) require that any natural gas be gathered, processed if necessary, and that the natural gas or liquid hydrocarbons extracted therefrom be marketed or injected into an underground reservoir for storage or for any other purpose. R.S.P.E.I. 1974, Cap. O-3, s.87. 25 26 Cap. O-5 Oil and Natural Gas Act

86. No scheme for Approval of schemes (a) repressuring, recycling, or pressure maintenance in any field or pool; (b) the processing, storage or disposal of natural gas; or (c) the gathering, storage and disposal of water produced from any field or pool, shall be proceeded with unless the Minister, by order, has approved the scheme upon such terms and conditions as the Minister may prescribe. R.S.P.E.I. 1974, Cap. O-3, s.88. Publication 87. Every regulation and general or special order made under sections 82 to 86 shall be published in the Gazette. R.S.P.E.I. 1974, Cap. O-3, s.89. Escape of oil or 88. If at any time an escape of oil or natural gas from a well is not natural gas or water prevented or if a flow of water is not controlled, the Minister may take such means as may appear to him to be necessary or expedient in the public interest to control and prevent the escape of oil, natural gas, or water. R.S.P.E.I. 1974, Cap. O-3, s.90. Discontinuance of 89. (1) If the Minister is satisfied, after an inquiry held upon such notice operations and to such persons as he considers proper, that a well is being operated in such a way that any provision of this Act or of the regulations, or of an order of the Minister is contravened or not complied with, the Minister may order that on and after a date to be fixed by the order no production is to be permitted from the well and that it is to be shut in and kept shut in until such time as the Minister orders to the contrary. Order for well to be (2) If, in the opinion of the Minister, waste, damage to property, or shut down pollution can thereby be prevented, the Minister may order the well to be shut down pending an inquiry under subsection (1), which inquiry shall be held within fifteen days of the making of the order. Drilling methods or (3) Where it appears to the Minister that a method or practice being practices employed in any drilling, completion, suspension, abandonment, or inadequate, Ministerial order production operation is in any way inadequate, improper or hazardous, he may order orally, confirmed by a note in the daily drilling report, that the operation be discontinued until methods approved by him are adopted. R.S.P.E.I. 1974, Cap. O-3, s.91. Prescribing methods of 90. (1) The Minister may prescribe the methods to be used for the measurements measurement of oil, natural gas, and water, and the standard conditions to which such measurements are to be converted. Methods and (2) If methods of measurement and standard conditions are prescribed standard conditions, under this section, the methods and standard conditions shall be used use of whenever the measurement of oil, natural gas, or water is required as a result of the provisions of this Act. R.S.P.E.I. 1974, Cap. O-3, s.92. 26 Oil and Natural Gas Act Cap. O-5 27

91. (1) When the Minister is of the opinion that, because of hazardous Wild-well control conditions in a field or at a well, it is necessary or expedient to close any area and to shut out therefrom all persons except such as are specifically authorized, the Minister may make an order in writing setting out and delimiting the closed area prohibiting anyone during the time the order is in effect from entering, travelling about, or remaining therein without a travel permit issued under the authority of the Minister. (2) An order under subsection (1) may contain any terms and Terms and conditions that the Minister considers necessary for the prevention of fire conditions of order in the closed area. (3) The Minister may provide for such notice as is practicable under Notice the circumstances, and may cause notice of the order setting out the area closed to be published as in his opinion will give adequate publicity. (4) In addition to the notice provided by the subsection (3), the Advising Minister shall advise an appropriate representative of the Department of Government of Canada Transport of Canada of the contents of the order made under subsection (1). R.S.P.E.I. 1974, Cap. O-3, s.93.

92. (1) Without restricting the generality of section 91, if, in the opinion Enforcement of of the Minister, the control of a well or any completion, suspension, or orders and costs abandonment is not in accordance with an order, direction, or requirement of the Minister, the Chief Officer, or any person duly authorized by the Minister, shall have access to and may enter upon the well-site or any structure thereon and do whatever the Minister considers necessary because of the failure to comply with the order, direction or requirement. (2) The Minister of Finance may use or expend all or any part of the Use of deposits to deposit made by the lessee to defray the costs, determined by the defray costs Minister, of or incidental to the work of control, completion, suspension, or abandonment of the well to the satisfaction of the Minister. (3) The return of the deposit or any part thereof, does not relieve the Return of deposit, lessee of the well of liability for any costs or of incidental to the control, effect on liability completion, suspension or abandonment of a well and does not reduce his liability for such costs. (4) The costs incurred by the Minister under this section remaining Costs incurred by unpaid after applying thereto a deposit held by the Minister of Finance Minister are a debt payable by the lessee of the well to the Minister of Finance. R.S.P.E.I. 1974, Cap. O-3, s.94; 1983, c.1, s.6; 1986, c.5, s.2; 1993, c.29, s.4; 2010,c.31,s.3; 2012,c.17,s.2; 2015,c.28,s.3. 27 28 Cap. O-5 Oil and Natural Gas Act

93. (1) The Minister, for the enforcement of any order made by him Enforcement of Ministerial orders under sections 91 and 92 may (a) take such steps and employ such persons as he considers necessary; (b) forcibly or otherwise enter upon, seize, and take possession of any well, together with the whole or part of the movable and immovable property in, on, or about the well or used in connection therewith or appertaining thereto together with any of the records pertinent thereto; (c) either discontinue all production or take over the management and control of it; (d) plug the well at any depth; and (e) take such steps as he considers necessary to prevent the flow of or escape of oil, natural gas, or water from any stratum that the well enters. Obeying order of (2) Upon the Minister taking possession of a well and so long as the Minister possession continues, every officer and employee of the lessee or the well agent, or contractor shall obey the orders concerning the well given by the Minister, or by such person or persons as may be placed in charge or control of the well. Disposition of oil (3) Upon possession being taken of any well, the Minister may take, and natural gas deal with, and dispose of all oil and natural gas produced at the well as if it were the property of the Crown, subject to the payment of the net proceeds thereof as provided in this section. Costs and expenses (4) The costs and expenses of and incidental to proceedings taken by of proceedings the Minister under this section are in the discretion of the Minister, and the Minister may direct by whom and to what extent they are to be paid. Payments from (5) Without restricting the generality of the foregoing subsections, the proceeds of oil and Minister may pay, from the proceeds of the oil and natural gas produced natural gas at the well (a) all costs and expenses of and incidental to the proceedings taken by the Minister under this section, including the costs and expenses of the management, operation, and control of the well by the Minister; and (b) all costs and expenses of carrying out investigations and conservation measures that the Minister considers necessary in connection with the well. Payment of net (6) The net proceeds of the oil and natural gas produced at the well proceeds into court remaining after the payment of the costs and expenses under subsection (5) shall be paid by the Minister into the Supreme Court of Prince Edward Island and thereafter shall be paid out to such persons and in 28 Oil and Natural Gas Act Cap. O-5 29 such amounts as may be determined by a judge of the Supreme Court upon the application of any person claiming to be entitled to any of the proceeds. (7) If the proceeds of the oil and natural gas produced at the well are Proceeds not sufficient to pay all costs and expenses of and incidental to the insufficient to pay costs and expenses proceedings, investigations, and measures taken, and the Minister directs that the balance of the costs and expenses or any part of it is to be paid by the lessee of the well, then the provisions of section 92 regarding the use of the deposit and regarding the further liability of the lessee of the well with respect to the costs referred to in that section apply, with the necessary changes, to the use of the deposit, and to the further liability of the lessee, to defray the balance of the costs and expenses that are incurred under this section. R.S.P.E.I. 1974, Cap. O-3, s.95. PART X GENERAL

94. With the approval of the Minister, a permittee may, for testing Production of oil purposes only, produce oil or natural gas from one or more wells on his and natural gas location in accordance with whatever terms and conditions are prescribed, but in no event shall the production continue for more than ninety days. R.S.P.E.I. 1974, Cap. O-3, s.96.

95. The inclusion in a permit or lease of oil or natural gas that does not Lease not belong or is not reserved to Her Majesty in right of the province does not invalidated by invalidate a permit or a lease, with respect to the remainder of the permit or lease. R.S.P.E.I. 1974, Cap. O-3, s.97.

96. The Lieutenant Governor in Council may authorize the Minister to Unitization enter into a unitization agreement for the unitized operation of a field or agreement pool or any part thereof, and upon its execution the unitization agreement shall be binding on all parties thereto. R.S.P.E.I. 1974, Cap. O-3, s.98. Exploration work,

97. No person shall commence exploratory work until he has notified the notice of Chief Officer in writing of his intention to do so. R.S.P.E.I. 1974, Cap. O-3, s.99. PART XI TRANSFERS AND ASSIGNMENTS

98. A permittee or lessee shall not assign, transfer, sublet or part with the Transfers and possession of the rights described in his permit or lease, or any part assignments thereof without the approval of the Minister. R.S.P.E.I. 1974, Cap. O-3, s.100. 29 30 Cap. O-5 Oil and Natural Gas Act

99. (1) No transfer, assignment, agreement or instrument affecting the Preconditions to transfers etc. title to a location shall be recorded or effective unless (a) the transfer, assignment, agreement, or instrument does not conflict or result in any conflict with the provisions of this Act; (b) the transfer, assignment, agreement, or instrument is made by or on behalf of the permittee or of the lessee; or (c) a transfer, assignment, agreement, or instrument affecting the title to a location shall be deemed to be recorded and be effective from and after the time that the application to record the transfer, assignment, agreement, or instrument is received by the Chief Officer. Failure to record a (2) Failure to record a transfer, assignment, agreement or instrument transfer etc. affecting the title to a location does not invalidate the transfer, assignment, agreement, or instrument as between the parties thereto, but the provisions of subsection (1) govern the effectiveness thereof with respect to any other person. Fee for recording (3) No transfer, assignment, agreement, or instrument affecting title to a location shall be recorded unless it is accompanied by the prescribed fee. Tranfer etc. to be (4) Every transfer, assignment, agreement, or instrument affecting title witnessed to a location when made by an individual under this Act shall be witnessed, and he shall sign his name and address, and when made by a corporation shall be properly executed under the seal of the corporation or its duly authorized attorney. Registration of (5) Where, by an instrument made pursuant to section 177 of the Bank certain documents Act (Canada), R.S.C. 1985, Chap. B-1, a lease of oil or natural gas, or with Chief Officer both, or any interest in the lease, is assigned, transferred, or set over as security to a chartered bank by the lessee of, or by a person having an interest in the lease, there shall be registered with the Chief Officer upon payment of the prescribed fee (a) an original or an executed copy of the instrument giving the security; or (b) a copy of the instrument giving the security certified by an officer or employee of the bank to be a true copy. Transfer of permit (6) A holder of a permit or lease may make a valid transfer of his or lease, to whom permit, or lease, directly to himself, jointly with another or others; and permitted where the permit or lease is held by more than one person, they may make a transfer directly to one or more of their number either alone or jointly with some other person; and a trustee, executor, or administrator may make a valid transfer of a permit or lease to himself individually 30 Oil and Natural Gas Act Cap. O-5 31 where the making of the transfer is otherwise within his power. R.S.P.E.I. 1974, Cap. O-3, s.101; 1978, c.16, s.21. PART XII SURVEYS

100. (1) The location and the boundaries of every lease shall be surveyed Surveys of leases by a Prince Edward Island land surveyor within one year from the date of and wells instructions by the Minister to do so, and any such location not surveyed within that time may be cancelled, unless the lessee can prove to the Minister that, through no fault on his part, he has been unable to obtain a Prince Edward Island land surveyor to survey the location. (2) A survey under this section shall be made in conformity with the Surveys requirements of the Chief Surveyor. 1971, c.27, s.103; 1999,c.38,s.16 {eff.} Nov. 14/00. PART XIII CONFIDENTIAL INFORMATION

101. (1) Subject to subsection (2), all records and instruments relating to Public inspection of oil and natural gas titles recorded pursuant to this Act shall, during records and instruments normal office hours be open to public inspection free of charge. (2) Geological, geophysical, and reports other than well reports and Release of certain well data received by the Chief Officer in the course of the reports restricted administration of this Act, and designated by the Minister as confidential, shall not be released except pursuant to the order of the Lieutenant Governor in Council. (3) Notwithstanding subsection (2), with the permission in writing of Release of the person who is the holder of the permit, or lease, the location of which information by Minister is dealt within the report, the Minister may, at his sole discretion, release information contained therein. Release of factual (4) Notwithstanding subsection (2), the Lieutenant Governor in information Council may release factual information considered confidential when it is considered to be in the public interest to do so. R.S.P.E.I. 1974, Cap. O-3, s.103. PART XIV MISCELLANEOUS

102. Every permittee, or lessee shall register with the Chief Officer an Address for service address for service. R.S.P.E.I. 1974, Cap. O-3, s.104. 31 32 Cap. O-5 Oil and Natural Gas Act

103. Every permit and lease shall be executed on the part of the Crown Execution of permits and leases by the Minister under his hand and seal, and shall be kept on file in the by Crown office of the Chief Officer; and a duplicate thereof, or a copy thereof, certified by the Minister, shall be executed and delivered to the permittee or lessee, and shall in all courts have the like effect and force as the original on file in the office of the Chief Officer. R.S.P.E.I. 1974, Cap. O-3, s.105. Specific orders 104. In any case where the Lieutenant Governor in Council may make a directed at specific regulation of general or particular application, the Minister may, if it people appears to him necessary to do so for the preservation or protection of life or property, or oil or natural gas, or oil or natural gas field or part thereof, or any well or other work, or any investment, make a specific order directed to a particular person or persons which order shall without publication in the Gazette, be of the same effect as a regulation, for such period not exceeding thirty days as the Minister specified in such order, but the Lieutenant Governor in Council or the Minister may at any time revoke or suspend any such order. R.S.P.E.I. 1974, Cap. O-3, s.106. Effective date of 105. Any regulation and any amendment, alteration or repeal thereof regulations made under this Act become effective in all respects as if enacted in this Act upon the publication thereof in the Gazette. R.S.P.E.I. 1974, Cap. O- 3, s.107. Penalties 106. Any person who contravenes any provision of this Act or of any regulations or order made hereunder in addition to any other penalty provided for in the regulations is liable upon summary conviction to a penalty not exceeding $1,000 and every day during which a contravention continues may constitute a separate offence. R.S.P.E.I. 1974, Cap. O-3, s.108; 1994, c.58, s.6. Fees, fines, etc. 107. All fees, fines and penalties collected under this Act shall be made payable to the Minister of Finance and submitted to the Chief Officer. 1971, c.27, s.110; 1983, c.1, s.6; 1986, c.5, s.2; 1993, c.29, s.4; 2010,c.31,s.3; 2012,c.17,s.2; 2015,c.28,s.3. 32