Permit, Lease and Survey System Regulations (P.E.I. Reg. EC689/00)

1. (1) In these regulations Definitions (a) “Act” means the Oil and Natural Gas Act R.S.P.E.I. 1988, Cap. Act O-5; (b) “anniversary date” means the annual return of the date on which anniversary date a permit or lease was issued; (c) “bid” means a proposal for exploration or development of bid provincial lands for oil or natural gas, that was submitted in response to a call for bids; (d) “call for bids” means a request by the Minister for bids on a call for bids permit to conduct exploration or development of provincial lands for oil or natural gas; (e) “offshore” means the seabed and the subsoil off the shore of the offshore land mass of the province to the limits of the sovereignty of the government of Prince Edward Island and to such limits as may be determined by federal provincial agreement; (f) “onshore” means the land mass of the province; onshore (g) “vacant”, in relation to lands, means provincial lands that are not vacant subject to a permit, lease or geophysical license under the Act. (2) Lessees, permitees and bidders shall comply with the Act, the Compliance with regulations and all other applicable federal or provincial laws and applicable laws regulations. (EC689/00)

2. (1) Where the Minister receives a written request that provincial lands Call for bids be submitted in a call for bids, the Minister shall consider the request and reply to it not later than 3 weeks from receipt of the request. (2) The Minister may issue a call for bids for an oil and natural gas Idem permit (a) for any provincial lands; or (b) for all or part of provincial lands described in a request submitted pursuant to subsection (1). 1 2 Cap. O-5 Oil and Natural Gas Act Updated 2009 Permit, Lease and Survey System Regulations Publication (3) A call for bids shall be published in the Gazette and such other publications as the Minister considers appropriate. Information (4) A call for bids shall include the following information: required (a) the location and description of the provincial lands for which bids are invited; (b) the total area for which bids are invited; (c) the location where the information package for bidders will be available; (d) the address where the Minister will receive bids; (e) the closing date and time for submission of bids; (f) the terms and conditions required to be met by a bidder; (g) the manner in which a bid is to be submitted; (h) the criteria to be applied for acceptance of bids; and (i) other information as the Minister considers appropriate. (EC689/00) Information on bid 3. A bid for an oil and natural gas permit shall be on the prescribed form and include the following information: (a) the type of work proposed by the bidder, including geological work, geophysical exploration, exploratory drilling and other activities specified in the call for bids or proposed by the bidder; (b) a description of the work plan and the time period in which it is to be carried out; (c) the monetary value of the work plan; and (d) any other information specified by the Minister in the call for bids. (EC689/00) Bid criteria 4. (1) A bid shall not be accepted by the Minister unless the bid (a) satisfies the terms and conditions and acceptance criteria of the call for bids; and (b) is submitted in the prescribed form and in manner specified in the call for bids. Late bids not (2) No bid received after the stated closing time for submissions of considered bids shall be considered by the Minister in issuing a permit. Late bids returned (3) All bids received after the stated closing date and time for submission of bids shall remain sealed and shall be returned to the bidder. (EC689/00) Minister may 5. (1) Notwithstanding any other provision of these regulations, the decline bids Minister may decline to accept any bids. Subsequent call for (2) The Minister may, at any time after the closing date of a call for bids bids for which no bids were received or for which all bids were rejected, request a call for bids for the same provincial lands on the basis of the 2 Updated 2009 Oil and Natural Gas Act Cap. O-5 3 Permit, Lease and Survey System Regulations same or different terms and conditions as set out in the original call for bids. (EC689/00)

6. (1) Within 15 days of being notified that a bid has been accepted, a Security bidder shall post with the Minister, (a) performance security payable to the Minister in accordance with subsection (2) with a value of 25% of the total monetary value of the bid; and (b) the required permit and rental fees. (2) Performance security shall be in the form of a performance bond Form of security from a company acceptable to the Minister, or such other substitute security as may be acceptable to the Minister, to ensure the proper performance of the permit by the permitee. (EC689/00)

7. (1) Where the successful bidder complies with section 6, the Minister Permit shall issue an oil and gas permit (a) on the terms and conditions of the call for bids and the bid, including the work plan described in the bid; and (b) on such other terms and conditions as the Minister considers necessary. (2) Where the successful bidder fails to comply with section 6, the If no security Minister (a) shall declare that bid null and void; and (b) may consider other bids submitted in response to the call for bids or disregard all bids and declare the lands vacant. (3) A permit shall only be issued in respect of contiguous areas. Contiguous areas (EC689/00)

8. (1) The term of an onshore permit shall be 6 years and the term of an Term of permit offshore permit shall be 9 years. (2) Notwithstanding subsection (1), the Minister may grant a one-time One-time extension extension to the term of an onshore permit prescribed by subsection (1), for a term not to exceed two years from the date of expiry of the permit, with such conditions as the Minister may impose. (EC689/00; 162/09)

9. (1) A permitee shall complete the work described in the work plan Permitee to which is described in the permit and shall comply with and fulfil all of complete work, comply with permit the terms and conditions of the permit. (2) All work shall be completed in the year in which it is scheduled in Work to be done in the work plan set out in the permit. year scheduled (3) Notwithstanding subsection (2), where a permitee has, in any Carry for ward preceding year, completed and recorded an excess of any scheduled work excess work 3 4 Cap. O-5 Oil and Natural Gas Act Updated 2009 Permit, Lease and Survey System Regulations required by the permit, the excess work may be carried forward to fulfil future work obligations of the permit. Minister may vary work schedule (4) Notwithstanding subsections (1) and (2), the Minister may vary the schedule for the implementation of a work plan as the Minister considers necessary. (EC689/00) Annual report 10. A permitee shall submit to the Minister, on or before 10 days from the anniversary date, (a) evidence of expenditures made for work done and completion dates; (b) reports and maps showing the geological or geophysical examinations, aerial photographs, detailed logs, well history reports and all information obtained respecting the presence of water, coal, salt, gravel, sand and other potentially useful substances; and (c) such other information as the Minister may require, on the prescribed form. (EC689/00) Revocation of 11. (1) In the event that a permitee fails to comply with subsection 1(2), permit section 9 or section 10, the Minister may revoke the permit, declare the permit area to be vacant, and declare as forfeit all or part of the performance security submitted pursuant to section 6. Amount determined (2) The amount forfeit in accordance with this section shall be by Minister determined by the Minister. (EC689/00) Security returned 12. Except where all or part of a performance security is forfeit, a after expiry performance security shall be returned to a permitee after expiry of the period in which coverage is bound by the security. (EC689/00) EXPLORATORY WELLS No well within 13. (1) No person shall drill an exploratory well within 500 metres of 500m, onshore the boundary of an onshore permit. Lease for additional (2) Where, in the Minister’s opinion, an existing well in an onshore well permit area may be capable of commercial production of oil or natural gas, the permitee shall not drill another well unless the permitee has applied for a lease and been issued a lease of the area for which the new well is proposed. (EC689/00) No well within 1 14. (1) No person shall drill an exploratory well within 1 kilometre of km, offshore the boundary of an offshore permit. Lease for additional (2) Where, in the opinion of the Minister, an existing well in an well offshore permit area may be capable of commercial production of oil or natural gas, the permitee shall not drill another well unless the permitee 4 Updated 2009 Oil and Natural Gas Act Cap. O-5 5 Permit, Lease and Survey System Regulations has applied for a lease and been issued a lease with respect to the area proposed for a well. (EC689/00) OIL AND NATURAL GAS PRODUCTION LEASE

15. (1) Except as provided in section 94 of the Act, no person shall No gas, oil produce any oil or natural gas from an onshore well, without a lease of production without lease the oil and natural gas rights issued for the area in which the well is located, issued in accordance with the Act or these regulations. (2) A lease of oil and natural gas rights derived from an onshore permit 20 year term, area shall be for a term not exceeding 20 years, and subject to such terms onshore and conditions as the Minister may consider necessary. (3) A lease of oil and natural gas rights derived from an offshore 25 year term, permit area shall be for a term not exceeding 25 years, and subject to offshore such terms and conditions as the Minister may consider necessary. (4) A lessee shall comply with the terms and conditions of a lease. Compliance with lease (5) The allocation of a lessee’s share of the oil and gas from the Allocation on spacing area pursuant to clause 61(5)(c) of the Act shall be on a hectare hectare basis basis. (EC689/00)

16. (1) A lessee may, at any time, surrender a lease upon giving 90 days Surrender of lease written notice to the Minister. (2) Notwithstanding any surrender or cancellation or expiration of any Liability continues lease, the lessee remains liable for any act, matter or thing for which at the date of surrender or cancellation or expiration the lessee was liable under this Act, the regulations or under the terms of the surrendered or cancelled or expired document. (EC689/00)

17. (1) In the event that a lessee fails to comply with subsections 1(2) or Cancellation of 15(4), or fails to pay the royalty as required by the Act and regulations, lease the Minister may cancel the lease upon first giving 90 days notice to the lessee stating the reasons for the intended cancellation. (2) If, within 90 days of the receipt of a notice under subsection (1), Cancellation may the lessee remedies the reason for the intended cancellation, the Minister be revoked may revoke the intended cancellation. (EC689/00)

18. Where a lease is cancelled or surrendered or has expired, the Minister Transfer production may require the lessee to transfer to the province, or the province’s and transportation facilities nominee, all production and transportation facilities that may be required for continued production from the lease area, at fair market value, as agreed by the parties, or failing such agreement, by arbitration pursuant to section 19. (EC689/00) 5 6 Cap. O-5 Oil and Natural Gas Act Updated 2009 Permit, Lease and Survey System Regulations

19. (1) Where a permitee or lessee disputes a decision made pursuant to Arbitration section 11 or 17, or there is a failure to reach an agreement on market value pursuant to section 18, the dispute shall be referred to arbitration by three arbitrators, one to be appointed by the Minister, one to be appointed by the permitee or lessee, and a chairperson to be appointed by the other two arbitrators. Arbitration Act (2) The Arbitration Act R.S.P.E.I. 1988, Cap A-16, applies to any applies arbitration held under this section. (EC689/00) SURVEY SYSTEM Grid areas 20. (1) All areas shall be divided into grid areas. Grid measurements (2) Grid areas shall be bounded on the east and west sides by successive meridians of longitude of the series 61 degrees 00’00”, 61 degrees 15’00”, 61 degrees 30’00”, 61 degrees 45’00”, 62 degrees 00’00”, which series may be extended by the Minister, as required. Idem (3) Grid areas shall be bounded on the north and south sides by straight lines joining the points of intersection of the east and west boundaries with successive parallels of latitude of the series 46 degrees 00’00”, 46 degrees 10’00”, 46 degrees 20’00”, 46 degrees 30’00”, 46 degrees 40’00”, 46 degrees 50’00”, 47 degrees 00’00”, which series may be extended by the Minister, as required. Northeast corner as (4) A grid area shall be referred to by the latitude and longitude of its reference northeast corner. Area of grid areas (5) The area for each grid area set out in Schedule C is calculated on the basis of the Universal Transverse Mercator plane from the Clarke 1866 Ellipsoid. Conversion, (6) The relationship between hectares and acres shall be established by hectares to acres multiplying the area in hectares by 1/2.4710387. Schedule C (7) The area for each grid area at a latitude as set out in Schedule C shall be the same at any longitude. (EC689/00) 100 sections per 21. (1) Every grid area shall be divided into 100 sections. grid area East/west (2) Sections shall be bounded on the east and west sides by meridians boundaries spaced at intervals of one-tenth of the interval between the east and west boundaries of the grid area. North/south (3) Sections shall be bounded on the north and south sides by straight boundaries line drawn parallel to the north and south boundaries of the grid areas and spaced at intervals of one-tenth of the interval between the north and 6 Updated 2009 Oil and Natural Gas Act Cap. O-5 7 Permit, Lease and Survey System Regulations south boundaries of the grid area and sections shall be numbered as illustrated in Diagram A of Schedule B. Section areas (4) The area for each section in a row across a grid area shall correspond to the area of the section in the first column of the grid areas as set out in Schedule C. (EC689/00)

22. (1) Every section shall be divided into 16 units. 16 units per section (2) Units shall be bounded on the east and west sides by meridians East/west spaced at intervals of one quarter of the interval between the east and boundaries west boundaries of the section. (3) Units shall be bounded on the north and south by straight lines North/south drawn parallel to the north and south boundaries of the section and boundaries spaced at intervals of one-quarter of the interval between the north and south boundaries of the section and units shall be lettered as illustrated in Diagram B of Schedule B. (EC689/00)

23. All latitudes and longitudes used in these regulations shall be North American determined according to the North American Datum of 1927. Datum as standard (EC689/00)

24. The survey, division and subdivision of any onshore area and the Land Survey Act definition and description of those areas, permits and leases shall be done applies in conformity with the Land Survey Act R.S.P.E.I. 1988, Cap. L-2.1. (EC689/00)

25. The survey, division and subdivision of any offshore area and the Land Surveys Act definition and description of those areas shall be consistent with the (Canada) applies Lands Surveys Act (Canada). (EC689/00)

26. Schedules A, B and C are prescribed. (EC689/00) Schedules

27. Every application under the Act or these regulations, or request for a Fees service for which a fee is payable, shall be accompanied by the prescribed fee. (EC689/00) 7 8 Cap. O-5 Oil and Natural Gas Act Updated 2009 Permit, Lease and Survey System Regulations SCHEDULE A FORM 1 Bid Documents Lands specified in Call for Bid No. ................Total Area:..................Ha Bidder: ....................................................................................................................................... Address for Service: ................................................................................................................... .................................................................................................................................................... .................................................................................................................................................... Amount of Bid: $............................. Amount of Deposit: $............................. 8 Updated 2009 Oil and Natural Gas Act Cap. O-5 9 Permit, Lease and Survey System Regulations FORM 2 Bid Documents Work Plan Year Description of Work Value Cumulative ($) Value ($) 1 2 3 4 5 6 7 (offshore only) 8 (offshore only) 9 (offshore only) signature: ................................................................................................................................... name: ......................................................................................................................................... title: ............................................................................................................................................ company: ................................................................................................................................... date: ............................................................................................................................................ phone: ........................................................................................................................................ fax:.............................................................................................................................................. 9 10 Cap. O-5 Oil and Natural Gas Act Updated 2009 Permit, Lease and Survey System Regulations SCHEDULE B SURVEYS Diagram A - Sections within a Grid Area 100 90 80 70 60 50 40 30 20 10 49 48 47 46 45 44 43 42 91 81 71 61 51 41 31 21 11 1 Diagram B - Units within a Section M N O P L K J I E F G H D C B A 10 Updated 2009 Oil and Natural Gas Act Cap. O-5 11 Permit, Lease and Survey System Regulations SCHEDULE C Grid Areas in Hectares Latitude of Northeast Corner of Grid Area 45 10’ 45 20’ 45 30’ 45 40’ 45 50’ 46 00’ Entire Grid Area 36,459 36,354 36,248 36,142 36,036 35,930 East or West Half 18,230 18,177 18,124 18,071 18,018 17,965 South Half 18,242 18,190 18,138 18,084 18,031 17,980 North Half 18,217 18,164 18,110 18,058 18,005 17,950 Section: 1 365 364 363 362 361 360 2 365 364 363 362 361 360 3 365 364 363 362 361 360 4 365 364 363 361 361 360 5 365 363 363 361 361 359 6 365 363 363 361 360 359 7 365 363 362 361 360 359 8 364 363 362 361 360 359 9 364 363 362 361 360 359 10 364 363 362 361 360 359 Latitude of Northeast Corner of Grid Area 46 10’ 46 20’ 46 30’ 46 40’ 46 50’ 47 00’ Entire Grid Area 35,823 35,717 35,609 35,501 35,393 35,285 East or West Half 17,912 17,858 17,805 17,751 17,697 17,643 South Half 17,925 17,872 17,819 17,764 17,710 17,656 North Half 17,898 17,845 17,790 17,737 17,683 17,629 Section: 1 359 358 357 356 354 353 2 359 358 357 355 354 353 3 359 357 356 355 354 353 4 358 357 356 355 354 353 5 358 357 356 355 354 353 6 358 357 356 355 354 353 7 358 357 356 355 354 353 8 358 357 356 355 354 353 9 358 357 356 355 354 353 10 358 357 356 355 353 352 Latitude of Northeast Corner of 47 10’ 47 20’ 47 30’ 47 40’ 47 50’ 48 00’ Grid Area Entire Grid Area 35,177 35,068 34,959 34,849 34,740 34,630 East or West Half 17,589 17,534 17,480 17,425 17,370 17,315 South Half 17,602 17,548 17,494 17,439 17,385 17,329 North Half 17,575 17,520 17,465 17,410 17,355 17,301 Section: 1 352 351 350 349 348 347 2 352 351 350 349 348 347 3 352 351 350 349 348 346 4 352 351 350 349 348 346 5 352 351 350 349 348 346 6 352 351 350 348 347 346 7 352 351 349 348 347 346 8 352 350 349 348 347 346 9 351 350 349 348 347 346 10 351 350 349 348 347 346 (EC689/00) 11