Energy, Mines and Resources

Oil and Gas Resources

Frequently Asked Questions: Disposition Process

Disposition Process
Request for Postings
Review Period
Call for Bids
Potential Oil and Gas Activity


Disposition Process
 

What is the oil and gas disposition process?

Rights to oil and gas are obtained through a competitive process. The oil and gas disposition process is initiated when a Request for Posting (RFP) is received by the Oil and Gas Resources branch. The Yukon government invites RFPs twice a year.

If the Minister accepts all or part of the requested location(s), the disposition process begins, and an RFP review of the location(s) will take place. This is where we ask First Nations and the public for their input. The review ensures that Yukoners' interests are considered before potential opportunities for the responsible development of Yukon's oil and gas resources are explored. 

Based on the submissions from the RFP review, the Division Head will prepare a report to the Minister with a recommendation regarding the requested location(s). The Minister will make a final decision on whether or not the areas will go forward with a Call for Bids (CFB).

Following the RFP review, the next step is a (CFB). The disposition process concludes with oil and gas permits being issued to qualified successful bidders. An oil and gas permit only grants the rights to explore for oil and gas in a specific location(s), it does not authorize oil and gas drilling or activity.

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Request for Postings
 

Why is there sometimes interest expressed and sometimes not?

The Yukon government conducts a regular disposition process twice a year.  It is up to industry to post expressions of interest.  

Who selects the areas?

Companies that are interested in exploring a parcel of land will submit a Request for Posting identifying the location of interest.  In this initial stage of the disposition process, where locations are requested and reviewed before being put up for competitive bid, the identity of company(ies) requesting the locations are kept confidential under the Yukon Oil and Gas Act and the Oil and Gas Disposition Regulations.

Quite often, it is land holding companies that make the requests on behalf of other companies.  

How does the disposition affect the rights of other land users (hunters, recreational users, farmers, etc.)?

The Yukon government works to manage oil and gas development in a manner that respects other land users while providing benefits to the Yukon public. The 60-day RFP review period is an opportunity for Yukoner's to express any concerns they may have about the posted location(s).

Requested areas excluded in the disposition are: First Nations Category A and B settlement land (and any site selections); protected areas; municipalities; and other privately held lands.

Will private land holders have to let oil and gas exploration or development occur on their lands?

No.  Currently, the disposition process excludes all privately held lands in the selected areas.  Under the Yukon Oil and Gas Act, surface rights holders have to give consent prior to any exploration or development on their land. 

This process prevents oil and gas development within municipal boundaries – why doesn’t the same apply to mining?

The legislation and disposition process that govern mining and oil and gas are completely different.  Yukon’s Oil and Gas Act requires a public review of any locations in which industry expresses an interest in exploring before rights are issued.

Why are the names of the nominee(s) (the company who requested an area) not made public?

Although the Minister has the authority to disclose the nominee, it is not common practice to do so. There are two reasons for this:

  • To maintain fairness and transparency to all involved in the disposition process; and
  • To maintain the public interest.

How is fairness and transparency maintained by not disclosing the nominee(s)?

The first reason that the nominee(s) is not disclosed is that they have not yet acquired a permit nor does the government know whether any of the posted parcels will proceed to a Call for Bids. If some or all of the posted parcels proceed to a Call for Bids, the nominee(s) may choose not to bid or they may be outbid, so a public dialogue with them before the bidding process may not be productive if they do not turn out to be the successful bidder of oil and gas rights in a specific geographic area. 
 
Secondly, once a posted area is nominated and proceeds to a Call for Bids, then it is open to competitive bidding by anyone, not just the nominee(s).  It is unfair to ask the nominee(s) to participate in dialogue with local residents and to disclose their plans; whereas a company that is not a nominee would be made aware of the nominee(s) plans and would not have to engage affected residents until after the bid would be awarded to them. This disclosure can result in providing any non-nominees with a competitive advantage by knowing the nominee(s) plans and also allowing them to avoid a requirement to engage the community and its residents during the request for postings review process.

Why is not disclosing the nominee in the public’s interest?

Non-disclosure of the nominee acts in the public interest to maximize the work bid arising from publicly owned hydrocarbon resources. The best way to explain is to examine two scenarios.

In the first scenario a large oil and gas company with significant financial resources is the nominee. If that company is disclosed as the nominee, a likely outcome is that smaller oil and gas companies may assume they cannot compete against a well-financed, bigger company and choose not to participate in the bid.  The larger company, may believe they have dissuaded their competitors and strategically submit a low work bid such as $400,000 which is the minimum bid required.  In this competitive scenario, Yukon is likely to receive the minimum work bid. 

In the second scenario, the converse occurs where the nominee is a smaller oil and gas explorer that lacks large amounts of capital. If the smaller company is disclosed as the nominee, a larger corporation may try to exploit an opportunity to outbid them by conducting a financial assessment of the smaller company and strategically submitting a work bid amount aimed at just exceeding the potential maximum bid of the smaller company. In this scenario, the process is not only unfair amongst competitors, but is likely to result in a less than maximum work bid for Yukon again.

Is non-disclosure of the nominee common practice?

The non-disclosure of a nominee or nominees is common practice in Canadian jurisdictions. This was the practice of the federal government when they administered oil and gas resources in Yukon prior to oil and gas devolution in 1998. This remains their practice in the NWT, Nunavut and the Beaufort Sea. The same process also exists in BC and Alberta.
 
How much does government know typically about the nominee?

In most disposition processes, oil and gas companies engage the services of a land agent to submit their Request for Posting(s). The agent often signs a non-disclosure agreement with the company they represent to not disclose their name and in some cases they have no knowledge of the company’s plans.  Hence in most cases, if the nominee were revealed, the public would only discover the name of the land agent and not the name(s) of the actual company(ies) who submitted the Request for Posting(s). 

When in the disposition process does the government disclose information about the companies?

The government discloses the name of the successful bidder and their winning bid amount after the Call for Bids process has completed.  The Yukon government encourages the company to engage with the public after the process.

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Review Period (if areas are requested)
 

What is the purpose of the review period?

The oil and gas disposition process ensures that the interests of Yukoners are considered before potential opportunities for the responsible development of Yukon's oil and gas resources is explored.
Yukoners are invited to provide comments with respect to environmental, socio-economic and surface access concerns they may have within the posted location(s) during a 60-day RFP review period.

Comments received during the review will be used to decide whether or not to proceed with issuance of oil and gas rights in all, or parts, of the areas identified by industry.

How will the government use the comments it receives?

Comments received during the RFP review are included in the Report to the Minister that is written at the end of the review period. The comments are included as an important part of the Call for Bids documentation so that before industry submits bids they are aware of the environmental, socio-economic, and surface access concerns raised by First Nations, government departments and the Yukon public about each of the locations.

What do you specifically mean when you ask for comments on “environmental, socioeconomic and surface access matters with regard to these specific locations?”

When we ask for comments on environmental issues, we would like to know if you have knowledge about issues such as high value wildlife areas, ecologically sensitive areas, rare plant species, etc. 

When we ask for socio-economic comments we are looking for comments about how future oil and gas projects in these specific locations may impact you, your livelihood, recreation opportunities, or your culture. 

And, when we ask about surface access comments, we want to know how potential access could impact you, or if you have views on how it could be managed.

When will the report to the Minister be completed and will it be made public?

The report to the Minister will be issued as soon as possible after the end of the 60-day RFP Review period. This report will be posted on the Oil and Gas Resources branch website.

Will the 60-day public review period be extended if you have not received sufficient information to make an informed decision on the posted locations?

It is not common for this period to be extended but if more time is required to gather and analyze information, then it can be extended by the Minister.

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Call for Bids
 

What is the Call for Bids process?

A Call for Bids is an invitation to submit work bids for oil and gas rights in posted locations.

A posted location is a location that was requested in a Request for Posting, approved by the Minister to be included in an RFP review, commented on in the RFP review, recommended by the Division Head in the Report to the Minister, and finally, approved by the Minister to be included in a Call for Bids.  All of these steps must be fulfilled before a location can be included in a Call for Bids.

A Call for Bids is scheduled for a period of approximately 45 days.

The Government of Yukon has adopted a work bid process for most areas of Yukon. The minimum work bid that will be accepted is $400,000. An oil and gas permit is awarded to the successful bidder submitting the highest work bid. Once the permit is awarded, the name of the winning bidder and their bid amount are made public.

What is a work bid?

Work bids indicate the dollar amount of expenditures that proponents will commit to spending over the initial term of a permit. Each bidder is required to include a work deposit that is 25% of their work commitment bid to the Government of Yukon when submitting their bid. Unsuccessful bidders will have their work deposits and permit issuance fees returned.

Work deposits may be replaced by an irrevocable letter of credit or any other form of negotiable financial instrument acceptable to the Minister. The work deposit is held by the Government of Yukon as security for carrying out the work outlined in the successful bid.

What happens to the work bid once the company begins doing work on their area?

As work progresses, the work deposit is refunded to the permit holder. A company must apply to the Yukon government for a refund, and supply receipts proving the work was done.  Refunds are proportionate to the allowable expenditures on work as it is completed. Refunds for expenditures and purchases are based on the Schedule of Allowable Expenditures included in the Oil and Gas Permit, and Supplemental Guidelines for the Schedule of Allowable Expenditures in Oil and Gas Permits.

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Potential Oil and Gas Activity
 

Could Yukon have the same oil and gas potential as areas in northern BC and Alberta?  How would large scale development affect Yukoners?

It is far too early to know how the industry could develop over the long term.  The disposition process is simply the first step that only issues subsurface rights to the potential oil and gas resources.

If the disposition leads to industry exploration, it will create a better understanding of the scale and type of resources here in Yukon.  The government is optimistic that there is good potential for an oil and gas industry in Yukon but we want to make sure it is developed responsibly and to the benefit of Yukoners.

If natural gas is found, would it be exported or used locally?

It is not known at this point.  Government is in the process of only issuing oil and gas rights for certain locations.  The potential for the development of new mines suggest that if, for example, natural gas is found and produced, it could be either utilized locally as an energy source for those mines (and other customers), or exported to outside markets.  The Yukon government is very interested in the potential for using our local oil and gas resources for expanding Yukon’s energy capacity in the face of growing need.

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