Energy, Mines, and Resources

Oil and Gas Rights

Oil and Gas RightsCompanies that undertake drilling and production operations must hold the oil and gas rights to the location being explored and developed. The legal framework for issuing and managing oil and gas rights is provided under the Oil and Gas Act  1.3 MB and the Oil and Gas Disposition Regulations  201 KB.

Acquiring Rights

Rights are issued through a competitive bidding process. The government uses one criterion for issuing rights - either the highest cash bid or the highest cash value of a work bid. The cash value of a work bid has been the criterion in Yukon’s Call for Bids to date. The successful bidder is required to submit a refundable work deposit equal to one quarter the value of the bid. The money deposited will be refunded on a pro-rata basis as work is performed and funds are spent. The minimum work bid is $400,000.

The process for issuing oil and gas rights on Yukon lands takes approximately five months to complete and requires a significant amount of consultative work by the Yukon government.

The disposition process involves: persons submitting for consideration through a Request for Posting locations of interest for the acquisition of rights to explore for oil and gas; a public notice and review process by which the public, affected Yukon First Nations, and Yukon Government departments and agencies may submit representations in respect of environmental, socio-economic, and access concerns related to the requested locations; a Call for Bids where persons are invited to submit bids on posted locations; and finally the issuance of an Oil and Gas Permit to successful bidders. The maximum size of a location submitted in a Request for Posting is 500 square kilometres.

In the event Request for Postings are not received, a disposition process is not conducted.

 

Schedule of Request for Postings Closing Dates

Submitted Request for Postings are reviewed semi-annually in accordance with the schedule below.

  Request for Posting:
Closing Date for Submissions		 Public Notice/Review Process Call for Bids
Spring 2007 Disposition  Closed February 21, 2007 Completed April and May 2007 Deadline June 27, 2007 
Fall 2007 Disposition July 18, 2007 August and September 2007 October and November 2007
Spring 2008 Disposition January 16, 2008 February and March 2008 April and May 2008
Fall 2008 Disposition July 16, 2008 August and September 2008 October and November 2008
Spring 2009 Disposition January 14, 2009 April and May 2009 May and June 2009

The Call for Bids is an invitation to companies to bid on parcels of land posted for bid. The successful bidder will be awarded the rights to explore and produce oil and gas.

 

Beyond the Disposition Process

Although the disposition process results in the granting of rights to oil and gas, specific authorizations are needed to proceed with specific oil and gas activities and operations. Prior to any oil and gas exploration or development, companies must obtain an Oil and Gas Act licence pursuant to Yukon’s Oil and Gas Act  1.3 MB and associated regulations. Most licenses will trigger a public environmental screening process under the Yukon Environmental and Socio-economic Assessment Act. Companies are invited to examine Yukon’s Oil and Gas Best Management Practices before deciding on the type and timing of activities. Other authorizations such as a Land Use Permit or a Water License may also be required, depending on the nature and scope of the project.

Permits and Leases

Oil and gas rights are granted through two instruments: a permit or a lease. A permit grants the holder the right to:

  • Explore, drill and test for oil and gas in a specific location.
  • Recover and remove the oil or gas produced as a result of the testing.
  • Apply for a lease at the location of a discovery.

A lease grants the holder the right to produce oil and gas.

A permit has a maximum duration of 10 years and consists of two terms. At least one well must be drilled during the first term of a permit to extend the permit to a second term. Permits issued to date have had initial terms of six years and second terms of four years. A permit may also be extended to allow completion of drilling already underway.

A permit holder may apply for a lease on the location of a discovery any time before the permit expires. The lease will be at the same location as the permit, minus any areas that are not believed to contain oil or gas. The lease is a three-dimensional one, granting rights over a certain area and to the bottom of the deepest productive oil or gas zone.

The term of a lease is 10 years, and is renewable for terms of five years each. A lease renewal will only cover spacing areas that contain productive zones.


Registration of Transfers and Security Notices

A company that acquires Yukon oil and gas rights may transfer them to another company. This transfer may be registered with the Division Head. A registered transfer has priority over any unregistered transfer.

A security notice in respect to a security interest may be registered with the Division Head. A registered security notice will have priority over an unregistered notice or transfer and over a subsequently registered notice or transfer.

A security notice registered against an oil and gas permit will be extended to an oil and gas lease issued in the permit area.

If the Minister reinstates a cancelled or surrendered disposition, all prior security notices will be applicable.

 

Rentals

Rentals for oil and gas dispositions are not set in regulation. Rather, rentals are indicated in the Call for Bids and set contractually in the permit. To date, rentals have been set at zero for the initial term of permits. In the second term of the permits rentals are set at $5/hectare.

 

Grouping

The grouping of permits allows for obligations in adjacent permits to be combined. The permits remain as individual dispositions, but the drilling obligations are shared.

The application for grouping must state that a well will be drilled prior to the expiry date of the earliest expiring permit and must specify in which disposition it will be drilled. It must also be demonstrated that the well will evaluate oil and gas in both permits. Grouped permits can be terminated at any time by the designated representative. Also, a grouping expires at the date of expiry of the first permit, with the exception of extensions for active drilling. No permit can belong to more than one group. Grouping of permits can involve both Yukon Government and First Nations permits.

Former Federal Oil and Gas Dispositions

Oil and gas dispositions, as defined in YOGA and granted by the federal government prior to the transfer of administration and control of oil and gas resources in 1998, remain in effect until they expire, are cancelled, surrendered or until otherwise agreed upon by the holder and Yukon. These former federal dispositions include Significant Discovery Licences, Explorations Licences and Production Leases. The Yukon Oil and Gas Rights Management Table  56 KB provides information on these rights.

The rights granted by the federal government have been “grandfathered” under the Yukon Oil and Gas Act  1.3 MB and the Yukon Oil and Gas Transfer Regulations  258 KB which provide:

  • That all Yukon laws of general application apply except that rights under the federal disposition cannot be diminished.
  • Those dispositions are regulated in a manner similar to the former federal regime. Yukon legislation incorporates by reference provisions of the former federal legislation so as to identify and protect specific rights that were conveyed under the federal system.
  • In addition, Yukon may make additional regulations that are substantially similar to provisions of the former applicable federal legislation and make them applicable to federal dispositions.

Contact:

Debra Wortley – Rights Disposition Manager
Phone: 867.667.3512
E-mail: debra.wortley@gov.yk.ca

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