Petroleum and Natural Gas Act
The provincial government
owns virtually all of the oil and gas in BC.
This page of the Guide deals with the steps that an oil and gas company
must take before it can drill for that oil and gas. It must first lease rights to the oil and gas from the provincial
government, and then obtain the right to enter onto the surface of the land in
order to build roads, wells, and pipelines.
The Petroleum and Natural
Gas Act governs both of these activities.
The Minister of Energy and Mines administers
the Act. It also governs how and where
oil and gas projects can be carried out—for details see the Guide Page on Petroleum and Natural Gas Act – Regulating Oil and Gas
Operations.
Watershed advocates working
on oil and gas issues should be aware of the potential to attach conditions
protecting watersheds when leasing both rights to the oil and gas, and rights
to enter land in order to access that oil and gas.
If the oil and gas is found
offshore in areas where it is regulated by the federal government, rights to
the oil and gas are leased under the Canada Oil and Gas
Operations Act.
Leasing of subsurface and surface rights
Subsurface rights
Subsurface rights to oil and
gas give the holder of the rights the exclusive ability to explore for oil and
natural gas, drill for oil and natural gas, and if
successful, produce the oil and natural gas.
In exchange for the rights,
a company will agree to certain work commitments (e.g. to drill) and to pay the
Province a royalty for using the rights.
For areas known to contain
oil or natural gas (Crown Reserves), the Province through the Ministry of
Energy and Mines must dispose of subsurface rights at a public auction. In other areas of BC, the company may
acquire the rights directly through the Ministry of Energy and Mines.
For rights that are auctioned, a company usually obtains
the rights from the Province by successfully outbidding other companies. In a typical process, a company will first
ask the Province to auction rights for a specific area. The Ministry of Energy and Mines will then
evaluate the request by asking First Nations, government agencies, and a
limited number of other stakeholders whether they have any concerns. Based on the comments, the Ministry will
decide whether to auction the rights, and/or whether any restrictions should be
placed on the sale (e.g. restrict access to the area during certain times of the
year in order to protect fish and wildlife habitat). Once posted for auction, other companies will have a chance to
evaluate the property. The successful
company is usually the one with the highest bid.
A company is not permitted
to explore or produce provincially owned oil and gas unless it is authorized by
the PNGA or its regulations.
Surface Rights
In order to build the roads,
wells, and pipelines needed to produce oil and gas, a company must also obtain
rights from the person who owns the land above an oil and gas deposit.
The Petroleum and Natural Gas Act requires a company to obtain a
landowner’s consent or provide adequate compensation before entering onto
land. The process is usually
negotiation.
If a landowner refuses to
negotiate a surface lease that is ‘satisfactory’ to the company, the company
can apply to a government body called the Mediation and Arbitration Board for
an ‘entry order,’ which will give the company the surface rights on terms that
the Board feels are fair. The Board
cannot issue an entry order without requiring a deposit from the company and
fixing amounts for compensation and/or rent for the landowner.
If the provincial government
owns the land, the company must obtain approvals under the Land Act from the Oil
and Gas Commission.
Related Guide Pages:
·
Petroleum and Natural Gas Act --
Regulating oil and gas operations.
·
Oil and Gas Extraction.
·
Oil and Gas Commission Act.
·
Pipeline Act.
For more information on the Petroleum and
Natural Gas Act:
