Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act (S.C. 1988, c. 28)

Marginal note:Financial resources — certain activities

• 167.1 (1) An applicant for an authorization under paragraph 142(1)(b) for the drilling for or development or production of petroleum shall provide proof, in the prescribed form and manner, that it has the financial resources necessary to pay the greatest of the amounts of the limits of liability referred to in subsection 167(2.2) that apply to it. If the Board considers it necessary, it may determine a greater amount and require proof that the applicant has the financial resources to pay that greater amount.

• Marginal note:Financial resources — other activities

  (2) An applicant for an authorization under paragraph 142(1)(b) for any other work or activity shall provide proof, in the prescribed form and manner, that it has the financial resources necessary to pay an amount that is determined by the Board.

• Marginal note:Loss of non-use value not considered

  (3) When the Board determines an amount under subsection (1) or (2), the Board is not required to consider any potential loss of non-use value relating to a public resource that is affected by a spill or the authorized discharge, emission or escape of petroleum or as a result of debris.

• Marginal note:Continuing obligation

  (4) The holder of an authorization under paragraph 142(1)(b) shall ensure that the proof referred to in subsections (1) and (2) remains in force for the duration of the work or activity in respect of which the authorization is issued.

• Marginal note:Extended obligation

  (5) The holder of an authorization under paragraph 142(1)(b) shall also ensure that the proof referred to in subsection (1) remains in force for a period of one year beginning on the day on which the Board notifies the holder that it has accepted a report submitted by the holder indicating that the last well in respect of which the authorization is issued is abandoned. The Board may reduce that period and may decide that the proof that is to remain in force during that period is proof that the holder has the financial resources necessary to pay an amount that is less than the amount referred to in subsection (1) and that is determined by the Board.

Marginal note:Financial responsibility

• 168 (1) An applicant for an authorization under paragraph 142(1)(b) shall provide proof of financial responsibility in the form of a letter of credit, guarantee or indemnity bond or in any other form satisfactory to the Board,

  • (a) in the case of the drilling for or development or production of petroleum in the offshore area, in the amount of $100 million or, if the Board considers it necessary, in a greater amount that it determines; or

  • (b) in any other case, in an amount that is satisfactory to, and determined by, the Board.

• Marginal note:Pooled fund

  (1.01) An applicant to which paragraph (1)(a) applies may, rather than provide proof of financial responsibility in the amount referred to in that paragraph, provide proof that it participates in a pooled fund that is established by the oil and gas industry, that is maintained at a minimum of $250 million and that meets any other requirements that are established by regulation.

• Marginal note:Increase in amount by regulation

  (1.02) Subject to section 6, the Governor in Council may, by regulation, increase the amount referred to in subsection (1.01).

• Marginal note:Continuing obligation

  (1.1) The holder of an authorization under paragraph 142(1)(b) shall ensure that the proof of financial responsibility referred to in subsection (1) or (1.01) remains in force for the duration of the work or activity in respect of which the authorization is issued.

• Marginal note:Extended obligation

  (1.2) The holder of an authorization under paragraph 142(1)(b) shall also ensure that the proof referred to in paragraph (1)(a) or subsection (1.01) remains in force for a period of one year beginning on the day on which the Board notifies the holder that it has accepted a report submitted by the holder indicating that the last well in respect of which the authorization is issued is abandoned. The Board may reduce that period and may decide — other than in the case of a holder that participates in a pooled fund — that the proof that is to remain in force during that period is for an amount that is less than the amount referred to in paragraph (1)(a) and that is determined by the Board.

• Marginal note:Payment of claims

  (2) The Board may require that moneys in an amount not exceeding the amount prescribed for any case or class of cases, or determined by the Board in the absence of regulations, be paid out of the funds available under the letter of credit, guarantee or indemnity bond or other form of financial responsibility provided under subsection (1), or be paid out of the pooled fund referred to in subsection (1.01), in respect of any claim for which proceedings may be instituted under section 167, whether or not those proceedings have been instituted.

• Marginal note:Manner of payment

  (3) Where payment is required under subsection (2), it shall be made in such manner, subject to such conditions and procedures and to or for the benefit of such persons or classes of persons as may be prescribed by the regulations for any case or class of cases, or as may be required by the Board in the absence of regulations.

• Marginal note:Deduction

  (4) Where a claim is sued for under section 167, there shall be deducted from any award made pursuant to the action on that claim any amount received by the claimant under this section in respect of the loss, damage, costs or expenses claimed.

• Marginal note:Reimbursement of pooled fund

  (5) The holder of an authorization under paragraph 142(1)(b) that is liable for a discharge, emission or escape of petroleum that is authorized by regulation or for any spill or debris in respect of which a payment has been made under subsection (2) out of the pooled fund, shall reimburse the amount of the payment in the prescribed manner.

Marginal note:Lesser amount

• 168.1 (1) The Federal Minister may, by order, on the recommendation of the Board and with the Provincial Minister’s approval, approve an amount that is less than the amount referred to in subsection 167(2.2) or paragraph 168(1)(a) in respect of an applicant for, or a holder of, an authorization under paragraph 142(1)(b).

• Marginal note:Financial resources — exception

  (2) If the Federal Minister approves an amount that is less than the amount referred to in subsection 167(2.2) in respect of an applicant for an authorization under paragraph 142(1)(b), that applicant, for the purposes of subsection 167.1(1), shall only provide proof that it has the financial resources necessary to pay the adjusted amount approved by the Federal Minister.

• Marginal note:No contravention

  (3) No applicant for an authorization under paragraph 142(1)(b) contravenes paragraph 168(1)(a) if that applicant provides proof of financial responsibility in the amount that is approved by the Federal Minister under this section.

Marginal note:Review committee

• 169 (1) A committee, consisting of members appointed by each government and by representatives of the petroleum industry and of the fisheries industry, is established by the joint operation of this Act and the Provincial Act to review and monitor the application of sections 167 and 168 and any claims and the payment thereof made under those sections.

• Marginal note:Dissolution of committee

  (2) The committee referred to in subsection (1) may be dissolved only by the joint operation of an Act of Parliament and an Act of the Legislature of the Province.

• Marginal note:Promotion of compensation policies

  (3) The Board shall promote and monitor compensation policies for fishermen sponsored by the fishing industry respecting damages of a non-attributable nature.

Inquiries

Marginal note:Inquiries

• 170 (1) Where a spill or debris or an accident or incident related to any activity to which this Part applies occurs or is found in any portion of the offshore area and results in death or injury or danger to public safety or the environment, the Board may direct an inquiry to be made and may authorize any person it deems qualified to conduct the inquiry.

• Marginal note:Mandatory inquiry

  (1.1) Where a spill or debris or an accident or incident related to any activity to which this Part applies occurs or is found in any portion of the offshore area and is serious, as defined by regulation, the Board shall direct that an inquiry referred to in subsection (1) be made and shall ensure that the person who conducts the inquiry is not employed by the Board.

• Marginal note:Power of person conducting inquiry

  (2) For the purposes of an inquiry under subsection (1), a person authorized by the Board under that subsection has and may exercise all the powers of a person appointed as a commissioner under Part I of the Inquiries Act.

• Marginal note:Report

  (3) As soon as possible after the conclusion of an inquiry under subsection (1), the person or persons authorized to conduct the inquiry shall submit a report to the Board, together with the evidence and other material that was before the inquiry.

• Marginal note:Publication

  (4) A report made pursuant to subsection (3) shall be published by the Board within thirty days after the Board has received it.

• Marginal note:Copies of report

  (5) The Board may supply copies of a report published pursuant to subsection (4) in such manner and on such terms as the Board considers proper.

DIVISION IIProduction Arrangements

Marginal note:Definitions

171 In this Division,

pooled spacing unit

pooled spacing unit means the area that is subject to a pooling agreement or a pooling order; (unité d’espacement mise en commun)

pooled tract

pooled tract means the portion of a pooled spacing unit defined as a tract in a pooling agreement or a pooling order; (parcelle mise en commun)

pooling agreement

pooling agreement means an agreement to pool the interests of owners in a spacing unit and to provide for the operation or the drilling and operation of a well thereon; (accord de mise en commun)

pooling order

pooling order means an order made under section 173 or as altered pursuant to section 175; (arrêté de mise en commun)

royalty interest

royalty interest means any interest in, or the right to receive a portion of, any petroleum produced and saved from a field or pool or part of a field or pool or the proceeds from the sale thereof, but does not include a working interest or the interest of any person whose sole interest is as a purchaser of petroleum from the pool or part thereof; (droit à redevance)

royalty owner

royalty owner means a person, including Her Majesty, who owns a royalty interest; (titulaire de redevance)

spacing unit

spacing unit means the area allocated to a well for the purpose of drilling for or producing petroleum; (unité d’espacement)

tract participation

tract participation means the share of production from a unitized zone that is allocated to a unit tract under a unit agreement or unitization order or the share of production from a pooled spacing unit that is allocated to a pooled tract under a pooling agreement or pooling order; (fraction parcellaire)

unit agreement

unit agreement means an agreement to unitize the interests of owners in a pool or part thereof exceeding in area a spacing unit, or such an agreement as varied by a unitization order; (accord d’union)

unit area

unit area means the area that is subject to a unit agreement; (secteur unitaire)

unit operating agreement

unit operating agreement means an agreement, providing for the management and operation of a unit area and a unitized zone, that is entered into by working interest owners who are parties to a unit agree ment with respect to that unit area and unitized zone, and includes a unit operating agreement as varied by a unitization order; (accord d’exploitation unitaire)

unit operation

unit operation means those operations conducted pursuant to a unit agreement or a unitization order; (exploitation unitaire)

unit operator

unit operator means a person designated as a unit operator under a unit operating agreement; (exploitant unitaire)

unit tract

unit tract means the portion of a unit area that is defined as a tract in a unit agreement; (parcelle unitaire)

unitization order

unitization order means an order of the Committee made under section 181; (arrêté d’union)

unitized zone

unitized zone means a geological formation that is within a unit area and subject to a unit agreement; (terrain)

working interest

working interest means a right, in whole or in part, to produce and dispose of petroleum from a pool or part of a pool, whether such right is held as an incident of ownership of an estate in fee simple in the petroleum or under a lease, agreement or other instrument, if the right is chargeable with and the holder thereof is obligated to pay or bear, either in cash or out of production, all or a portion of the costs in connection with the drilling for, recovery and disposal of petroleum from the pool or part thereof; (intérêt économique direct)

working interest owner

working interest owner means a person who owns a working interest. (détenteur)

Pooling

Marginal note:Voluntary pooling

• 172 (1) Where one or more working interest owners have leases or separately owned working interests within a spacing unit, the working interest owners and the royalty owners who own all of the interests in the spacing unit may pool their working interests and royalty interests in the spacing unit for the purpose of drilling for or producing, or both drilling for and producing, petroleum if a copy of the pooling agreement and any amendment thereto has been filed with the Chief Conservation Officer.

• Marginal note:Pooling agreement by Her Majesty

  (2) The Board may, on behalf of Her Majesty, enter into a pooling agreement on any terms and conditions that it deems advisable and, despite anything in Part II or this Part, the Federal Real Property and Federal Immovables Act or any regulations made under those Parts or that Act, the pooling agreement is binding on Her Majesty.

Marginal note:Application for pooling order

• 173 (1) In the absence of a pooling agreement, a working interest owner in a spacing unit may apply for a pooling order directing the working interest owners and royalty owners within the spacing unit to pool their interests in the spacing unit for the purpose of drilling for and producing, or producing, petroleum from the spacing unit.

• Marginal note:Hearing by Committee

  (2) An application under subsection (1) shall be made to the Board which shall refer the application to the Committee for the purpose of holding a hearing to determine whether a pooling order should be made and at such hearing the Committee shall afford all interested parties an opportunity to be heard.

• Marginal note:Matter to be supplied Committee on hearing

  (3) Prior to a hearing held pursuant to subsection (2), the working interest owner making application shall provide the Committee, and such other interested parties as the Committee may direct, with a proposed form of pooling agreement and the working interest owners who have interests in the spacing unit to which the proposed pooling agreement relates shall provide the Committee with such information as the Committee deems necessary.

• Marginal note:Order of Committee

  (4) After a hearing pursuant to subsection (2), the Committee may order that all working interest owners and royalty owners who have an interest in the spacing unit shall be deemed to have entered into a pooling agreement as set out in the pooling order.

• Marginal note:Contents of pooling order

  (5) Every pooling order shall provide

  • (a) for the drilling and operation of a well on the spacing unit or, where a well that is capable of or that can be made capable of production has been drilled on the spacing unit before the making of the pooling order, for the future production and operation of that well;

  • (b) for the appointment of a working interest owner as operator to be responsible for the drilling, operation or abandoning of the well whether drilled before or after the making of the pooling order;

  • (c) for the allocation to each pooled tract of its share of the production of the petroleum from the pooled spacing unit that is not required, consumed or lost in the operation of the well, which allocation shall be on a prorated area basis unless it can be shown to the satisfaction of the Committee that such basis is unfair, whereupon the Committee may make an allocation on some other more equitable basis;

  • (d) in the event that no production of petroleum is obtained, for the payment by the applicant of all costs incurred in the drilling and abandoning 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 pooling order, and for the payment of the actual costs of the completion, operation and abandoning of the well; and

  • (f) for the sale by the operator of petroleum allocated pursuant to paragraph (c) to a working interest owner where the working interest owner thereof fails to take in kind and dispose of such production, and for the deduction out of the proceeds by the operator of the expenses reasonably incurred in connection with such sale.

• Marginal note:Provision of penalty

  (6) A pooling order may provide for a penalty for a working interest owner who does not, within the time specified in the order, pay the portion of the costs attributable to the working interest owner as the share of the cost of drilling and completion of the well, but such penalty shall not exceed an amount equal to one-half of that working interest owner’s share of such costs.

• Marginal note:Recovery of costs and penalty

  (7) If a working interest owner does not, within the time specified therefor in the pooling order, pay the share of the costs of the drilling, completing, operating and abandoning of the well, that portion of the costs and the penalty, if any, are recoverable only out of the share of production from the spacing unit and not in any other manner.