What is Tenure
The tenure system facilitates the leasing of rights that enable companies to explore for and develop petroleum and natural gas from Alberta's resources, for the benefit of the province's residents. The Alberta tenure system is looked upon by industry as one of the best in the world.
Alberta's Crown petroleum and natural gas rights are issued in the form of licences or leases through a competitive bid auction system. Public offerings (or sales) of petroleum and natural gas rights are held every two weeks. Notice of the parcels being offered are published on the department's website approximately eight weeks prior to the sale.
The Crown attaches several expectations to the licences and leases issued:
- annual rent of $3.50 per hectare must be paid for each hectare covered by the agreement
- tenure holders must meet all regulatory requirements
- lands in a licence are earned by the drilling of a well
- a lease is proven productive at the end of its five-year term by drilling, producing, mapping, being part of a unit agreement or by paying offset compensation
- if a lease is proven productive, it will continue indefinitely beyond the end of the term.
The tenure ends when an agreement holder can no longer prove his agreement is capable of producing oil or gas in paying quantities or is lost through rental or royalty payment default or by voluntary surrender.
The Crown owns 81 per cent of the province's mineral rights. The remaining 19 per cent are 'freehold' mineral rights owned by the federal government on behalf of First Nations or in National Parks, and by individuals and companies.
Owners of freehold mineral rights, except the federal government, pay a tax to the Crown based on the production of oil or gas from their holdings. The tax ensures the owners contribute to Alberta's infrastructure and regulatory costs.