The following frequently asked question topics are covered in this page;
- Economics and cost to test shallow zones
- Surface Footprint
- Activity Levels
- Agreements Subject to Unit Agreements
- Alignment with Other Provincial Policies / Initiatives
- Spacing, Commingling and Consolidation
- Flaring
A glossary tool is available on this website to help users understand unique terms. To activate the tool, highlight a term, and select "Control" (The button is located at the bottom on the left side of your keyboard) and "Y" (the letter).
Definitions (as defined in the Act or Regulation unless otherwise noted)
Capable of producing in paying quantity: The Department determines capability by several factors, including production, tests, reserves, logs and mapping of wells on the agreement and in the area.
Deeper Rights Reversion Zone Designation (DRRZD): A DRRZD identifies a zone by its name. As noted in ERCB Decision 95-10, historically the name of the zone identified within type wells takes precedence over the depths identified in terms of utilizing a DRRZD.
Formation: A body of rock identified by lithic characteristics and stratigraphic position; it is prevailingly but not necessarily tabular, and is mappable on the Earth’s surface or traceable in the subsurface.
Pool: A natural underground reservoir containing or appearing to contain an accumulation of oil or gas or both separated or appearing to be separated from any other such accumulation.
Potentially Productive Zone: A zone that is, in the opinion of the Minister, potentially capable of producing petroleum or natural gas or both in paying quantity.
Producing Well: A well that is considered by the Minister to be a producing well on the basis of the records of the Board and other information available to the Minister.
Productive: Capable, in the opinion of the Minister, of producing petroleum or natural gas from [a]well in paying quantity.
Proven: Treated the same as “productive”.
Reservoir: In petroleum geology, any porous and permeable rock that yields oil or gas.
Test: Physical recovery of a measurable quantity of hydrocarbons at the surface.
Zone: A stratum or series of strata considered by the Minister to be a zone for the purposes of the P&NG Tenure Regulation.
Zone Designation (ZD): Designates a lithostratigraphic zone described specifically by the depths identified in a particular well. ZDs are used, for instance, to describe the zones included in natural gas leases. When a ZD is being used, the depths and the interval take precedence over the name given to the zone.
Shallow Rights Reversion
For the purpose of this section:
- Regulation means the Petroleum and Natural Gas Tenure Regulation (the Regulation);
- Act means the Mines and Minerals Act (the Act).
What is shallow rights reversion?
Shallow rights reversion (SRR) means that the petroleum and natural gas rights above the top of the shallowest productive zone in an agreement will be severed from the agreement at continuation for those agreements issued on or after January 1, 2009, or upon expiry of a shallow rights reversion notice (see "Notices" below). This is in addition to the existing deeper rights reversion. Rights between the top of the shallowest productive zone and the base of the deepest productive zone will remain in the agreement.
Why implement shallow rights reversion?
Shallow rights reversion is being implemented to encourage increased production from up-hole zones by severing non-productive shallow rights and to fill existing pipeline capacity.
When did shallow rights reversion become effective?
P&NG agreements issued in 2009 and later are subject to SRR and are governed by Regulation. P&NG agreements already in existence (i.e.; issued before January 1, 2009) are subject to SRR and will be served a SRR notice in accordance with Section 82.1 of the Act.
How does SRR affect continuation in P&NG agreements issued in or after 2009 (i.e.; issued subject to SRR?
When the five-year term of an agreement expires, both the shallowest and the deepest zones must be proven productive to be continued indefinitely. For this type of agreement, the Regulation governs the continuation application. In other words, all the familiar continuation rules will apply. Rights between the top of the shallowest productive zone and the base of the deepest productive zone will remain in the agreement.
What information will be included in a SRR notice?
The SRR notice will advise the lessee of the department’s determination of the shallowest productive zone or if the agreement is considered entirely non-productive. Although the department is reviewing agreements for the shallowest productive zone, it may become apparent that the deepest zone is no longer productive. If so, the notice will state that, at the end of the three-year notice period, the non-productive rights will revert to the Crown and that the lessee may respond to the notice by application.
How long is the SRR notice period?
The SRR notice gives a lessee three years to prove the shallowest the non-productive rights under notice are productive. How will SRR notices be served?
Notices will be served based on vintage, with the oldest agreements being served first. This means that P&NG agreements that are currently sitting at an indefinitely continued status, under Section 15 of the Regulation, will have SRR notices served. Based on public records, the notices state the non-productive rights as determined by the department.
P&NG agreements that have not yet expired or not yet been continued, will only be subject for review under deeper rights reversion (DRR). Once continued under deeper rights reversion, these agreements will be added to the category above and served a shallow rights reversion notice when their vintage comes due.
What is the difference in the continuation administration of P&NG agreements issued subject to SRR versus those agreements served SRR notices?
The continuation of agreements issued subject to SRR will be administered following Sections 14, 15, 16 and 17 of the Regulation, i.e., shallow rights will be reviewed the same as the deeper rights.
The continuation of agreements issued a SRR notice follows Section 82.1 of the Act. To continue the shallowest zone in an agreement, it will need to be producing or be proven productive; be subject to a Unit or Gas Storage Unit; be subject to the offset compensation payment; or be capable of producing based on mapping. This follows much the same requirements as when agreements are issued a Section 18 notice under the Regulation. Under the Act, there is no provision for a Section 16 or Section 17 continuation. An agreement with a qualifying well, which would normally be continued under Section 16 of the Regulation, would have to be extended under Section 82.1 (6) of the Act.
Am I allowed to submit a late application on a Section 82.1 notice?
If you do not apply for a shallower zone prior to the expiry date of the notice, the agreement will be reviewed and the rights severed as indicated in the notice. If you miss applying for a shallower productive zone you may be able to apply for a reinstatement of those rights under Section 8(1)(e) of the Act, but only for limited circumstances. Those circumstances include surface access issues or landowner issues for example. Payment of a $5,000.00 reinstatement penalty and GST will apply if the reinstatement is granted.
Will SRR cause additional development near cities and towns?
There is the potential for additional development across most of the province. Activities associated with this energy development will be managed in the same manner as current activities with the same opportunities for stakeholder consultation and involvement.
Does the Energy Resources Conservation Board (ERCB) anticipate an increase in non-routine applications?
With the potential for more wellbores, more testing and additional infrastructure under an accelerated shallow development proposal, conflicts may increase, resulting in more non-routine ERCB applications. However the ERCB believes conflict management issues should not change significantly with:
- appropriate SRR implementation rules,
- compliance with the regulations,
- increased efforts by companies to plan and coordinate multi-company development activities, and
- effective consultation
The expected ongoing success in the alternative dispute resolution (ADR) process, supported by an increase in ADR staff, will also assist in this regard.
Will SRR mean more seismic activity?
If existing seismic data was shot for deeper strata and the technical parameters are different to image shallower depths, then a new survey may be needed. This will be determined by the quality of industry data and also the existing regulatory approach for seismic activity.
