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3. 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 and the Oil and Gas Disposition Regulations. Registration of Transfers and Security Notices C. Former Federal Oil and Gas Dispositions
A. Acquiring Rights Rights are issued through a competitive bidding process. The government uses one criterion for issuing rights - either the total cash bid or the total cash value of a work expenditure bid. The cash value of work expenditures has been the criterion in the 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 oil and gas disposition process on Crown land takes approximately 10 months to complete and requires a significant amount of consultative work by the Yukon government. Issuing rights in this way ensures that public and community issues and concerns can be identified. The issues and concerns can be appropriately addressed by applying terms and conditions to the disposition before rights are issued to a company. Oil and gas rights to date have been issued following a five stepstep process that concludes with a Call for Bids on a specific parcel. Through participation in this process, companies, First Nations and all Yukoners will be offered greater certainty and stability regarding land tenure.
Of interest to oil and gas companies wanting to obtain rights are the last three steps: Call for Nominations, Public Review and the Call for Bids. In preparation for the Yukon’s Call for Nominations, input is gathered from government, interest groups and Yukon First Nations. Based on this information, the Yukon government prepares a draft Call for Nominations and engages in government to government consultations with affected Yukon First Nations. Following Yukon First Nations consultations, the Department of Energy, Mines and Resources will prepare and post the final Call for Nominations on the website Yukon Oil and Gas. The Call for Nominations is an invitation to companies to identify parcels of land in which they wish to acquire the rights to explore and produce oil and gas. If a parcel is nominated, a public review of the nominated parcels is conducted. The purpose of the review is to determine environmental, socio-economic, and surface access concerns that could arise as a result of exploration and development operations. First Nations, the public and Yukon government departments are invited to make submissions. Based on input received during the public review, specific operating terms and conditions may be applied to parcels of land that are posted for bid. 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. B. Permits and Lease Oil and gas rights are granted through two instruments: a permit or a lease. A permit grants the holder the right to:
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. Since 1999 the Yukon has conducted four rights issuances and received work expenditures bids totalling approximately $24 million. Three permits were issued to Anderson Exploration, now Devon Canada, in the Eagle Plain, and one permit to Hunt Oil Company of Canada in the Peel Plateau. See Yukon Oil and Gas Dispositions Table ( 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 transfer is not effective against the Commissioner or Minister until it is registered. 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. However, a security notice will not have priority over an operator’s lien. 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 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.
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 Nation permits.
C. Former Federal Oil and Gas Dispositions Oil and gas dispostions, 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 the Yukon. These former federal dispositions include Significant Discovery Licences, Explorations Licences and Production Leases. The Yukon Oil and Gas Dispositions Table ( The rights granted by the federal government have been “grandfathered” under the Yukon Oil and Gas Act and the Yukon Oil and Gas Transfer Regulations which provide:
Contact Information For more information, or to submit comments and suggestions on this section, contact: Debra Wortley – Rights Disposition Manager (867) 667-3512 E-mail: debra.wortley@gov.yk.ca Back to previous section (Legislative and Regulatory Framework) or on to next section (Oil and Gas Activities).
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Last Updated 07-09-2005