July 19, 2018 - Letter: Comments relating to the proposed Regulations as pre-published in Canada Gazette, Part I (CGI) and First Nations Gazette (FNG)
Indian Oil and Gas Canada
100, 9911 Chiila Boulevard
TsuuT'ina, Alberta T2W 6H6
Tel. : 403-292-5625
July 19, 2018
RE: Comments relating to the proposed Regulations as pre-published in Canada Gazette, Part I (CGI) and First Nations Gazette (FNG)
In my letter dated, June 28, 2018, I invited you to review and provide feedback, if any, to amendments to the pre-published version of the proposed regulations that will entirely replace the existing Indian Oil and Gas Regulations, 1995.
The proposed regulations are intended to modernize the oil and gas regime on First Nations reserve lands in Canada. The proposed regulations are available for review and comment in CGI at www.canadagazette.gc.ca and on the FNG website at www.fng.ca. The comment period began on May 19, 2018 and will continue until August 17, 2018.
Indian Oil and Gas Canada (IOGC) also received comments relating to four additional areas: Record Search; First Nation Audit; Opening of bids; Compensatory Royalty and related parties; that are addressed separately below:
IOGC received comments that the term "contractual documentation" is too broad and may allow for the inadvertent disclosure of confidential.
Section 2(5) provides that "A person may apply for a record search of non-confidential, contractual documentation…" in the Minister’s possession. It is proposed that the word "contractual" be removed and a non-exclusive list be provided to aid in the interpretation of the provision.
IOGC agrees with the comments and is proposing to make the correction to the final version before publication in Part II of the Canada Gazette (CGII).
First Nation Audit
A new provision in the proposed regulations, section 86(2), First Nation Audits and Examinations, set out criteria for the "…person who conducts an audit or examination under the Act…" and may unintentionally disqualify auditors who have previously been "affiliated" with an oil or gas company.
There is a request for further clarification on the interpretation of the provision but there is no proposed change being requested at this time.
IOGC agrees with the comment and is proposing to provide further clarification prior to the final version being published in CGII.
Opening of Bids
IOGC received comments that the timeline for the acceptance of bids, as it relates to the tender process, is unrealistic.
Section 42(4) provides the Council with "…seven days after the day on which the tender closes…" to notify the Minister that they are rejecting the highest bid. It is proposed that the timeline of fifteen days is a more realistic timeframe for Council to convene and provide such notice to the Minister.
IOGC agrees with the comments and is proposing to change the timeframe in the final version before publication in CGII.
Compensatory Royalty and Related Parties
IOGC received comments that the provisions relating to the difference in the compensatory royalty payable on confidential wells as opposed to non-confidential wells is detrimental to First Nations. Furthermore, the definition of related parties under section 82(4) should be expanded.
Section 93 to 102, Equitable Production of Oil and Gas, provides that offset notices be sent, outlining compensatory royalty payable, to the contract holder within different timeframes depending on whether the well is considered confidential or non-confidential. It is proposed that a pre-offset notice be sent to the contract holders, in the case of confidential wells, that set out that compensatory royalty be calculated in the same manner as non-confidential wells.
Section 82(4), related parties, sets out that "…section 251 of the Income Tax Act…" be referred to when seeking the definition of related parties. It is proposed that the definition of related parties be amended to "…related persons, affiliated persons or associated corporations … as determined in accordance with subsections 251(2), 251.1(1) and 256(1) of the Income Tax Act."
IOGC agrees with the comments and is proposing to make the correction to the final version before publication in CGII.
IOGC has received feedback and comments relating to a concept from the Indian Oil and Gas Regulations, 1995 (IOGR, 1995) relating to Fair Market Value.
The provisions relating to the concept of Fair Market Value, Schedule 1 section 4 of the IOGR, 1995 were not brought forward in its entirety. It is proposed that the provisions be brought forward into the proposed regulations.
IOGC agrees with the feedback and is proposing to bring forward the concept, under Fair Value, before publication in CGII.
In addition to the above, IOGC received comments that subsection 49(2)(g) of the IOGR, 1995, addressing the financial ability of a contract holder to fulfill its obligations has been removed from the proposed regulations. It is proposed that the financial ability of the contract holder be carried forward into the proposed regulations. IOGC is currently reviewing the proposal, please advise if you have any comments or concerns with retaining the clause and inclusion before publication in CGII.
This is an opportunity for industry to review the proposed amendments before they appear on CGII and FNG. Note that IOGC will be providing information sessions that specifically relate to the administration of the regulations, as it relates to industry, after publication in CGII.
The comment period on the regulations in CG1 and FNG is open until August 17, 2018.
If you would like further information on the proposed regulations or on the IOGA, 2009, please contact IOGC by email at contactIOGC@canada.ca.
We thank you in advance for your anticipated participation.
Executive Director and CEO