Offsets Frequently Asked Questions

If you have failed to respond to an offset notice, the rights in your agreement down to the base of the offset zone will be deleted. You have 60 days from the date of the cancellation letter to request re-instatement of those rights. You will also be expected to make a pay election and you will have to pay a $5,000.00 + GST reinstatement penalty. If you are beyond the 60-day period, you will have to re-acquire the rights through the P&NG Sales process. 

Offset compensation is calculated on a spacing unit basis. Since you have been served with a gas offset notice the spacing unit would be a full section (barring special spacing). Each notice will generate an obligation equal to the share of the section. In other words, each of your quarter-section leases will be responsible for their share, or 25% of the offset compensation. 

You must have placed the well on production by the expiry of the notice in order to satisfy an offset notice. If you don't put a well on production within that time you will lose the rights unless you take some other action.  You should elect to pay offset compensation until you can get your well on production. The only other alternative would be to request an extension of the offset notice. An extension would only be granted in unusual circumstances, such as being delayed for reasons outside your control in obtaining a well license. 

A non-productive well does not necessarily mean that the offset zone does not exist on the Crown lease. There are different reasons a well may not be productive (such as not having drilled in an ideal location, or technical problems with the well). However if you have enough evidence (through geological, geophysical or engineering data) to prove that the freehold offset well is not draining the Crown spacing unit or alternatively the offset zone is not on the Crown spacing unit, you may request a review of the notice. Technical data must accompany your request and if we agree with your interpretation the notice will be withdrawn.

If freehold well is still draining the Crown spacing unit, the notice will remain in effect. In order for you to keep the rights under notice you have to elect to pay offset compensation. Otherwise you can surrender the affected rights.

 

This would depend entirely upon the expiry of the offset notice and when you notify us the well is on production. If you elect to pay compensation in the middle of one month, and don't notify us within the same month that you have a well on production you will be responsible for at least one month of compensation. For example your notice expires March 2^nd and you elect to pay offset compensation. Your liability to pay starts April 1. You put a well on production from the offset zone and notify us March 26^th that you have done so. As the compensation liability does not start until the first of the month following the notice expiry, no compensation is owed. However if you do not notify us the well is on production until sometime in May, you would be liable for April's compensation payment. 

The liability to pay ends the first of the month in which you notify us that the well is put on production. If the well is put on production and you don't notify us, you will continue to be liable for compensation. 

If the well is producing from the offset zone within the offset notice period and you notify us that it is, the offset will be satisfied. 

Any time the agreement or portion of the agreement that a well was drilled on is cancelled, you are responsible for the abandonment of that well, in accordance with the Energy Resources Conservation Board (ERCB) regulations. 

You may request that offset compensation is terminated at any time. At the same time you would have to surrender the affected rights or request a review.  With your review request you must provide data indicating that the freehold offset well is not draining the Crown or that the offset zone is not present on the Crown. 

Compensation is calculated based on the amount of royalty that would owe from the freehold well as if the freehold well was producing on a Crown spacing unit. The value of the Crown's royalty share will be calculated by using 80% of the Gas Reference price or 100% of the Oil Par price.  Refer to Section 23 of the P&NG Tenure Regulations for more information. If you do not have the full spacing unit your royalty will be decreased accordingly. For example, a quarter-section lease served with a gas offset would only be responsible for one-fourth of the offset compensation owed.