A. UNITS
Please refer to the Crown Involvement in Units document for policies and technical requirements.
When should I send the department a unit proposal?
What type of information does the department require for a unit?
I have calculated the tract factors for my unit based only on remaining reserves in place. Is this acceptable? What is a Production Allocation Unit Agreement?
Can a unit be executed retroactively?
How do you calculate the Unit Participation Percentage for each Working Interest Owner in a unit and how is the Crown interest for each Working Interest Owner determined?
Should the effective date on Exhibit A, Part II (Exhibit D of older unit operating agreements) be the same effective date as shown on Exhibit D?
When should an Exhibit A be revised?
Is a letter required when a revised Exhibit A is submitted?
Does the department require an abbreviation page to Exhibit A?
Why do you need to send Part II of Exhibit A (Exhibit D of older unit operating agreements)?
Does the department require an effective date on Exhibit A and any subsequent revisions?
If there is a change in the royalty owner, does the department require a revised Exhibit A?
Do the revisions submitted to the department have to be in chronological order?
If a new unit operator wishes to change the numbering system of an Exhibit A, (e.g. from a revision number to a date [revision no. 2 to 1999-01]) is this allowed?
Does the department require notification of change of operator? If so, does the department require it in writing?
When do you need to put the word 'correction' on the Exhibit A?
When a correction is required, should the effective date and revision number stay the same?
When a corrected copy of Exhibit A is faxed, should the original be sent to the department as well?
A. UNITS
When should I send the department a unit proposal?
A unit proposal can be submitted at any time but should not proceed to the final execution stage without having discussed it with us first. This allows us to ensure the following:
- method of tract factor calculation is acceptable
- all royalty and interest owners affected have been contacted
- all interest owners have agreed or declined in writing to participate
- only productive leases or validated licenses are included in the unit
- full spacing units are included in the unit
- the entire pool is unitized or an explanation why only part is unitized is submitted
- the Exhibit C interval adequately represents the unitized zone.
What type of information does the department require for a unit?
The department requires the proposed tract factors, how the tract factors were calculated in detail, technical information (such as net pay and structure mapping, cross sections, engineering and geophysical data) that explain the pool being unitized, the extent of the pool, presence of a gas cap and Alberta Energy and Utilities Board water flood application and project area approval.
I have calculated the tract factors for my unit based only on remaining reserves in place. Is this acceptable?
The basis for determining tract factors, particularly in a unit containing both Crown and freehold lands, must be equitable and technically justifiable. In some cases remaining reserves may be acceptable. However, the use of several parameters such as original hydrocarbon pore volume, remaining reserves and productivity is encouraged if they produce a better result. A formula that heavily penalizes undrilled lands or relies mainly on surface area is normally not acceptable to the department as the basis for tract participation.
What is a Production Allocation Unit Agreement?
A Production Allocation Unit Agreement (PAUA) is a unit-type agreement used for a single well. It is used where there are two spacing units adjoining each other, one freehold and one Crown, but only one well is required to drain both sections. This may be a well whose productive wellbore crosses both spacing units. The PAUA ensures that the royalty payments from one well are distributed to both royalty owners in a fair and equitable manner.
Can a unit be executed retroactively?
No, a unit cannot be executed retroactively. The unit becomes effective on the first of the month following execution by all required working interest owners and royalty owners, including the Crown.
However, a Production Allocation Unit Agreement must become effective at 0800 on the first day of the first calendar month which is the earliest of:
- the month in which production of production allocation substances from the well commences, or
- the month following the date of execution and delivery of the agreement by the owners of one hundred percent (100%) of the Working Interest and one hundred percent (100%) of the Royalty Interest within the production allocation area.
How do you calculate the Unit Participation Percentage for each Working Interest Owner in a unit and how is the Crown interest for each Working Interest Owner determined?
The overall Unit Participation Percentage for a working interest owner (WIO) is taken from Exhibit A. All of the tracts that the WIO has an interest in are added together. This calculates the overall Unit Participation Percentage for the WIO.
The Crown interest is calculated as:
(WIO participation % in all Crown Tracts ÷ WIO participation % in all Tracts) x 100
Should the effective date on Exhibit A, Part II (Exhibit D of older unit operating agreements) be the same effective date as shown on Exhibit D?
The effective dates of Exhibit A and Exhibit D should be the same.
When should an Exhibit A be revised?
The unit operator should revise an Exhibit A whenever there is a change in working interest owners, sale of interest, partial transfer of interest, change in royalty interest, name change or an amalgamation of companies.
Is a letter required when a revised Exhibit A is submitted?
A letter should accompany the revised Exhibit A outlining what changes are taking place on the revised exhibit. The department requires all pages to be sent, including the pages where the changes occur. If you only submit one page, the department would never have a complete revision on hand that will match the Exhibit D.
Does the department require an abbreviation page to Exhibit A?
Unless the company name is spelled out in full on the Exhibit A or Exhibit D, the department requires an abbreviation page for Exhibit A to be included with the revision.
Why do you need to send Part II of Exhibit A (Exhibit D of older unit operating agreements)?
Exhibit D is used to verify the Share of the Tract Participation Percentage for each working interest owner. When crosschecked to Exhibit A, the Share of Tract Participation Percentage must be the same for Exhibit A and Exhibit D (Part II of Exhibit A) for each working interest owner.
Does the department require an effective date on Exhibit A and any subsequent revisions?
Yes, when changes are made to ownership (working interest owner or royalty owner), the Exhibit A needs to be revised and a new effective date is required.
If there is a change in the royalty owner, does the department require a revised Exhibit A?
Yes, the department requires a revised Exhibit A in order to maintain the numerical sequence of revisions in our records, and ensure we haven't missed any changes.
Do the revisions submitted to the department have to be in chronological order?
Yes, the current revision received should be of a later date than the previous one on file. If the department receives two revisions with the same effective date, we will use the last revision received, which means that valid changes from the first revision will not be noted on our system and the information from the first revision will not be used in royalty calculations.
If a new unit operator wishes to change the numbering system of an Exhibit A, (e.g. from a revision number to a date [revision no. 2 to 1999-01]) is this allowed?
The unit operator can revise the way the revisions are numbered as long as the numbering system is consistent after the change.
Does the department require notification of change of operator? If so, does the department require it in writing?
We require a letter from either the new or previous unit operator advising the department of the new unit operator and when the change is effective.
When do you need to put the word 'correction' on the Exhibit A?
If a revised exhibit has already been entered in our system and a correction is required, an amended exhibit must be submitted with the word 'Correction' following the revision number. For example: Revision No. 2 (Correction). If there is no revision number, the word 'Correction' needs to follow the effective date.
When a correction is required, should the effective date and revision number stay the same?
The revision number and effective date should remain the same when submitting corrected documents.
When a corrected copy of Exhibit A is faxed, should the original be sent to the department as well?
As long as the facsimile is legible, the department does not need the original.
B. GAS STORAGE
What is the process to convert a partially depleted reservoir into a commercial storage field?
Who would be a party to a Gas Storage Unit Agreement?
How does the department administer petroleum and natural gas agreements that are subject to a Gas Storage Unit Agreement?
How is native gas treated in a Gas Storage Unit Agreement?
Does the department have any regulated buffer zone protection or specific rules around migration of gas?
Is there any information available pertaining to existing gas storage facilities?
What are the necessary approvals/requirements in order to develop a salt cavern for commercial storage?
What are the necessary approvals/requirements in order to convert a salt cavern from liquid storage to gas storage?
Does the department support the storage of gas in Alberta, and are there any publications promoting gas storage in Alberta?
B. GAS STORAGE
What is the process to convert a partially depleted reservoir into a commercial storage field?
To convert a partially depleted reservoir into a commercial storage field, a company must form a Gas Storage Unit Agreement, if some or all of the reservoir is on Crown land.
The model for this agreement is on the department's website at Tenure Forms unitgasAgreement.doc
For additional information, see Information Letter 1998-23 on the department's website
Who would be a party to a Gas Storage Unit Agreement?
Working interest owners, holding Crown petroleum and natural gas leases containing the unitized zone, would be a party to a Gas Storage Unit Agreement. Mineral owners, including the Crown would also be parties to the Agreement.
How does the department administer petroleum and natural gas agreements that are subject to a Gas Storage Unit Agreement?
The agreements are administered in accordance with the Petroleum and Natural Gas Tenure Regulation.
How is native gas treated in a Gas Storage Unit Agreement?
The Gas Storage Unit Agreement provides for the payment of royalties on remaining recoverable marketable gas in the reservoir over a base amortization period. When the volume of gas has been determined, 80% of this amount - described by the heat content - will be amortized over a negotiated period. This amount will be indicated in the Gas Storage Unit Agreement, which provides the methodology for the payment of royalties.
The treatment of native gas is outlined in the model Gas Storage Unit Agreement.
Does the department have any regulated buffer zone protection or specific rules around migration of gas?
No, the department does not have any regulated buffer zone protection or specific rules around migration of gas. It is important for the operator to identify the limits of the gas reservoir prior to using it for storage. However, only lands the Crown considers as part of the gas storage operation will be included in the Gas Storage Unit Agreement.
Is there any information available pertaining to existing gas storage facilities?
Information pertaining to existing facilities such as cushion gas, areal extent, licences, capacity, operators, etc. is handled by the Energy Resources Conservation Board (ERCB). In particular there are two reports (ST98 and ST3) which contain information on gas storage pools and volumes. Copies of existing Gas Storage Unit Agreements can be obtained by contacting the ERCB Information Services at (403) 297-8190 or referring to their website at http://www.ercb.ca/.
What are the necessary approvals/requirements in order to develop a salt cavern for commercial storage?
The following must be obtained to develop a salt cavern for commercial storage:
- a lease from the Crown for the right to create cavern in the salt formation and store specified materials, and
- approval/licence from the ERCB for the injection well. Additionally, the ERCB may also approve a disposal well to dispose of the brine solution.
The lease for the salt formation is obtained through direct application, made to the Coal and Mineral Development Business Unit of Alberta Energy. The applicant must identify the lands, the formations to be used for the caverns and the products (in general terms) that will be stored. The application fee for the lease is $625.00 and the annual rental is $12.50 per hectare. The lease is issued pursuant to section 9 of the Mines and Minerals Act, so an Order-in-Council is required.
What are the necessary approvals/requirements in order to convert a salt cavern from liquid storage to gas storage?
The ERCB has technical requirements for converting a salt cavern from liquid storage to gas storage and they should be contacted for more details. The cavern lease from Department of Energy will usually accommodate a substance change if the applicant presented this option in the initial application.
Does the department support the storage of gas in Alberta, and are there any publications promoting gas storage in Alberta?
Although the Department of Energy does support the storage of gas in Alberta, there is no published policy on the promotion of gas storage in Alberta. Please refer to Information Letter 1998-23 for further information.
