Initial Term Licences Frequently Asked Questions

An Application for Validation received prior to the three-month period before expiry will be returned for resubmission.

A licence cannot be validated early in its initial term, even if drilling occurred early in the initial term. Applications for validation are only accepted by the department within the last 3 months of the initial term, in accordance with Section 11(2)(a) of the P&NG Tenure Regulation. Applications received before or after the last 3 months of the licence term will be rejected. Validation of a licence into its intermediate term is finalized by the department after the initial term expires.

Under Section 9 of the Petroleum and Natural Gas Tenure Regulation, petroleum and natural gas licences carry an obligation to evaluate the rights in the licences. Rights can be evaluated by:

• Drilling a well on the licence,
• Drilling a grouping well to evaluate grouped licences and minimize drilling,
• Drilling a well during the initial term of the licence,
• Re-entering an existing well bore and deepening it to at least the minimum depth, or
• Re-entering a productive zone in the spacing unit.

The licences are stacked. One licence is for shallow rights and other licence is for deeper rights.

In such a situation, the depth of the well will be pro-rated to the rights in each licence, and the sections earned will be calculated based on the pro-rated depth in relation to each licence. The well must evaluate the deeper rights licence. You are required to provide the well log.

Licences purchased after December 31, 2001 are subject to severance. This has been in effect for initial term licences in the Plains Region and the Northern Region since January 2004 and January 2006, respectively. For licences subject to severance, you must submit a full set of open hole logs (e.g., Resistivity/Sp and Gamma Ray/Neutron density logs.) Formations should be clearly marked on the logs. Well logs will be evaluated by the department’s Geology unit in order to determine the deepest zone evaluated by the well. Rights will then be severed below the base of that zone.

Licences purchased before January 1, 2002 are not subject to severance. This now only applies to initial term licences in the Foothills regions which expired January 1, 2007. The information on the Validation Application and Administrative form is often sufficient. However, if a licence contains only deeper rights, a full set of logs must be submitted for evaluation by the department’s Geology Unit, in order to confirm if the rights in the licence have been evaluated.

Please ensure the ERCB well status information is up to date. The department relies on the ERCB information to confirm the well validates the licence.

Under Section 9 of the Petroleum and Natural Gas Tenure Regulation, validating wells may include the following:

• A well drilled on location to minimum depth.
• A well re-entered on location with additional drilling of at least minimum depth.
• A well drilled outside the location (not on another licence), but part of the spacing unit falls within the location of the licence and the well is drilled to minimum depth.
• A well re-entered on location but with less than minimum depth of additional drilling and in the opinion of the Minister, the drilling operation provides significant new information.
• A well re-entered on location, no new drilling but becomes productive. Only the spacing unit is validated to the base of the productive zone.