The purposes of the Oil and Gas Conservation Act (OGCA) are, among other things, to effect the conservation of oil and gas resources, to give each owner the opportunity to secure its share of the production of oil or gas from any pool, and to provide for economic, orderly, and efficient development in the public interest. Section 36 of the OGCA mandates that the AER address all three of these purposes. Historically, this legislation has been applied only in the equity context and to allow for economic, orderly, and efficient development; other sections of the OGCA have been applied to ensure conservation of resources.
Under section 36, the AER may limit the amount of gas that may be produced or distribute the amount of gas that may be produced from a pool or part of a pool. Historically, this legislation has been used to authorize the distribution of gas production among wells in a nonassociated gas pool.
A situation that could warrant an application under section 36 of the OGCA would typically involve several gas wells, that are of different ownership in a pool, being on production. One owner, for example, believes its reserves are being inequitably drained because its well has been placed on production at rates that do not allow the well to capture the owner’s share of the pool reserves. The well’s rate may be restricted by pipeline or processing capacity or by a gas sales contract.
In a case where the rate limitation is due to pipeline or processing capacity, the owner has capacity in its own facilities and believes that it would not represent economic, orderly, and efficient development to build or obtain more capacity. Where the limitation is due to a gas sales contract, the owner has been unable to adjust the contract or produce gas in excess of the contract to allow for an equitable rate of production.
The following outlines the process to follow to get approval for rateable take applications. It includes links to application submission procedures and guidance documents.
The applicant will submit its rateable take application through electronic applications submission (EAS). Applications are registered using the Integrated Application Registry (IAR), and all material related to an application is stored in this system.
After the application is received, it will be reviewed for completeness under Directive 065 requirements. If the application is determined to be incomplete, the application will be closed and returned with an explanation. If an application contains minor deficiencies, a letter will be issued itemizing the information required.
The AER considers the issuance of a rateable take order to be a very significant action because it has the potential to override contractual arrangements put in place through normal business practices. Consequently, before approving an application, the AER requires an applicant to demonstrate that it is being deprived of the opportunity to secure its share of production from the pool. The applicant must show that drainage has occurred and continues to occur or that it can be expected to occur with a very high degree of certainty. The drainage must also be a result of the applicant not having an opportunity to produce its share of production. The restriction in rate must not be due to limitation in well capability. The AER has previously ruled that where the only limitation on production is well capability, a producer is not being deprived of an opportunity to obtain an equitable share of production (Decision D85-5: Thomson-Jensen Petroleums Ltd. – Rateable Take of Gas from the Atmore Nisku A, McMurray B, and Wabiskaw C Pools).
If the application is determined to be complete, a review will be conducted as follows:
The processing time for this application is 120 calendar days.