Alberta grants one-year tenure extensions to bolster industry

The essentials 

• Alberta Energy will grant one-year extensions pursuant to section 8(1)(h) of the Mines and Minerals Act,  RSA 2000, c M-17 (MMA) for petroleum and natural gas agreements, oil sands agreements and metallic and industrial mineral permits expiring from March 20, 2020, up to and including December 31, 2020.
• Proponents must apply for the extension prior to the applicable agreement’s expiry. However, given the unprecedented times, if an application is not made prior to the expiry, proponents should consider on a case-by-case basis whether an extension may still be granted.   
• It is unclear whether the Saskatchewan and British Columbia governments will take a similar approach to assist energy producers in these provinces.

The details 

As part of the Alberta government’s response to the recent oil price collapse and ongoing economic concerns associated with COVID-19, on March 20 Premier Jason Kenney announced that the term of mineral agreements expiring in 2020 would be extended for one year. Premier Kenney indicated this decision was made to bolster economic certainty by allowing additional time for industry to raise capital and plan for future activities. Based on Premier Kenney’s comments, it does not appear there will be any rental holidays associated with the extensions. 

While little detail was provided in Premier Kenney’s announcement, further specifics were provided on March 23 by Alberta Energy via Information Letter 2020-09. The letter is brief, indicating that Alberta Energy is offering one-year extensions for petroleum and natural gas agreements, oil sands agreements and metallic and industrial mineral permits expiring from March 20, 2020, up to and including December 31, 2020. The letter goes on to state that extension applications must be submitted prior to the applicable agreement’s expiry, and upon verification, that Alberta Energy will grant extensions under section 8(1)(h) of the MMA, with a new expiry one year after the original agreement expiry date.

Applying for extensions and continuation

The Petroleum and Natural Gas Tenure Regulation, Alta Reg 263/1997 (PNG Tenure Reg) provides the usual channels by which proponents can apply for extensions and continuations of applicable agreements. Indefinite continuation under section 15 of the PNG Tenure Reg is the preferred outcome for proponents. However, extensions can also be granted for definite periods including (i) a six-month continuation based on a recently drilled well or a well being drilled over the agreement expiry (PNG Tenure Reg section 16); (ii) a one-year extension based on potential productivity (PNG Tenure Reg section 17); or (iii) a notice of non-productivity can be issued for rights previously continued under section 15 under which proponents have one year to apply for continuation under section 15 or 16 (PNG Tenure Reg section 18).

The information letter does not specifically indicate whether agreements subject to expiries under sections 16, 17 and 18  under the PNG Tenure Reg will also be granted the same one-year extension. That being said, we understand from discussions with Alberta Energy that given the ministerial discretion included in sections 16(6) and 18(6) of the PNG Tenure Reg, and the general reasoning provided by Premier Kenney, extensions granted under these sections with an expiry between March 20, 2020, and December 31, 2020, will also be eligible for the one-year extension. 

Extensions not automatic

It is worth noting these extensions will not be granted automatically and it does not appear Alberta Energy will be directly notifying industry proponents with applicable agreements to apply for the extension. As such, applicable agreements with an expiry between March 20, 2020, and December 31, 2020 should be reviewed and applications submitted in a timely manner to ensure these agreements can take advantage of the extension. 

Section 8(1)(h) of the MMA addresses agreements that would not otherwise be eligible for continuation or extension under the PNG Tenure Reg. It does so by granting ministerial discretion to provide an extension if more time is required due to non-economic extenuating circumstances. In current circumstances, this might include geologists who could not otherwise return from the field to provide the necessary information for the application, COVID-19 office closures hindering the ability to make timely applications, or other extenuating circumstances as a result of the recent state of emergency declaration in Alberta.  

As such, if the deadline for an applicable agreement is missed, proponents should consider whether the flexibility contemplated in the language of section 8(1)(h) of the MMA, and the circumstances surrounding the missed deadline may, on a case-by-case basis, still result in a one-year extension being granted.

The usual channels for continuation and extensions via sections 15-18 of the PNG Tenure Reg remain viable options for proponents. Nonetheless, while granting a section 8(1)(h) application would normally be rare, given this recent announcement, consideration should be given to including a section 8(1)(h) application as an alternative if Alberta Energy is not prepared to grant any of the usual extensions. This may provide additional certainty to proponents that might otherwise have been concerned with the ability to continue or extend the applicable agreements under the usual channels.