Oil and gas tenure on Ontario's Crown lands is regulated under Part IV of the Mining Act and Regulation 263/02 thereunder.
Part IV of the Mining Act provides the Minister of Natural Resources authority for granting oil and gas exploration, production rights, underground storage rights of prescribed substances in depleted reservoirs and in salt caverns and salt solution mining mineral rights on Crown land in Ontario.
Part IV also grants the Minister authority to make regulations regarding the disposition of these rights:
To explore for and produce oil and gas on Crown land, an applicant must obtain an exploration licence and a production lease from the Crown. Exploration licences are tendered and granted to the highest bidder. The licensee or lessee pays an annual rental fee for an exploration licence, annual rental for a production lease and a royalty to the Crown based on the oil and gas produced from the area covered by the lease.
Ontario Regulation 263/02 is issued under Part IV of the Mining Act and provides the routine administrative details for oil and gas exploration licences, production leases and storage leases on Crown lands. Regulation 263/02 describes the rules for licence and lease applications, rights tendering, surrendering, assigning and terminating licences and leases as well as the financial requirements of licensees and lessees.
With respect to granting storage leases for hydrocarbons, the applicant makes a tender bid which consists of a cash bonus for the right to obtain the storage lease. In the case of natural gas storage, the bid must also propose a rental fee based on storage volume per month.
If the applicant is storing prescribed substances other than natural gas, he or she pays a prescribed monthly rental for the storage lease.
Note: Other sections of the Mining Act can be applied to oil and gas operations such as Section 175 which provides relief to operators unable to gain access to subsurface minerals including oil and gas due to surface rights disputes. Section 175 provides for a hearing and easement granting authority before the Mining and Lands Commissioner.
