ARCHIVED - Proposed 2012-2013 Call for Bids for Exploration Licences in the Arctic Islands of Nunavut

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Table of Contents


Terms and Conditions

The management of oil and gas resources north of latitude 60° N in the Northwest Territories, Nunavut and northern offshore is a federal responsibility managed by the Northern Petroleum Resources Directorate (formerly Northern Oil and Gas Branch) of Aboriginal Affairs and Northern Development Canada.

1. Call for Bids

The Minister of Indian Affairs and Northern Development hereby calls for the submission of bids for Exploration Licences in respect of (_____) parcel(s) comprising the following lands located in the Arctic Islands of Nunavut:

PARCEL
(_______ hectares, more or less)    Issuance Fee = $ ______
Latitude*Longitude*Section(s)
     
*North American Datum 1927 (NAD27)

Land Description and Map will be Inserted in Final Package

2. Acceptance and Agreement

Canada Petroleum Resources Act, subsection 24(1)

Any submission of a bid in response to a Call for Bids shall be made on the understanding that the terms and conditions as contained herein are accepted and agreed to by the bidder. Such understanding shall include the acceptance of and agreement with the terms and conditions contained within the Exploration Licence and with the Northern Benefits Requirements Associated with New Exploration Programs, copies of which are attached.

3. Submission of Bids

Canada Petroleum Resources Act, sections 14 and 15

Calls for Bids remain open for at least 120 days following publication in the Canada Gazette.

Sealed bids must be delivered, either by registered mail or in person, to the following address prior to NOON, Mountain Time on date to be announced.

Group Leader, Data Management
Operation Business Unit
National Energy Board
444 Seventh Avenue S.W.
CALGARY AB T2P 0X8

Each bid submitted in response to a Call must be addressed to the Minister of Indian Affairs and Northern Development and be in double sealed envelopes bearing no corporate identification. The outer envelope should be clearly marked with the date and Call name, i.e. 2012-2013 Call for Bids for Exploration Licences– Arctic Islands of Nunavut. The inner envelope(s) should be clearly marked with the date, Call name and parcel number", i.e. 2012-2013 Call for Bids for Exploration Licences– Arctic Islands of Nunavut - Parcel No.___.

Individuals or companies submitting more than one bid may place all bids in a single outer envelope.

The Bid Submission Form is included in this package.

To be accepted, bids must be accompanied by a financial instrument with respect to the Bid Deposit (see clause "10. (a) Bid Deposit" below).

4. Bid Selection

(a) Sole Criterion

Canada Petroleum Resources Act, paragraph 15(1)(b)

Selection of the successful bid will be made on the basis of a sole criterion, namely, the total amount of money that the bidder proposes to spend doing exploratory work on each parcel within Period 1 of the term of the Exploration Licence (Work Proposal Bid).

(b) Minimum Bid

Canada Petroleum Resources Act, paragraph 14(3)(d)

Work Proposal Bids of less than one million dollars for each parcel will not be considered.

(c) Acceptance/Rejection of Bids

Canada Petroleum Resources Act, subsection 15(1)

For the purpose of issuing an Exploration Licence, the Minister will select the highest bid in terms of the sole criterion (Work Proposal Bid).

Bids will be accepted only in relation to an entire parcel.

(d) Tied Bids

In the event of two or more bids being tied, each bidder will be notified and have the opportunity to submit a new bid by 4 p.m. (EDT) the day following notification.

5. Notification of Results

Bidding results will be made available as soon as possible following the closing of the Call via posting on the Northern Petroleum Resources Directorate (formerly Northern Oil and Gas Branch) website (www.aadnc-aandc.gc.ca/nth/og/index-eng.asp).

The identities of unsuccessful bidders and the amounts of their bids will not be disclosed.

6. Issuance Fees

Frontier Lands Registration Regulations, section 15

Issuance fees of $250.00 per grid, or portion thereof, must be submitted with the Work Deposit by separate cheque made payable to the "Receiver General for Canada".

7. Issuance of Licence

Canada Petroleum Resources Act, section 16

The Minister is not required to issue an interest as a result of a Call for Bids. The Minister may issue an interest to the successful bidder within six (6) months after the closing date specified in the Call for Bids.

8. Exploration Licence

Canada Petroleum Resources Act, paragraph 14(3)(a)

Any Exploration Licence which may result from a Call for Bids will be issued pursuant to the Canada Petroleum Resources Act, R.S., 1985, c. 36, 2nd supplement, or legislation made in amendment thereof or in substitution therefor and any regulations made thereunder from time to time. The proposed Exploration Licence for the 2012-2013 Call for Bids for Exploration Licences is attached.

Term

Canada Petroleum Resources Act, section 26

The term for Exploration Licences issued from the 2012-2013 Call for Bids for Exploration Licences– Arctic Islands of Nunavut will be nine (9) years consisting of two consecutive periods of six (6) and three (3) years.

9. Work Program

Canada Petroleum Resources Act, paragraph 14(3)(c)

The drilling of one (1) exploratory or delineation well prior to the end of Period 1 of the term is a condition precedent to obtaining tenure to Period 2.

To meet this requirement, such a well should reach a depth sufficient to evaluate a prospective horizon as described in the geological prognosis in the application for Authority to Drill a Well.

Where a well has been commenced and drilling is being pursued diligently, Period 1 shall continue until the well has been completed. Period 2 shall be reduced accordingly.

Failure to meet this requirement on the lands by the end of Period 1 will result in the termination of the Exploration Licence. Consequently, lands revert to the Crown.

10. Deposits

(a) Bid Deposit

  1. Each bid must be accompanied by a Bid Deposit for the specific parcel in the amount of fifty thousand dollars, in the form of a certified cheque, money order or bank draft payable to the "Receiver General for Canada". Each Bid Deposit must relate to a single parcel.
  2. Bid Deposits will be returned to unsuccessful bidders, without interest, following announcement of the winning bidder(s).
  3. The Bid Deposit will be returned to the winning bidder, without interest, once the Work Deposit is received by the Rights Administrator.

(b) Work Deposit

  1. The successful bidder will be required to post 25% of the Work Proposal Bid as security for the performance of work within 15 working days. This period commences the day following the notice of winning bids being posted on the Northern Petroleum Resources Directorate (formerly Northern Oil and Gas Branch) website. This deposit will be referred to as the Work Deposit.
  2. Failure to post the Work Deposit will result in forfeiture of the Bid Deposit and disqualification of the bid. In that event, the Minister may, if he sees fit, select the second highest bidder as the winner without making another Call for Bids.
  3. The Work Deposit must be submitted in the form of an irrevocable standby letter of credit, certified cheque or other negotiable financial instrument in a form satisfactory to the Minister. A sample irrevocable standby letter of credit may be obtained from the Rights Administration.
  4. Parties submitting a joint bid may submit separate guarantees representing their proportionate share of the required Work Deposit, within 15 working days, such period shall commence the day following the notice of winning bids being posted on the Northern Petroleum Resources Directorate (formerly Northern Oil and Gas Branch) website. The bid representative as designated on the bid submission form will be responsible for collecting and submitting all parties' share of the Work Deposit.
  5. As expenditures are incurred exploring the Exploration Licence during Period 1 of the term, Work Deposits are refundable in accordance with Clause "12. Allowable Expenditures", below. Since Work Deposits represent 25% of the total amount bid for a parcel, refunds are likewise prorated on the basis of 25% of allowable expenditures incurred. Any Work Deposit balance remaining at the end of Period 1 will be forfeit.
  6. Expenditures incurred in Period 2 of the term will not be credited against the Work Deposit as these may be credited against Period 2 rentals (see Clause "11. Rentals", below).

(c) Drilling Deposit

The interest owner may, at its option, in order to meet the work requirement, extend Period 1 for one year by posting a Drilling Deposit before the end of the last year of Period 1. Where Period 1 is extended by the posting of a Drilling Deposit, Period 2 shall be reduced accordingly.

This Drilling Deposit shall be in the amount of one million dollars and is to be in the form of an irrevocable standby letter of credit, certified cheque or other negotiable financial instrument in a form satisfactory to the Minister. A sample letter of credit may be obtained from the Rights Administration.

If a Drilling Deposit is posted, it will be refunded in full if the licence is validated as required to obtain tenure for Period 2 by the drilling of a well.

If a validation well is not drilled or has not been commenced within the one year extension, the Drilling Deposit will be forfeited to the Receiver General for Canada upon the termination of the licence at the end of Period 1. If a well has been commenced and drilling operations are being diligently pursued, Period 1 will continue until the well has been completed.

Allowable expenditures cannot be applied against the Drilling Deposit.

Successive one-year extensions to Period 1 are possible by the posting of further Drilling Deposits of one million dollars prior to the end of the extended period. This means, in effect, that with application for a successive extension, the previous year's Drilling Deposit is forfeit on the anniversary of the licence.

The Canada Petroleum Resources Act does not permit the overall term of the Exploration Licence to extend beyond nine years. As a result, any extension to Period 1 will result in an associated reduction to Period 2.

As a result of the extension of Period 1 by the posting of a Drilling Deposit, rentals payable in Period 2 will be applicable at the rate of $8.00 per hectare.

All other rental provisions remain applicable.

11. Rentals

Canada Petroleum Resources Act, paragraph 14(3)(c)

Rentals are not applicable during Period 1 of the term.

Rentals paid during Period 2 are refundable in accordance with Clause "12. Allowable Expenditures", below.

Refunds may be made or future rentals may be waived, as the case may be, as expenditures are incurred on the lands subject to the Exploration Licence during Period 2 of the term.

Any rental balance remaining at the end of Period 2 will be forfeit.

In Period 2, rentals will be applicable at the following rates:

1st year of Period 2 $5.50/ha
2nd and 3rd year of Period 2 $8.00/ha

Rentals will be payable annually, in advance, and are to be submitted in the form of an irrevocable standby letter of credit, certified cheque or other negotiable financial instrument in a form satisfactory to the Minister. A sample irrevocable standby letter of credit may be obtained from the Rights Administration.

When an Exploration Licence continues in force beyond Period 2 due to the drilling of a well deemed to be pursued diligently in accordance with section 27 of the Canada Petroleum Resources Act, rentals will be payable at the rate of $8.00 per hectare. Such rentals will be payable monthly, in advance, at the rate of one twelfth (1/12) of the applicable annual rates.

Rentals will be payable on lands included in a successor Significant Discovery Licence to any Exploration Licence issued as a result of this Call for Bids. A copy of the proposed successor Significant Discovery Licence is attached.

Failure to pay rentals will result in the early termination of the Exploration Licence. Consequently, lands revert to the Crown.

12. Allowable Expenditures

Canada Petroleum Resources Act, paragraph 14(3)(c)

Work Deposits and rentals will be offset on the following basis, subject to further clarification by the Rights Administrator.

Costs related to the following classes of exploratory work undertaken as part of a program authorized by the National Energy Board may be claimed at cost:

Data acquisition: by means of reflection seismic surveys or other geophysical, geo-technical or geological surveys, including costs relating to field acquisition and processing, inspection and clean-up.

Data purchase: from vendors at arm's length for re-processing and/or interpretation, to the extent that the data assists the evaluation of the specific Licence.

Drilling operations: Costs relating to construction of access routes, preparation of drilling sites, transportation to and from well location and staging areas, onsite drilling and evaluation, support vessels, helicopters, site clean-up and restoration. Drilling operations involved in an exploratory or delineation well may entail waiting on weather, logging, well testing and completion. Extended formation flow testing will not be regarded as an allowable expenditure.

Mobilization and demobilization: equipment and supplies, and any incurred stand-by charges deemed reasonable by the Rights Administrator.

Notwithstanding the above, the Minister may agree to costs claimed with respect to classes of work or activity, or the use of innovative technology not contemplated by this schedule.

General and Administrative: Ten percent (10%) of the above allowable expenditures to reflect other costs not specifically itemized above, and including program specific consultations, data interpretation, regional office support, management and pre- and post program costs.

All claims are subject to approval by the Minister and may be subject to a post audit if ordered by the Rights Administrator.

The document Guidance Notes on Claiming Allowable Expenditures (available at www.aadnc-aandc.gc.ca/eng/1100100036405) describe the classes and scope of expenditures which may be viewed as allowable under the terms of Exploration Licences issued pursuant to the Canada Petroleum Resources Act in areas under the jurisdiction of the Minister of Indian Affairs and Northern Development, and are intended to assist interest owners to claim refunds from the Northern Petroleum Resources Directorate (formerly Northern Oil and Gas Branch). The Guidance Notes may be amended from time to time.

13. Environmental Studies Research Fund (ESRF) Levies

Canada Petroleum Resources Act, section 81

Upon issuance of an Exploration Licence, the interest owner must pay ESRF levies pursuant to section 81 of the Canada Petroleum Resources Act. The levies are to be paid for the year in which the Exploration Licence is issued and retroactive levies for the two preceding years (less any levies paid in respect of the same lands for the two preceding years by a previous interest owner). ESRF levies are determined by multiplying the number of hectares of land included in the Exploration Licence by the ESRF rate for the applicable region. Where applicable, the ESRF Administrator will send notices to the representative of the Exploration Licence. More information can be found at: www.esrfunds.org.

14. Related Requirements

The exercise of petroleum exploration rights may be subject to specific terms and conditions relating to the environment, and must comply with requirements under land claims and for northern benefits.

(a) Conditions Relating to the Environment

Operators wishing to carry out activities as a result of this process will be required to comply with all federal environmental requirements defined in the Nunavut Land Claims Agreement as well as those stemming from the Canadian Environmental Assessment Act, the Canada Oil and Gas Operations Act, the Territorial Lands Act, the Arctic Waters Pollution Prevention Act, the Migratory Birds Convention Act, the Species at Risk Act, the Fisheries Act, the Canadian Environmental Protection Act and other applicable legislation.

Some areas on the map attached are of particular environmental importance. They have been identified to alert interested parties that additional operating terms and conditions may be applied at the activity stage. For example, the work season may be restricted to those months when the proposed type of activity will not have a significant impact on sensitive fish and marine habitats, mammals, birds or other species. In addition, extra conditions may be imposed relating to drilling fluids and waste discharges, and site specific environmental protection plans may be required prior to the commencement of activity. These environmental protection plans would describe the necessary procedures the operator would take to minimize any environmental impacts to a particular species in the region.

The Petroleum and Environmental Management Tool (www.aadnc-aandc.gc.ca/eng/1315784918505/) ranks the Arctic Islands of Nunavut and surrounding area in terms of relative environmental and socio-economic sensitivity. This information has been identified by specialists and is intended to alert interested parties that this area may be subject to additional regulatory terms and conditions. In areas of the Call not covered by the Petroleum and Environmental Management Tool, please refer to the "Area subject to specific environmental considerations" on the attached map.

Specific environmental information has been provided by Nunavut Tunngavik Incorporated and marine and wildlife specialists, such as Fisheries and Oceans Canada, Environment Canada and the Government of Nunavut. The Canadian Wildlife Service advises that the Ivory Gull has been listed by the Committee on the Status of Endangered Wildlife in Canada (COSEWIC) as "Endangered"; the Red Knot, a medium-sized shorebird which nests in the region, is listed as "Special Concern"; and the Ross's Gull is listed as "Threatened", under the Species at Risk Act. Information on all of the species at risk in this region can be found at www.sararegistry.gc.ca . The Canadian Wildlife Service has extensive information on known breeding locations in the high Arctic, and proponents should contact its Iqaluit office for further information (867-975-4633).

Fisheries and Oceans Canada encourages operators to contact its Iqaluit office for fisheries and mammal sensitivity information in the Nunavut area (867-979-8010).

Polar Bears and Peary Caribou inhabit the Arctic Islands of Nunavut. Polar Bears are listed as "Special Concern" by COSEWIC, while the Peary Caribou are listed as "Endangered" by the Government of Canada.

Management of bears and caribou is a territorial responsibility and thus proponents should contact the Iqaluit office of the Government of Nunavut for further information on important locations for these species (Department of Environment (867-975-7704).

The Nunavut Planning Commission has prepared a Draft Nunavut Land Use Plan to encourage discussion on land use planning in the Nunavut Settlement Area. The plan provides an illustration of how the Nunavut Land Use Plan may guide development, once approved. Industry is encouraged to look at the draft plan which can be accessed at: www.nunavut.ca/en/draft-plan.

(b) Land Claims Requirements

The successful bidders shall comply with the terms of the Nunavut Land Claims Agreement. Interested parties are advised to obtain a copy of the agreement: www.aadnc-aandc.gc.ca/eng/1100100030601/.

(c) Northern Benefits Requirements Associated with New Exploration Programs

Canada Petroleum Resources Act, section 21
Canada Oil and Gas Operations Act, section 5.2

  1. Benefits Statement of Principles

    Companies engaged in exploration activities on frontier lands are expected to follow the principles outlined below.

    It is recognized that the nature and duration of work programs must be considered in determining the extent to which companies are able to implement the benefits principles.

    Industrial Benefits

    The company is committed to obtaining its goods and services on a fair and competitive basis. The company will support and encourage the development of regional businesses by considering potential suppliers for work associated with the program on the basis of best value, competitiveness and benefits to the regional communities and by providing relevant information to the supply community.

    Within the context of its general procurement policy, the company will conduct its operations so as to optimize the short and long-term benefits accruing to the North by providing opportunities for involving northern businesses on a full, fair and competitive basis.

    The company is committed to work with regional communities and government agencies to identify potential business development opportunities.

    The company is committed to ensuring that its contractors follow the above with respect to all subcontracting opportunities.

    Employment and Training

    The company is committed to the principles of fair and equal employment and training opportunities consistent with the Canadian Charter of Rights and Freedoms. This commitment will promote fairness in employment opportunities and avoid employment practices which result in employment barriers. The company will give first consideration to qualified individuals resident in the regional communities.

    The company is committed to work with regional communities and government agencies to identify potential employment and training opportunities.

    The company is committed to ensuring that its contractors follow the above with respect to all employment and training opportunities.

    Consultation

    The company is committed to providing appropriate information concerning its exploration programs to concerned individuals, groups and communities in the region. Exchanging relevant information in a timely fashion will enable the company to assess the potential local economic and employment opportunities.

    Compensation

    The company will provide fair and equitable compensation to individuals involved in hunting, trapping and fishing in the event of adverse impacts demonstrated to result from project-related activities.

  2. Annual Report

    The company will submit an annual report within three months of the completion date of its seasonal work program.

    The report should contain the following information:

    • a brief work program description;
    • total program costs (total value of purchased goods and services, total direct wages and total direct work months);
    • total direct wages by northern community of residence;
    • total direct work months by community of residence;
    • number of northern community residents employed for each program component (e.g. seismic, drilling, support and construction);
    • total value of purchased goods and services from each northern community, including a brief description of the goods and services purchased from each community;
    • listing of consultations undertaken;
    • a brief description of any programs that may be undertaken in the next work season.

    Benefits Plans and Reports for Nunavut and the adjacent northern offshore are to be sent to AANDC Headquarters:

    Director
    Northern Petroleum Resources Directorate
    Northern Petroleum and Mineral Resources Branch
    Aboriginal Affairs and Northern Development Canada
    10 Wellington
    Gatineau, Quebec
    Postal Address:
    OTTAWA ON K1A 0H4

    Note: The Northern Benefits Requirement Associated with New Exploration Programs is currently under review. For more information on the review process and the interpretation of the current requirements, please contact: LOPC-COGOA@aadnc-aandc.gc.ca, or visit the web page.

15. Cancellation of Rights

Canada Petroleum Resources Act, section 105

Where the Minister has reason to believe that an interest owner or holder is failing or has failed to meet any requirement of or under the Canada Petroleum Resources Act or the Canada Oil and Gas Operations Act or any regulation made under either Act, the Minister may give notice to that interest owner or holder requiring compliance with the requirement within ninety days after the date of the notice or within such longer period as the Minister considers appropriate.

Notwithstanding anything in the Canada Petroleum Resources Act, where an interest owner or holder fails to comply with a notice within the period specified in the notice and the Minister considers that the failure to comply warrants cancellation of the interest of the interest owner or holder or any share in the interest held by the holder with respect to a portion only of the frontier lands subject to the interest, the Minister may, by order, cancel that interest or share, and where the interest or share is so cancelled, the frontier lands thereunder become Crown reserve lands.

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Further Information and Contacts

For more information on this call, the rights issuance process or the resource management regime, please contact:

Rights Administration
Northern Petroleum Resources Directorate
Northern Petroleum and Mineral Resources Branch
Aboriginal Affairs and Northern Development Canada
10 Wellington
Gatineau, Quebec
Postal Address:
OTTAWA ON K1A 0H4
Tel: 819-953-2087 Fax: 819-953 5828
Rights@aandc.gc.ca
www.aadnc-aandc.gc.ca/nth/og/index-eng.asp

Any geological and well information with respect to the lands or area may be obtained from:

Regulatory Data Analyst
Operations Business unit
National Energy Board
444 Seventh Avenue SW
CALGARY AB T2P 0X8
Tel: (403) 292 4800; Fax: (403) 292 5876
FIO@neb-one.gc.ca
www.neb-one.gc.ca

Nunavut Contact List

Regional Inuit Associations

* Primary Contact - Designated Inuit Organization

Please note that Designated Inuit Organization may have compiled a comprehensive list of Inuit firms, together with information on goods and services which they would be in a position to furnish. This list has been compiled for purposes of government contracts but may be considered for oil and gas activity when consulting, pursuant to article 27.1.2 of the Nunavut Land Claim Agreement.

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Annexes

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