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

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:

Land Description and Map will be Inserted in Final Package

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.

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).

(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.

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.rcaanc-cirnac.gc.ca/nth/og/index-eng.asp).

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

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".

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.

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.

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.

(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

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:

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.

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.rcaanc-cirnac.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.

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.

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

(b) Land Claims Requirements

(c) Northern Benefits Requirements Associated with New Exploration Programs

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.