Nthe
egotiatorT h e M a g a z i n e o f t h e C a n a d i a n A s s o c i a t i o n o f P e t r o l e u m L a n d m e n
March 2000
A History of Oil & Gason the SettlementsMetis General Settlements counsel provides
informative and interesting background of how oil &
gas affected the Settlements. Discussion surrounds
recent litigation, legislation & policies. page 2
Underbalanced Drilling– An IntroductionThe term underbalanced drilling has been used in
the oil and gas industry for over 50 years. It has
evolved to define a highly technical approach to
drilling. page 16
Why Hedge?
Confusion arises due to misconceptions
about risk, concerns about the cost of
hedging, and fears about reporting
hedging losses. page 10
The Prospect Exchange!
N Pa g e 1mar. 2000
The NegotiatorMONTHLY NEWS MAGAZINE OF THE
CANADIAN ASSOCIATION OFPETROLEUM LANDMEN
Editor-in-ChiefMargaret Wyonzek, P.Land
[ph] 218-6086 [fax] 263-0623
Senior EditorsNathan MacBey
[ph] 218-8976 [fax] 263-0623Rob Motherwell
[ph] 269-8877 [fax] 264-0995
Assistant EditorJeremy Wallis
[ph] 290-3283 [fax] 290-3264
Editorial StaffLinda Bernier [ph] 266-8200 [fax] 290-8200
Warren Blair, P.Land [ph] 242-0513 [fax] 242-0513Scott Clapperton [ph] 261-6517 [fax] 263-5263
Harry Ediger [ph] 264-3959 [fax] 266-6209Darryl Erickson [ph] 265-2230 [fax] 517-7412
Joe Iaquinta [ph] 517-6823 [fax] 517-7412Melesia Kasha [ph] 606-4051 [fax] 686-6039
Carla Luiken [ph] 298-4423 [fax] 262-6705Andrew Lynch [ph] 233-1449 [fax] 233-5610
Jim Mak [ph] 517-6822 [fax] 517-7412Peter Manchak [ph] 517-7119 [fax] 517-7412Donna Phillips [ph] 260-5498 [fax] 260-3941
Brad Purdy [ph] 218-6837 [fax] 266-6988Bill Skorenki [ph] 298-7442 [fax] 298-7040
Lori Van Immerzeel [ph] 777-2613 [fax] 777-2609Stephen White [ph] 234-5058 [fax] 234-5734
PhotographersDave Leslie [ph] 237-5570 [fax] 237-5568Dave Laurie [ph] 229-1500 [fax] 245-0074
SubmissionsSubmissions to The Negotiator should be mailed in
print ready form to the Senior Editor.All articles printed under an author’s name repre-sent the views of the author; publication neitherimplies approval of the opinions expressed, nor
accuracy of the facts stated.
AdvertisingFor information, please contact the Editor-in-Chief.
No endorsement or sponsorship by the CanadianAssociation of Petroleum Landmen is suggested
or implied.
CAPL InternetThe Website for the CAPL is: www.landman.ca
A History of Oil and Gas on the SettlementsBill Skorenki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board BriefsCameron Fraser, P.Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Prospect Exchange 2000Lynn Lehr, P.Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Message From the ExecutiveGlenn Kruyssen, P.Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Editorial HighlightsNathan MacBey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Meeting AnnouncementsCAPL Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Why Hedge?David Tims, Dan Noble, Scott Debusschere . . . . . . . . . . . . . 10
Mineral Rights Issues ManagementBrian Birchill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Get SmartCAPL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Underbalanced Drilling: An IntroductionGeoff Whitehouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Bill 31 (Grazing Lease) UpdateDeryl R. Hurl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
NAPE 2000Nathan MacBey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Roster UpdatesCAPL Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Negotiator CalendarCAPL Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Table of Contents
N Pa g e 2mar. 2000
Before the Accord
Before the Accord the only money earned by the Settlements from oil and gas
development was through employment or through surface rights compensation.
On allocated land the surface rights money went to the landholder. On unallo-
cated land all money was paid into the Metis Betterment Trust Fund and shared
by all the Settlements. The guiding principles and payment distribution rules
were set by the Federation (Federation of Metis Settlements Associations).
(See Guiding Principles)
The Policy also included Payment Distribution Rules for surface rights money.
The first rule was that the central trust fund concept must be preserved.
This was necessary to prevent the development of rich and poor Settlements.
To that end all surface rights compensation on unallocated land went to the
common fund. Then, in recognition of the damage done to the affected
Settlement, 10% of the money received from work on that Settlement was
paid back to the Settlement.
There were no payments from royalties or participation rights because neither
the Federation nor the individual Settlements had the power to negotiate
them. The highest amount paid into the Trust Fund in one year was in 1988
when the total from all the Settlements was $1.183 million.
Natural Resources Litigation
The lawsuit brought against the Province by the Federation claimed that the
Province hadn’t properly managed the Metis Betterment Trust Fund –
the Trust Fund shared by the eight Settlements. The charge was that the
Province had not paid all the money from oil and gas development into the
Fund. If the lawsuit would have been won by the Federation, all the royal-
ties and bonus payments from oil and gas development in the Settlement
areas would have been paid into the shared Trust Fund. The Fund would
then be paid out as determined collectively by the Settlements. This would
still be the case if the lawsuit “became alive” again as a result of the
Province failing to live up to its commitments to protect the land.
The Accord and Accord Legislation The Accord
The Accord signed by the Federation and Alberta in 1989, and approved by
an all-Settlements referendum, included a “Co-Management Subsurface
A History of
Oil & Gas on the
Settlements
Reprinted with permissions from theMetis General Settlements Counsel.
N Pa g e 3mar. 2000
Resources Agreement”. The Agreement gave General Council the right
to negotiate royalty and participation in future subsurface resource
development. It said:
• The General Council would, through direct negotiation wit
the successful bidder, have the prerogative to include the
option of royalty override in part or all of surface rights
considerations
• The General Council would have a seven-day option to negotiate a deal
The Accord also included Bill 64, a proposed new Metis Settlements
Act, that gave General Council the exclusive power to control explo-
ration for minerals in all Settlement Areas.
Accord Legislation
The General Council acquired two oil and gas development related
rights. Under the Co-Management legislation it has the right to
negotiate overriding royalties and participation up to 25%. Under the
lands legislation it has the right to keep a developer from entering a
Settlement Area.
Co-Management Agreement
The Co-Management Agreement included in the Accord legislation
repeated the principle in the Accord by reserving overriding royalties
and participation options to General Council. It says that the condi-
tions for the sale of minerals under a Settlement Area can include
“terms and conditions concerning reservation to the General Council of
an Overriding Royalty, Participation Option, or both, with respect to
such development”.
Metis Settlements Land Protection Act
Section 7(3) of the Metis Settlements Land Protection Act changed the
condition in the Accord so that both General Council and the
Settlement had to consent to any exploration or development of
minerals under a Settlement Area. It says:
A person who, after the coming into force of this section, has
obtained from the Crown a right to work or develop a mineral in or
under patented land, or anyone authorized by that person, may not,
with out the consent
(a) of the Settlement Council of the Settlement Area for which the
right has been obtained, and
(b) of the General Council
enter on patented land and conduct operations in order to obtain
information about a mineral, including its existence or nonexis-
tence, or to extract a mineral.
In short, under current legislation, General Council has two basic
rights to work with, the right to negotiate royalties and participation
(up to 25%) and the right to prevent access.
After the Accord The Original Plan
When the Accord was signed there was planning underway to set up
an oil company to handle the royalty and participation rights won for
General Council in the Accord. A November 9, 1989 “Plan for Managing
Resource Development” included the same basic principles as the
1984/85 Surface Rights Policy. The Plan included the following:
PRINCIPLES (Nov 9, 1989 Plan for Managing Resource Development)
In designing the necessary institutions and procedures the
Settlements agree that certain basic principles apply. These are:
• All the Settlements share a common interest in subsurface
resources
• The common interest will be reflected financially by sharing the
benefits from resource development, including royalty overrides
and equity participation
• Subsurface resources will be developed and shared in accordance
with a General Council Resources Policy requiring unanimous
approval
• In determining the sharing of common benefits, the Resources
Policy will take into account the needs of individual Settlements
and the General Council as well as the location of the resources
being developed
• The role of the General Council in managing resource development
will be primarily:
– to protect the common interest
– to provide the expertise, information, and coordination
needed to properly manage development
– to oversee the operations of a jointly owned resource devel-
opment corporation
– to distribute the development benefits among the Settlements
• The role of the Settlement on which the development occurs will
be primarily:
– to manage local development – determine timing of activi-
ties, location of work, etc.
– to ensure local benefit from the activity – jobs, contracts, etc.
– to ensure individuals and the Settlement are fairly compen-
sated for surface damage and inconvenience
– to protect the local community and environment
A History of Oil & Gas on theSettlements
N Pa g e 4mar. 2000
The Reality
In reality, the plan for a jointly owned resource development corpora-
tion got sidetracked when the Accord first came in. Everyone was too
busy trying to get the new system of government up and running. For
awhile the General Council (GC) imposed a moratorium on oil and gas
development to protect the resources and give the Settlements and GC
time to organize to take advantage of their new rights. It wasn’t until
about 1995 that the GC’s right to negotiate overriding royalties and
participation was finally used. At first the GC only reserved royalties
because it did not have the money to invest in well ownership. Since
some Settlements have money, the GC started trying to negotiate a
participation right where it could find Settlements ready to invest. The
situation got more and more confusing because there was no clear GC
position or Policy on how it should exercise its two basic rights:
• the right to negotiate royalty and participation up to 25%
(Co-Management)
• the right to prevent access to a Settlement area
(Land Protection Act)
The Mineral Projects Policy and Guidelines
In September 1996, the GC did three things to solve the resource
development problems:
• Eliminated confusion by passing a resolution (96.09.27.06)
rescinding all previous resolutions about collective action on
subsurface resource development
• Created a framework for development by passing the Mineral
Projects Policy which gave the General Council sole authority on
matters for united action, which included “carrying out General
Council’s rights and responsibilities under the Co-Management
Agreement” [s.2.2]. Those rights included the reservation of over-
riding royalties and participation of up to 25%.
• Committed to building an oil and gas company by unanimously
adopting the Statement of Basic Principles, shown on the
previous page.
In accordance with its Business Plan and the Statement of Basic
Principles, the GC also assigned its rights and responsibilities to Resco
Oil & Gas Ltd.
In December, 1996, the GC fleshed out the Mineral Projects Policy by
adopting Guidelines for United Action that
• required the GC to reserve itself at least a 3% royalty override and 25%
participation option in future development agreements [s.2.2] and
• allowed the GC to assign its rights to Resco, provided Resco agreed
to “offer, on a nonassignable basis, the Affected Settlement a
reasonable opportunity to invest cash and earn corresponding return
in up to half of Resco’s elected participation” [s.2.3].
Current Situation The Financial Reality
Before the Accord the only money earned by the Settlements from
resource development was surface rights compensation and almost all
of it was shared among them. Today the Settlements earn substantially
more money because the Accord gave the GC the right to negotiate
royalty and participation.
The Framework
The Mineral Projects Policy and the Guidelines for United Action
created a framework for oil and gas development, but they were done
before Resco was available to take a lead role in developing resources.
Under the current system, Resco can bid and buy the land same as any
other oil and gas company. If it does, the development agreement
would reserve 25% to the GC, as required by the Guidelines and Resco
would have the remaining 75%, like any other operator. Unlike other
operators, Resco also manages the part reserved to the GC under the
Co-Management Agreement – usually 25%. For that part, Resco must
offer the affected Settlement an opportunity to invest in half (usually
12.5%) on the conditions set out in the Guidelines. Like any other oil
company, what Resco does with the other 75% is up to its Board of
Directors which is made up of Settlement members appointed by the
Settlement Councils.
In any case, no development happens unless both the
Settlement and General Council have agreed to the terms of the
development agreement.
A History of Oil & Gas on theSettlements
N
Guiding Principle
(1984/85 Surface Rights Policy)
Each Settlement has cultural and financial interest in all Settlement
Area lands. Since these lands constitute the only Metis-governed
land in Canada, each Settlement has an interest in ensuring that
the land on all Settlements will be kept in a condition that enables
its use for preserving the Metis way of life. Each Settlement also has
a direct financial interest as a sharer in the common trust fund in
any consideration paid for the use of land on another Settlement.
N Pa g e 5mar. 2000
1999-2000CAPL Executive
PresidentJ.K. (Jim) Moore, P.Land
[ph] 974-8845 [fax] 974-8811
Vice-PresidentK.F.J. (Kevin) Burke-Gaffney, P.Land
[ph] 298-4403 [fax] 262-6705
TreasurerC. (Colin) McKinnon, P.Land
[ph] 531-6506 [fax] 531-6525
Director, Secretary/SocialC.M. (Cameron) Fraser, P.Land
[ph] 216-2510 [fax] 216-2514
Director, CommunicationsMargaret Wyonzek, P.Land
[ph] 218-6086 [fax] 263-0623
Director, EducationD.B. (Dave) Horn
[ph] 750-7678 [fax] 263-8876
Director, Field Acquisition and ManagementG.K. (Glenn) Kruyssen, P.Land
[ph] 264-2533 [fax] 264-2605
Director, Membership and Member ServicesC.A. (Carolyn) Murphy
[ph] 205-5821 [fax] 237-9410
Director, MineralsB.H. (Brian) Birchall, P.Land
[ph] 231-0468 [fax] 231-0157
Director, ProfessionalismH.L. (Hank) Riggelson, P.Land[ph] 221-0818 [fax] 269-6617
Director, Public RelationsD.J. (David) Bernatchez
[ph] 260-5244 [fax] 260-4752
Director, Technology/PetroDocsD.K. (Dennis) Eisner, P.Land
[ph] 213-7967 [fax] 213-7900
Past PresidentJ.E. (Ted) Levebvre, P.Land
[ph] 237-5813 [fax] 261-7871
CAPL OfficeSuite 2800, 500 4th Avenue S.W.
Calgary, Alberta T2P 2V6[ph] 403-237-6635 [fax] 403-263-1620
email: [email protected]
Denise Grieve, Office ManagerKarin Steers, Administrative Assistant
The key issues discussed and resolved at the CAPL Executive Meeting
on February 1, 2000 were as follows:
• Colin McKinnon advised that as at February 1, 2000, CAPL invest-
ments totalled $455,194.40 and the cash balance was $23,298.86.
• Carolyn Murphy advised that membership will be granted to seven
active and six student applicants. The total membership, including
active, associate, senior and student members is currently 1,459.
• Ted Lefebvre advised that nine individuals are standing for six available Directorships
at the April 11, 2000 Elections.
• Glenn Kruyssen advised that Dave Broda, MLA for the Redwater Constituency has been
asked by Premier Ralph Klein and the Honourable Ty Lund, Minister of Agriculture,
Food and Rural Development, to lead a further review of the Agriculture Dispositions
Statues Amendment Act, 1999 and the Draft Regulations with the principle stakehold-
ers, including the CAPL. The goal is to find a consensus where possible and arrive at a
workable solution based on the input from the principle stakeholders.
• Kevin Burke-Gaffney advised that currently 73 Exhibitors and 400 viewers have regis-
tered for The Prospect Exchange to be held April 27 and 28, 2000.
• Kevin Burke-Gaffney advised that the 2000 Conference Committee is currently working
on the registration brochure which will be mailed to members with the April
Negotiator.
• Jim Moore advised that the 2000 Conference Marketing Committee is currently mailing
sponsorship and advertising information to industry.
• Jim Moore advised that the CAPL Office Committee has looked at four offices and will
be looking at several more, prior to making their decision for the relocation of the
CAPL office effective June 1, 2000.
• The next CAPL Board of Director’s Meeting will be held Tuesday, March 7, 2000 at the
CAPL Office. If any member of the CAPL has any questions or concerns regarding the
items highlighted above or the minutes of any CAPL Executive Meeting, please call me
at 216-2510, extension 101.
Cameron Fraser, P.Land
Secretary
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Board Briefs
N Pa g e 6mar. 2000
P R O S P E CT E X C H A N G E 2 0 0 0 !As of this printing, 99 booths
have been purchased for this year’s Prospect Exchange, and over 900viewers have registered to attend CAPL’s premier business forum of theyear! Look for the special one page acknowledgement in this editionof the Negotiator for those Exhibitors who have registered early, madetheir booth selection and are now busy getting ready for the April 27& 28, 2000 show.
By most accounts, analysts and the industry in general are looking atthe coming year in very favorable terms. Oil is currently trading at justover $30/Bbl (US), while a year ago prices were hovering around$12/Bbl (US). Gas is currently trading around the $3/gj (Cdn.) andland sale activity so far this year has been very good. Drilling activitythis winter drilling season compares favorably to last year, with about90% of drilling rigs at work. The mood on the street is generally opti-mistic, although we’ve all seen how quickly a turnaround can occur!
But how many companies in this city are looking to the future, andtaking steps today to meet the coming challenges? We can’t ignore thenumerous predictions of diminishing gas supply and increasingconsumption, to the point where North American demand is expectedto grow at a rate of 2.3%/year, to reach 32 Tcf over the next 20 years.Where is this much needed supply going to come from? Activity on theEast Coast continues at a high level, with current Hibernia productionaveraging about 150MBOPD, with plans to increase to 180MBOPD, andSable Island reserves coming onstream at a rate of 110 MMcf/d.
Recent successes “North of 60” will also mean that more companieswill venture further north to take advantage of other attractive, albeitexpensive, opportunities which can potentially add to the supply equa-tion. Meanwhile closer to home, numerous exploration and acquisitionopportunities are surfacing, and companies are scrambling to keepapprised of those prospects that could have a serious impact on theirbottom line.
What are you doing about helping your company find these new oppor-tunities? Do you have an efficient network that will keep you in theloop regarding all the exciting opportunities and prospects that areavailable? The Prospect Exchange provides a venue that encouragesnetworking, and provides the forum to explore the many offerings madeby the Exhibitors. This year, with the active involvement of the geotech-nical community, viewers and exhibitors alike should see an excitingvariety of prospects with more “meat” to them. Companies looking forplaces to invest their money should have ample opportunities to talkover ideas and concepts with Exhibitors, and hopefully come away withsomething more than just ideas!
If you haven’t got your registration in yet, don’t delay! This year’sProspect Exchange is really shaping up to be an exiting event, wherethe “oil and gas explorers of the world” truly are coming to meet! Formore information, don’t forget to check out our website atwww.landman.ca/pex
AEC Oil and GasAlberta Department of Resource ManagementAnderson ExplorationApache Canada Ltd.
Applied Terravision Systems Inc.Artemis Energy Limited
Barrington Petroleum Ltd.Beartooth Oil & Gas Company
Benson Petroleum Ltd.Cabre Exploration Ltd.Canada-Nova Scotia
Canadian Discovery Ltd.Offshore Petroleum BoardCanadian 88 Energy Corp.
Canadian Natural
Resources LimitedCavalier Land Ltd.
Coastal Oil & Gas Canada, Inc.Crestar Energy Inc.
Enerplus Group of CompaniesExplorer Software
Solutions Ltd.Gascan Resources Ltd.Government of Yukon
Gulf Canada Resources LimitedGulf Midstream Services Limited
Hunt Oil CompanyIHS Energy Canada Ltd.
Indian Oil and Gas CanadaJura-Search Inc.
Kobayashi & Associates Ltd.Manitoba Conservation & Petroleum Energy BranchMarathon Canada Limited
Maverick Land Consultants (87) Inc.
Mobil Oil CanadaNCE Resources Group Inc.
New Brunswick DepartmentNatural Resources & Energy
Newport Petroleum CorporationNew Zealand Crown Minerals
Northstar EnergyNumac Energy Inc.
PanCanadian Petroleum LimitedPetroCanada Oil & Gas
Petrovera ResourcesPioneer Oil & Gas
Public Knowledge Inc.Quebec Natural ResourcesRobinson Oil Company, LLC
Seventh Energy Ltd.SEPAC
Startech Energy Inc.Suncor Energy Inc.
Talisman Energy Inc.The Cadastral Group
The Excalibur-Gemini Group Ltd.The Precision Group
Union Pacific Resources Inc.Upton Resources Inc.Velvet Exploration Ltd.
The Organizing Committee of the 2000 Prospect Exchange would like to acknowledge and thank the following Exhibitors
who have registered prior to January 31, 2000 and who will be in attendance at this year ’s Prospect Exchange:
The countdown is on!
N Pa g e 7mar. 2000
Message from Executiveprojects the association has been working on. None of these initiatives oraccomplishments would have been possible, were it not for the hard work anddedication of our volunteers.
The Field Acquisition and Management Committee (FAM) is no different. We have asmall be nevertheless dedicated team of Land Agents who are working on a varietyof issues and projects.
Our active and ongoing involvement with the grazing lease issue (Bill 31), under thedirection of Deryl Hurl, is a perfect example. Not only has it provided excellentexposure for CAPL but I also believe it has enhanced our image and strengthenedour relationship with other industry associations, landowners and the government.Thanks in part to the “front line” experience of these committee members and theirability to work with landowners; we have been able to bring a more balancedperspective to the table when discussing “access to land” issues in general. (Iencourage you to read Deryl’s article on Bill 31 in this issue of the Negotiator).
Dave Savage and Ray MacEachern, who are the respective Chairs for the Surface LandCommittees of SEPAC and CAPP, are also members of the FAM Committee. Theirsupport and participation have helped to strengthen the link and cooperationbetween our associations on surface matters.
In the fall of 1999, the Committee released its’ first CAPL Surface Lease Agreementfor use in the Province of Saskatchewan. In the near future, a subcommittee underthe leadership of Karen Riep will begin a review of the CAPL Right-Of-WayAgreements currently being used in Alberta and Saskatchewan.
Bob Garies who is also actively involved with Bill 31 and CAPP’s Industry/LandownerRelations Task Force, also sits on the AEUB’s Alternative Dispute Resolution SteeringCommittee. This committee, which was initiated by the AEUB, is looking into otherways to resolve conflicts with landowners through the ADR process.
About the time you read this article, a two day symposium organized by The CalgaryChamber of Commerce entitled “Conflict Solutions 2000” will begin at the PalliserHotel on March 10 and 11, 2000. CAPL was invited to participate in this initiativeand FAM committee members have provided suggestions, recommendations anddirection into planning some of the energy sessions for the program.
Several committee members are course instructors and/or advisors for some CAPLcourses as well as at post-secondary institutions and include Ron Vermeulen, KarenRiep, Bob Garies, Merv Henkelman, Norm McNally, Jason Gouw, Glenn Miller andRob Telford.
As Director of the Field Acquisition and Management portfolio, I would like to takethis opportunity to acknowledge and thank the committee members for the hardwork, tireless dedication, guidance and support they have extended to the CAPL andto me. Their combined efforts have not only contributed to the success of our asso-ciation but have helped to significantly raise its profile.
Volunteers have always been, and will continue to be, the “backbone” of the CAPL.Our future successes will be as a result of our continued involvement.
Glenn Kruyssen, P.LandDirector, Field Acquisition and Management
The CAPL has grown and matured significantly inrecent years. Several goals and initiatives havebeen achieved; not the least of which will be themove into our own offices later this year. We finallysucceeded in implementing re-certification for theP. Land designation. Our annual CAPL Conferenceand The Prospect Exchange continue to grow andare recognized as “First Class Events”. Other recentinitiatives include the CAPL wall calendar andimprovements to member services, which includeour roster, the CAPL website, student membershipand insurance coverage. Last year, CAPLA and CAPLco-sponsored a successful Round Table Discussionwith the Department of Resource Development onP&NG Tenure Regulations. This past year ournewsletter, the Negotiator and the EducationCommittee were well-deserved AAPL Apex awardwinners, reflecting a high standard of quality andprofessionalism.
This is by no means a complete list but is intendedto provide you with a flavour of the variety of
N
N Pa g e 8mar. 2000
THEY SPENT LONG DAYS
OPENING FRONTIERS,
BLAZING TRAILS,
STAKING CLAIMS,
AND SETTLING
THE LAND.
THE REALLY
TOUGH STUFF,
THEY LEFT TO US.
CALGARY T (403) 229-3969, F (403) 244-1202E [email protected]
EDMONTON T (780) 462-4486, F (780) 468-4325E [email protected]
GRANDE PRAIRIE T (780) 532-7707, F (780) 532-7711E [email protected]
FORT ST. JOHN T (250) 785-0669, F (250) 785-0644TOLL FREE 1-800-430.-7990E [email protected]
REGINA T (306) 584-3044, F (306) 584-3066TOLL FREE 1-877-584-7707E [email protected]
COMPLETE LAND, RECLAMATION
AND EMERGENCY RESPONSE SERVICES FOR THE
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Visit us at www.pioneerland.ca
Another month full of informative andexciting articles await readers insidethe March Negotiator. Topics from thefinancial industry to The ProspectExchange pack this issue and make itone of our most informative andenlightening issues yet.
• Reprinted with the permission of the Metis Settlements GeneralCouncil, we have an article entitled “A History of Oil and Gas on theSettlements”. This article brings to light many of the issuessurrounding the Settlements and provides some insight into whatthe future may hold. All CAPL members are encouraged to attendthe upcoming CAPL Education course on cross-cultural relationswhich is occurring on March 15 and 16, 2000.
• As Lynn Lehr says in her article on The Prospect Exchange, “thecountdown is on” towards the most exciting show to hit the oilpatch all year! Already, we have record numbers of exhibitors andviewers signed up, so all interested parties are encouraged tosubmit their forms today. The Negotiator will have unprecedentedcoverage leading up to and following the show, guaranteeing tokeep all CAPL members informed.
• Underbalanced drilling – what is it and how can we use it better?These are just a few of the questions that Geoff Whitehouse fromNorthland Energy Corporation answers in his article. This is a greatarticle for all landmen to read and pin up on their walls for futurereference. Sincere appreciation goes out to Northland Energy forsubmitting this article and we look forward to bringing more arti-cles of this nature to the CAPL members.
• Also, in this month’s issue is a brief write-up on the 10th AnnualUniversity of Calgary Petroleum Landman’s Invitational Charity GolfTournament to be held at Canmore on July 21, 2000. This year weare expanding to 144 golfers and hope to donate a record amountof money to charity through our sponsorship and fundraising. Besure to get your entry form in early to avoid any disappointment asthis event will sell out quickly.
• Lastly, the Field Acquisition and Management (FAM) Committeeprovides an update on Bill 31 regarding the much-discussed grazinglease issue. The FAM Committee is serving as the strong voice onthe CAPL in various meetings with provincial officials. Work isprogressing with the grazing lease situation and new issues such asthe counter-vail tariff sought by the United States Department ofCommerce against cattle ranching are always arising.
As always, The Negotiator staff encourages any feedback on thismonth’s issue. As we start our planning for next year editions, wewould welcome any new CAPL members interested in joining themagazine or just wanting to make suggestions for improvement.
Nathan MacBeySenior Editor
Editorial Highlights
N
MARCH GENERAL MEETING
13th Annual Merit Awards
Tuesday, March 21, 2000, Crystal Ballroom, Palliser Hotel
Cocktails 5:00PM
Dinner 6:00PM
Let’s all turn out and honor our fellow members who have generously given their time
and abilities in the best interest of CAPL.
Members must fax their response to the CAPL office (263-1620) by 12:00 noon, Wednesday,
March 15, 2000. Tickets for guests are available at the CAPL office until 12:00 noon,
Wednesday, March 15, 2000. Please contact the CAPL office for further information.
APRIL GENERAL MEETINGTuesday, April 11, 2000
Crystal Ballroom, Palliser Hotel
Cocktails 5:00PM
Dinner 6:00PM
Guest Speaker
Mr. Neil Camarta
Senior Vice President
Oil Sands, Shell Canada Limited
In late 1999, Shell Canada Limited and its new joint venture partners, Chevron Canada
Resources and Western Oil Sands Inc. received approval for the Athabasca Oil Sands
project. First oil from this $3.5 billion joint venture is expected in late 2002. Mr.
Camarta is a very knowledgeable and dynamic speaker who will deliver a very interesting
speech to the CAPL on this world class project.
Members must fax their response to the CAPL office (263-1620) by 12:00 noon, Friday,
April 7, 2000.
Tickets for guests are available at the CAPL office.
Meeting Announcements
N Pa g e 1 0mar. 2000
WhyHedge ?
The question of whether or not to hedge continues
to be a major issue for many oil and gas companies. Confusion arises
due to misconceptions about risk, concerns about the cost of hedging,
and fears about reporting hedging losses. The various stakeholders in
an enterprise often have conflicting desires. Shareholders may argue a
desire for a “pure” commodity price play, therefore often advocating
minimal hedging of commodity prices. Management and employees
wish to ensure the stability and viability of the enterprise in order to
ensure future growth and employment. Lenders look to ensure safety
of loan principal and therefore prefer stability in earnings and costs.
Boards of directors must balance the potentially conflicting motiva-
tions of stakeholders in the company.
Fundamentally, the introduction of a hedging program offers the
company the ability to increase shareholder value by i) reducing the
cost of capital (ie. broadening access) and ii) stabilizing earnings.
An effective hedging program does not attempt to eliminate all risks.
Rather it attempts to transform unacceptable risks into an acceptable
form. The key challenge for any corporate treasurer / CFO is to iden-
tify the risks the company wishes to manage and then balance the
benefits of protection against the costs of hedging.
The following outlines a number of criteria that you may wish to use
to determine whether or not the company stands to benefit from a
hedging program.
Identify the Risks
In determining which risks to hedge, the corporate treasurer / CFO
needs to distinguish between the risks the company is paid to take
and the ones it is not. Most companies will find they are rewarded
for taking risks associated with their primary business (i.e. operat-
ing risk) but, they are not rewarded for taking risks which are not
central to their basic business such as interest rate and exchange
rate (i.e. financial risk).
Another critical factor to consider when determining which risks to
hedge is the materiality of the potential loss that might occur if the
exposure is not hedged. The cost of hedging can sometimes make
corporate treasurers / CFOs reluctant to hedge. To accurately evalu-
ate the cost of hedging, the corporate treasurer / CFO must consider
it in light of the implicit cost of not hedging. In most cases, this
implicit cost is the potential loss the company stands to suffer if
market factors, such as interest rates or exchange rates, move in an
adverse direction. In such cases the cost of hedging must be evalu-
ated in the same manner as the cost of an insurance policy, that is,
relative to the potential loss.
Unless the potential loss is material (i.e., large enough to severely
impact the corporation’s earnings) the benefits of hedging may not
outweigh the costs, and the corporation may be better off not hedging.
Distinguish Between Hedging and Speculating
One reason corporate treasurers / CFOs are sometimes reluctant to
hedge is because they associate the use of hedging tools with spec-
ulation and believe hedging introduces additional risk. In reality,
the opposite is true. A properly constructed hedge always lowers
risk. It is by choosing not to hedge that managers regularly expose
their companies to additional risks. Financial risks – regardless of
whether or not they are managed – exist in every business.
N Pa g e 1 1mar. 2000
The manager who opts not to hedge is betting that the markets will
either remain static or move in his favor.
A reason some managers choose not to hedge, is that not hedging
often goes unnoticed by the company’s board of directors. Conversely,
hedging strategies designed to reduce risk often receive a great deal
of scrutiny. Corporate treasurers / CFOs who wish to use hedging tech-
niques to improve their company’s risk profile must educate their
board of directors about the risks the company is naturally exposed to
when it does not hedge.
Use the Right Measuring Stick to Evaluate HedgePerformance
Another reason for not hedging often cited by corporate treasurers /
CFO’s is the fear of reporting a loss on a derivative transaction. This
fear reflects widespread confusion over the proper benchmark to use in
evaluating the performance of a hedge.
Many derivative transactions are substitutes for traditional transactions.
A fixed-price term gas sales contract is the equivalent of a floating
price gas sales commitment and a fixed for floating gas price swap. In
this case, the cash flows associated with the swap and floating rate
gas contract will mirror the fixed price gas transaction. Thus, any
money lost on the swap would have been lost if the corporation had
fixed it’s gas price via a fixed price term contract. Only if the swap’s
performance is evaluated in light of management’s original objective
(i.e., to replicate the cash flows of the fixed price physical transaction)
will it become clear whether or not the swap was successful.
Don’t Base Your Hedge Program On Your Market View
Many corporate treasurers / CFOs attempt to construct hedges on the
basis of their outlook for interest rates, exchange rates or some other
market factor. This would be considered more of a price optimization
strategy, and due to a lack of discipline in implementation may serve to
increase earnings volatility. The best hedging decisions are made when
corporate treasurers / CFOs acknowledge that market movements are
unpredictable. A hedge should always seek to minimize risk. It should
not represent a gamble on the direction of market prices. Long term
consistency in the establishment and maintenance of a hedging program
also makes it easier to manage the expectations of stakeholders.
Understand Your Hedging Tools
A final factor that deters many corporate treasurers / CFOs from hedg-
ing is a lack of familiarity with derivative products. Some managers
view derivatives as instruments that are too complex to understand.
The fact is that most derivative solutions are constructed from two
basic instruments: forwards and options. These two instruments
comprise the following basic building blocks:
Forwards Options
• Swaps • Caps
• Futures • Floors
• FRAs • Puts
• Locks • Calls
• Swaptions
The manager who understands these will be able to understand
more complex structures which are simply combinations of the two
basic instruments.
Establish a System of Controls
As is true of all other financial activities, a hedging program requires
a system of internal policies, procedures and controls to ensure that
it is used properly. The system, often documented in a hedging
policy, establishes, among other things, the names of the managers
who are authorized to enter into hedges; the managers who must
approve trades; and the managers who must receive trade confirma-
tions. The hedging policy may also define the purposes for which
hedges can and cannot be used. For example, it might state that the
corporation uses hedges to reduce risk, but it does not enter into
hedges for trading purposes. It may also set limits on the notional
value of hedges that may be outstanding at any one time. A clearly
defined hedging policy helps to ensure that top management and the
company’s board of directors are aware of the hedging activities used
by the corporations risk managers and that all risks are properly
accounted for and managed.
CONCLUSION
A well-designed hedging program reduces both risks and costs.
Hedging frees up resources and allows management to focus on the
aspects of the business in which it has a competitive advantage by
minimizing the risks that are not central to the basic business.
Ultimately, hedging increases shareholder value by reducing the cost
of capital and stabilizing earnings.
David Tims, Managing Director, Western Canada
Dan Noble, Vice-President, Commodity Derivatives Group
Scott Debusschere, Vice President, Foreign Exchange
N
Mineral RightsIssues Management
Co-operative Approach among CAPP, SEPAC, CAPL and CAPLA
Doing more with less was the way of the 90’s. To respond to the chal-
lenge of layoffs, mergers and companies restructuring became a way of
life.
In the land profession business processes were amended and new stan-
dard form documents were developed in order to become more
effective and efficient.
The implementation of the Notice of Assignment and the Farmout
Procedure are examples of industry working together to do it better.
The Alberta Department of Energy commenced a review of Alberta’s
petroleum and natural gas tenure regime with representatives of vari-
ous industry associations, including the Canadian Association of
Petroleum Producers (CAPP), the Small Explores and Producers
Association of Canada (SEPAC), the Canadian Association of Petroleum
Landmen (CAPL), and the Canadian Association of Petroleum Land
Administrators (CAPLA). This broad based consultative approach
proved to be an efficient and effective vehicle to review and develop
changes to land tenure in Alberta.
Moving forward into the new millennium we will continue to face new
challenges with limited resources. There is little advantage for industry
associations land professionals to overlap each others' efforts when the
real goal is to respond to issues in away that is beneficial to industry
and industry stakeholders. Industry associations working together in a
co-operative manner best achieves this.
A co-operative framework has been developed among CAPP, SEPAC,
CAPL and CAPLA to respond to mineral rights issues. The goal is to set
priorities, develop unified industry positions where possible, ensure
that all applicable issues are covered, and minimize the duplication of
effort. To co-ordinate the responsibilities among these Associations a
steering committee has been established. Members include Russ
Waddell (CAPP), Ted Lefebvre (SEPAC), Brian Birchall (CAPL) and Ted
Weryshko (CAPLA). CAPL has a number of groups set up to address
these types of issues. If you are aware of Mineral Rights issues which
you think need to be addressed by any of our Associations, please
contact any member of the above Committee.
Brian Birchill, P.Land
Director, Minerals
Halifax ExplosionDuring World War I, Halifax was the launching point for convoys ofships carrying war supplies, munitions andtroops to Europe. On December 6, 1917,the French munitions ship Mont Blanc,and Norwegian ship Imo, collided inthe narrowest part of the HalifaxHarbor.
Fire quickly broke out upon theMont Blanc, and at 9:05 amexploded. The Halifax explosion isknown as the world’s largest man-made explosion until the coming ofthe atom bomb. Over 1700 people diedand more than 4000 were injured in the explosion.
20002000 PRESIDENT’S SPRING BALLSaturday, April 1, 2000
Westin Hotel
It’s time to gear up for the biggest event of the millennium – The President’s Spring Ball
For the year 2000, this event will be held at the Westin Hotel, to accommodate of 600 CAPL
members and guests.
Spend the evening in the excitement and lights ofLas Vegas and test your luck in winning a trip to the strip!
Oil & Gas Land SpecialistsMineral & Surface Acquisition
Professional Service
Serving Saskatchewan &Manitoba
2010 7th Avenue Regina, Saskatchewan S4R 1C2 Business: 306.775.3415 Cellular: 306.536.6256 Facsimile: 306. 585.7307 email: [email protected]
Brad Lane, President
Mineral Acquisition
Surface Acquisition
Right-of Way Acquisition
Damage Settlements
Rental Reviews
Crown Sales
Comprehensive Land Services including:
N Pa g e 1 4mar. 2000
The following courses are being offered in the month of March:
Economic Considerations for Land Deals March 7, 8
Conventional Exploration Agreements March 15, 16
Cross Cultural Relations March 20, 21
Oil and Gas Law March 20, 21
Freehold Mineral Lease March 21
Introduction to Surface Rights March 28, 29
CAPL Operating Procedure March 29, 30
Introduction to Petroleum Agreements March 31
To register, complete the registration form on reverse and return to
Denise or Karin at the CAPL Office as soon as possible.
Remember that all members who register for any of the courses
listed above will qualify for the draw to win a paid 2000 CAPL
Conference Delegate and Registration Package, courtesy of the
Education Committee!
Dates: March 20 and 21, 2000 Time: 8:30 a.m. to 4:30 p.m.
The course will cover the legal and regulatory issues between First Nations’
peoples and the oil and gas industry, including land claims and self-govern-
ment. Additionally, the course will examine intercultural relations between First
Nations’ peoples and general society. Finally, the course will provide an open
forum for discussion on other pertinent First Nations’ issues.
The instructor for this seminar is Dr. Edward (Ted) Van Dyke. Dr. Van Dyke has a
Ph.D
in anthropology, and has operated a private consulting business for 32 years.
The vast majority of his work has occurred in the context of interaction
between various aboriginal and Euro-Canadian cultures. He has lived and
worked in many aboriginal communities throughout Western Canada and the
Northwest Territories. In his practice, Ted has worked with various communi-
ties, governments, police forces, courts, education and health services, the
military and many corporations, particularly in resource industries.
Cross-cultural Relations With First Nations’ Peoples
Get Smart
N Pa g e 1 5mar. 2000
With all the opportunities bestowed upon the PLM students this
year, PLUS thought it would be appropriate to show our sponsors our
appreciation for all that they do. For this reason, on January 27,
2000, PLUS was pleased to hold its first annual Industry
Appreciation Night. Not only are we thankful for our financial
supporters, but we feel fortunate to have been included in the new
CAPL mentoring program. As well, we have been fortunate to be the
first class to benefit from the CAPL student membership initiative.
Hats off to all the industry people who make life so much better for
the University PLM students.
We started the evening at about 5:30 with drinks and then contin-
ued on to enjoy great food and some interesting conversation. The
turnout was exciting; we had the room filled to capacity. As always
the students were happy with the chance to network. We would like
to thank everybody who attended and made the event a success. To
all those who could not attend, we missed you but we had to have a
good time without you!
Congratulations go to Dalton Dalik, one of our prestigious CAPL
mentors, who won the door prize. Despite some hinting regarding
possible bribing of the PLUS executives, the draw was done fairly.
A special thanks goes to Peter Rallios and the rest of the Piazza
Pizza & Steak House staff. As always they served fabulous food and
once again showed their support of PLUS.
Jodi Gosling
VP Finance, Petroleum Landman Undergraduate Society
Wood CarvingArtist: Elmar Shultes
PLUS 1st Annual IndustryAppreciation Night
I’ve heard about underbalanced drilling, but what is it? The termunderbalanced drilling has been in the oil and gas industry for over50 years. It originally described a form of air drilling where verticalwells were drilled with air to improve rates of penetration through uphole, harder sections.
Now, the meaning of underbalanced drilling has evolved to define ahighly technical approach to drilling. It combines estimating thereservoir or bottom hole pressure – the pressure at the bottom of thewell, opposite the reservoir – and ‘drawing down’ or decreasing thepressure on the reservoir while drilling, with a specific approach tohandling formation returns at the surface.
What is Underbalanced Drilling?
Most wells drilled throughout the world are drilled overbalanced,where the density of the drilling fluid is designed to be higher thanthe formations that are penetrated and the expected reservoir pres-sure. This density is typically achieved by adding a weighting materialto the drilling fluid in order to prevent the contents of the reservoirfrom returning to the surface while drilling.
Underbalanced drilling is a method of drilling a well (usually horizon-tal) where the pressure on the reservoir created by the weight of thecolumn of drilling fluid in the wellbore is less than the expectedreservoir pressure. This can occur naturally, or be induced by addingan inert gas to the drilling fluid at the surface (like nitrogen) todecrease the density of the drilling fluid. The advantage of this novelapproach is that when the density of the drilling fluid column is lessthan the reservoir pressure, the reservoir contents (gas or oil) canflow out of the reservoir and return to the surface while drilling.
Underbalanced drilling is done under controlled conditions after engi-neering and planning for the well, and the operation is conductedusing proper equipment on the surface. Hence, the term ControlledPressure Drilling is now applied to most underbalanced operations.
Why Drill ‘Underbalanced’?
The reasons to use underbalanced drilling can be separated into fourmain categories.
Reducing formation damage. Exposing reservoirs that are under pres-sured or fractured to a weighted drilling fluid system can cause severedamage. By reducing that weight and letting the well flow into thedrilling fluid while drilling (rather than letting the drilling fluid flowinto the reservoir) the damage can be reduced or almost eliminated.
Solving drilling problems traditionally associated with horizontalwells. Loss of circulation (large volumes of drilling fluid enter theformation damaging the reservoir), differential sticking (drilling fluid‘filtercake’ – the solid residue left behind on the walls of the well borewhen the drilling fluid flows into the formation – builds up to thepoint where the drill pipe or directional tools get stuck), or low Rates
N Pa g e 1 6mar. 2000
UNDERBALANCED DRILLING: An Introduction
of Penetration (drilling fluid densities are too high and actually slowthe performance of the drill bit) can all be eliminated by using under-balanced drilling.
Evaluating reservoir performance while drilling. Being able to seeresults while drilling enables companies find the best part of thereservoir. With overbalanced drilling, you do not know if a well issuccessful until the well is drilled and completed.
Reducing costs and increasing revenues. Many costs associated withdrilling and completing horizontal wells can be eliminated if underbal-anced operations are completed properly. Reducing damage to thereservoir should significantly increase production and the well shouldyield higher revenues over the long term.
Which Wells are the Best Candidates?
Underbalanced drilling is best suited for formations with low reservoirpressure, fractures, low permeability, or formations that are suscepti-ble to damage by invasion and drilling fluid sensitivities. It is notrecommended to use underbalanced drilling in formations that are:unconsolidated or unstable; extremely hard and would result in havinglow Rates of Penetration; or that have been produced for many yearsand would not see a benefit of incremental production from usingunderbalanced drilling.
How do you get started with underbalanced operations? It is importantto involve all of the disciplines within your company: geology; reservoirengineering; drilling; exploitation; completions; and land, and utilize aservice company with many years of experience that can offer the prop-erly designed equipment and the engineering expertise to develop, plan,and implement an effective underbalanced drilling program.
To date, Northland Energy Corporation (a division of Precision Drilling)has participated in over 1000 underbalanced wells in Canada and manymore in the U.S. and overseas.
Geoff Whitehouse, MBA, P.Eng.Senior Sales Engineer, Northland Energy Corporation
N
N Pa g e 1 7mar. 2000
The Field Acquisition And Management Committee (FAM) through its
Bill 31 Sub-committee, has been actively involved with a number of
Industry Associations to provide input to the Government of Alberta
on Bill 31 – The Agricultural Dispositions and Statutes Amendment
Act, 1999, and its accompanying Draft Regulations. The CAPL In
conjunction with CAPP has taken a leadership role and provided
surface rights expertise to the group. This group now includes:
• CANADIAN ASSOCIATION OF PETROLEUM PRODUCERS (CAPP)
• CANADIAN ASSOCIATION OF PETROLEUM LANDMEN (CAPL)
• SMALL EXPLORERS AND PRODUCERS ASSOCIATION OF CANADA (SEPAC)
• CANADIAN ENERGY PIPELINE ASSOCIATION (CEPA)
• CANADIAN ASSOCIATION OF OILWELL DRILLING CONTRACTORS
(CAODC)
• CANADIAN ASSOCIATION OF GEOPHYSICAL CONTRACTORS (CAGC)
• PETROLEUM SERVICES ASSOCIATION OF CANADA (PSAC).
The FAM Committee recognized early in the process, a number of prob-
lems associated with the government’s review of public land policy in
May 1998. The FAM Sub-committee consistently and vigorously lobbied
the Government to affect the outcome of the amendments in a posi-
tive manner that would benefit both the industry and landowners.
Working in conjunction with the aforementioned groups, the Sub-
committee most recently attended no less than three meetings with
government officials. The first meeting was on December 3, 1999 with
the Honourable Ty Lund, Minister of Agriculture, Food and Rural
Development, who is responsible for the Bill, to explain our concerns
in more detail. That was followed by a joint industry breakfast meeting
on December 7, 1999 with the Honourable Stephen West, Minister of
Resource Development. This meeting was to discuss industry’s concerns
with the whole “access to land” issue which included Bill 31. Finally a
meeting was held in Edmonton on December 13, 1999 with the
Standing Policy Committee for Sustainable Development. The Standing
Policy Committee meeting was attended by some 12 to 14 sitting cabi-
net ministers and MLA’s. At this meeting, CAPP made a formal
presentation again regarding the “access to land” issue and Bill 31,
followed by a question and answer period.
Mr. Roger Marvin, Director, Public Lands was subsequently invited to a
meeting held at CAPP’s offices on December 17, 1999. Mr. Marvin was
initially asked to explain the position of the Government on the Draft
Regulations associated with Bill 31, which had been released in
November 1999, without the joint input of the stakeholders. CAPL was
particularly disappointed because it had been given assurances that
industry would be involved in discussions prior to Draft Regulations
coming out. The former Minister of Agriculture, Food and Rural
Development, the Honourable Ed Stelmach and the former Minister of
Labour the Honourable Murray Smith had promised this to industry at
an evening meeting on May 13, 1999. Mr. Marvin was taken to task on
the cumbersome and unworkable regulations by both CAPP and the
CAPL Sub-committee and was requested to report the concerns of
industry to the Minister.
On January 13, 2000, a meeting was held at CAPP’s offices attended
by the above-named associations and at the invitation and request of
CAPL, representatives of the ranching community including the
ALBERTA CATTLE COMMISSION, WESTERN STOCK GROWERS ASSOCIATION,
ALBERTA GRAZING LEASEHOLDERS ASSOCIATION and the ALBERTA
SURFACE RIGHTS FEDERATION. The meeting was chaired by CAPL under
the direction of Bob Garies. As a result of this meeting, a joint letter
dated January 17, 2000, bearing the logos of all eleven associations
represented at the meeting, was forwarded to the Alberta Government.
The letter indicated our continuing concerns with the regulations as
proposed and requested joint-stakeholder consultation as undertaken
earlier by the government.
As a result of the leadership role the FAM Sub-committee had taken
with the ranching community, it received an invitation from the
Alberta Grazing Leaseholders Association to attend their annual
general meeting in Youngstown, Alberta on January 20, 2000. The
CAPL was asked to present the views of the oil and gas industry
regarding Bill 31 and the proposed regulations. FAM committee
members Bob Garies and Deryl Hurl attended this meeting on behalf of
CAPL, and made a presentation to some 250 grazing leaseholders.
Also represented at this meeting was a member of the Alberta Surface
Rights Board, the Director of Special Areas, and the Honourable Shirley
McClellan, Minister of International and Intergovernmental Relations
and MLA for Drumheller – Chinook.
Bill 31 (Grazing Lease)Update
N Pa g e 1 8mar. 2000 Pa g e 1 8FEB. 2000
During the meeting, Minister McClellan indicated that the Government
of Alberta had received the “powerful” joint-letter dated January 17,
2000, and announced that the government had decided to suspend the
proposed regulations for Bill 31. She then charged the ranching and
oil and gas stakeholders with the responsibility to negotiate revised
regulations and policy, and if necessary, amendments to Bill 31 as
required. The Minister also announced that Dave Broda, MLA for
Redwater had been appointed to ensure that joint stakeholder consul-
tation occurs.
During the meeting it became very apparent that the cattle ranching
industry is most concerned with a new threat (a counter-vail tariff)
sought by the United States Department of Commerce under NAFTA. A
case has been made that compensation paid to grazing leaseholders by
the oil and gas industry constitutes a subsidy. If the claim is deter-
mined to be valid, it could have serious consequences to the Canadian
cattle industry. This claim is presently under appeal.
On January 21, 2000, the FAM Sub-committee began contacting the
various cattle industry associations to begin the process of negotiation
as charged by the Government of Alberta. At the time of this writing,
CAPL is gathering the responses from the various associations so we
can begin the next step.
The ranching community and the energy industry have been given
considerable responsibility to negotiate an acceptable arrangement for
all stakeholders. You have the assurance of the FAM Committee that
CAPL will have a significant voice and representation at the negotiat-
ing table.
If you have any questions or comments, please feel free to contact
any of the Sub-committee members listed below:
• Bob Garies
• Merv Henkelman
• Glenn Kruyssen
• Ray MacEachern
• John Winton
Deryl R. Hurl, Chair
Bill 31 Sub-Committee
N
Bill 31 (Grazing Lease) Update (continued)
N Pa g e 1 9mar. 2000
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One asset that all
Landmen can
work with.
Over 7000 viewers and 700+ exhibitors created the formula for
success at the North American Prospect Exchange (NAPE) in Houston,
Texas on February 2 and 3, 2000. Deals were flying at the start of the
first morning of business on Wednesday and continued strong through
until the closing bell on Thursday afternoon of the last day. In addi-
tion to the hundreds of exhibits, many exciting and interesting events
occurred at NAPE. Specifically, the 2000 NAPE Institute attracted a
packed room. This year the NAPE Institute examined the intricacies of
economic
analysis of
producing
properties. In
addition to the
Institute, NAPE
hosted an
international
forum where
visiting
governmental
bodies and companies active in those countries showcased new explo-
ration acreage within
their respective coun-
tries.
The Canadian
Association of Petroleum
Landmen (CAPL) also
had a strong presence at
NAPE 2000 through our
Prospect Exchange
booth. Throughout the
show, visitors to the booth
were overwhelming, with all indications that our Prospect Exchange
will be well attended by a record number of our American and
international counterparts. Many of the interested parties were looking
to diversify their portfolio of assets and expressed interest at the
opportunities provided by The Prospect Exchange. Countless hours
were spent by the CAPL volunteers moving around the exhibit floor,
Land is the basis of all wealthat NAPE 2000!
Dave Dunkley, Lynn Dyson and Nathan MacBey discuss strategy.
Gary Montgomery and Lynn Dysonpromote the big show
N Pa g e 2 0mar. 2000
WHERE: The Glencoe Club (636-29th Ave SW) Check in at West Entrance. Darts and pool inthe Corner Pocket Sports Bar after squash
(Please note that all white clothing only is arequirement for the Squash Courts)
WHEN: Saturday Mar. 11, 2000 @ 5:00p.m.(sharp)
FEE: $30.00 (incl. T-shirt, prizes food andbeer)
RETURN ENTRY FORM TO:Scott Clapperton c/o Scott Land & Lease Ltd., 900, 202-6th Ave SW Calgary, Alberta T2P 2R9
CHEQUES PAYABLE TO: 2000 CAPL Squash Tournament
QUESTIONS TO ANY COMMITTEE MEMBER:Troy Smith, Steven Ludgate, Dave Leslie,Brad Purdy, Don Austin, Pat Burgess,Scott Clapperton, Kofi Prah
ensuring that all exhibitors and viewers in
attendance were aware of The Prospect Exchange
and the benefits of their participation. Through the
CAPL’s involvement at NAPE 2000, we will
guarantee a stronger and more vibrant Prospect
Exchange.
The CAPL would like to congratulate the two organ-
izations presenting NAPE, the American Association
of Professional Landmen (AAPL) and the
Independent Petroleum Association of America
(IPAA), for an outstanding effort resulting in a
resounding success! Any CAPL members wishing for
more information on NAPE, please visit the AAPL
web site at www.landman.org or the IPAA web site
at www.ipaa.org.
Be sure to visit The Prospect Exchange home
page at www.landman.ca/pex for further details
on the show.
Nathan MacBey
Administration Chairman, The Prospect Exchange
2000 CAPL SquashTournament
N
NAPE 2000 (continued)
JANUARY
HOT SALE AREASAVERAGE $/ha
N Pa g e 2 2mar. 2000
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Dust off those clubs and get ready because the
10th Annual University of Calgary Petroleum
Landman’s Invitational Charity Golf Tournament is
quickly approaching (see enclosed entry form). On
Friday, July 21, 2000 all the best (and worst…)
golfers in the industry will chase their golf balls
around the Canmore Golf and Curling Club situ-
ated in the heart of the Rocky Mountains!
Last year’s tournament was a huge success and
this year promises to be even better as we cele-
brate a decade of excellence. The superb prizes
and gracious donations of our sponsors in 1999
were well received and truly appreciated by the
record number of 128 golfers. As the tradition
goes, all proceeds from the tournament were
donated to a local charity. In 1999, the Multiple
Sclerosis Association was extremely grateful for
the monies we raised through the silent auction
and “Beat the Hack”. Once a year, the U of C PLM
alumni, current students, and all our industry
counterparts get a chance to give back to the
community and together we make a difference.
This year, we have chosen the Calgary Child and
Family Services’ PATCH Program as our designated
charity. The PATCH Program works out of a subsi-
dized apartment complex in Calgary whereby
social workers help families (mainly single parents
with small children) deal with challenges such as
unemployment, hunger, education and health.
This year’s millennium tournament should again
sell-out so fill out the registration form and send
in your fees early! The format will be 144 golfers
with a shotgun start at 10:00 a.m. on July 21,
2000. We encourage all golfers of all skill levels
to come and join in the action as the focus is on raising money for our charity, not qual-
ifying for the PGA tour! The organizing committee guarantees a day of camaraderie, fun
and sport with a commitment to donate all the money raised to the Calgary Child and
Family Services’ PATCH Program. I welcome you to the tournament and in advance, thank
you for your generosity.
Looking forward to sunny skies and great golfing in the mountains.
Nathan MacBey
Chairman, U of C PLM Invitational Charity Golf Tournament
2000 Committee Members
Chairman:
Nathan MacBey, Upton Resources Inc., Telephone: 218-8976,
email: [email protected]
Past Chairman:
Jeremy Newton, Velvet Exploration, Telephone: 303-3140;
email: [email protected]
Administration:
Tim Louie – AEC; phone: 213-2623; email: [email protected]
John Lawson – Anderson; phone: 232-7337; email: [email protected]
Marketing:
Bart Iverson – Excalibur Gemini; Telephone: 264-8850; email: [email protected]
Rob Motherwell – Hornet Oil and Gas; Telephone: 269-8877;
email: [email protected]
Jeremy Wallis – PanCanadian; Telephone: 290-3283; email: [email protected]
Dave Boisjolie – PanCanadian; Telephone: 290-2956; email: [email protected]
Richard Galvin – AEC; Telephone: 261-2409; email: [email protected]
Marga Gunn – Koch; Telephone: 716-7633; email: [email protected]
Cory Stewart – ARC Financial; Telephone: 292-9147; email: [email protected]
Walter Vrataric – Search; Telephone: 781-8140; email: [email protected]
Keenan Cannady – Player; Telephone: 543-0917; email: [email protected]
U of C Representative:
Nielson Rand – University of Calgary PLM; Telephone: 290-2012;
email: [email protected]
Golf Tournament
N Pa g e 2 5mar. 2000
on the MOVEJohn CoveyCanadian 88 Energy Corp.To Northstar Energy
Margaret EckhardtI S H Energy Ltd.To Bonavista Petroleum Ltd.
Marc FonteyneFletcher Challenge EnergyCanada Inc.To Petromet Resources Limited
Costa FotopoulosCanadian Natural ResourcesLimitedTo Independent
Larry HeathMurphy Oil Company Ltd.To Canadian Natural ResourcesLimited
Dwayne Irwin, P.LandRigel Oil & Gas Ltd.To Barrington Petroleum Ltd.
Ed JohnstonNumac Energy Inc.To Murphy Oil Company Ltd.
Jesse KalsiGlencoe Resources Ltd.To Independent
David KeefeCanor Energy Ltd.To David J.S. Keefe PetroleumLand Consultant Ltd.
Deanna KingKing Resource ConsultantsTo Wascana Energy Inc.
Jahn LightIndependentTo Marathon Canada Limited
Brett McDonaldNewport Petroleum CorporationTo Baytex Energy Ltd.
Richard MitchellRigel Oil & Gas Ltd.To Independent
Dan Mutlow, P.LandCoparex Canada Ltd.To Independent
Deric Orton, P.LandBaytex Energy Ltd.To Piper Energy Inc.
Roy RavenhillFletcher Challenge EnergyCanada Ltd.To Independent
Zvonko RimacRigel Oil & Gas Ltd.To Talisman Energy Inc.
Brad RudyBurlington Resources Canada Energy Ltd.To Millennium Land Ltd.
Bill Savage, P.LandAltana Exploration Ltd.To Independent
Darlene SchwabEnerplus GroupTo Independent
Al SiemensAmoco Canada PetroleumCompany Ltd.To Independent
David ThompsonNOVA Gas Transmission Ltd.To Canamex Land Services Ltd.
Thom Vysohlid, P.LandBriAlto Energy CorporationTo Highland Energy Inc.
Ann WalshChevron Canada ResourcesTo Berkley PetroleumCorporation
Rob Weeks, P.LandProbe Exploration Inc.To Independent
Tom ZuorroInuvialuit Energy Inc.To Independent
Roster Updatesnew MEMBERSNew Members
The following were approved for membership at the February 1, 2000 Executive
Meeting:
Applicant Current Employer Sponsors
Bruce Anderson Canadian Natural Resources Limited Ric Crowe, P.Land,
Bob Mosoronchon,
Kofi Prah
Wayne Boodoo PanCanadian Petroleum Limited Bob Funnell,
Norm Parsons,
Perry Tse
Jane Crouch White Eagle Exploration, Inc. Lynn Dyson, P.Land,
Ted Lefebvre, P.Land,
Greg Strachan, P.Land
Brent Davidson Crestar Energy Inc. Barry Davis,
Trevor Reidy,
James Taylor, P.Land
Theresa
Kondrat-Bochulak Independent Don Finlay, P.Land,
Janice Lambert,
Barry Warnick
Angelica Lyall Belair Energy Corporation Christopher Baker,
Rick Kaminski,
Gary Weiler, P.Land
Mary Ostrom Suncor Energy Inc. Dena Brown,
Sandy Buschert, P.Land,
Lynn McCabeStudent MembersRyan Heath University of Calgary Robert Schulz
Shelly Hittle University of Calgary Robert Schulz
Cam Lockerby University of Calgary Robert Schulz
Jennifer McKennie University of Calgary Robert Schulz
Dan Radke Olds College Ron Reid
Heather Sych University of Calgary Robert Schulz
The CAPL Topical Issues Luncheon Committee invites you to a luncheon to be heldon April 6th, 2000 in the Crystal Ballroom at the Palliser Hotel for a presentation onone of the most exciting moments in stock market history; the dot-com rage.
Our speakers include Art Price; former CEO of Husky Oil who in 1995 left the oil indus-try for the technology sector and founded Calgary based Axia NetMedia Corp.Axia has three divisions that include; the installation of high-speed networks,the production of educational software for the Internet and a variety of othermedia services such as web site development. In October 1999 Axia received astrong endorsement from one of the most powerful Internet companies in theworld, Cisco Systems Inc., the U.S. networking giant. In the past year Axiastock has posted a return in excess of 300%. Mr. Price will be joined by a yetto be named related industry analyst or fund manager.
The luncheon will offer an informative and entertaining discussion on the insa-tiable appetite for dot-com stocks in North America, the technology sector in
Calgary, and speculation on the future of technology stocks. Our speakers will alsoprovide insight on the current flight of capital from the resource-based sector to tech-
nology stocks.
The luncheon will begin at 11:30 and it is anticipated will run until 1:30. Tickets canbe purchased from the CAPL office for$30 each plus GST.
www.ShowMeTheMoney.com(That used to go into the Oil Patch)
Topical Issues Luncheon
We work for you.annual reports
multimedia presentationsadvanced internet designcorporate identification
Suite 204, 805 1st Street SWCalgary, Alberta T2P 7N2
[ph] (403) 237-7955[fax] (403) 263-8155
www.thestudiogroup.com
N Pa g e 2 7mar. 2000N Pa g e 2 7mar. 2000 N Pa g e 2 7J a n u a r y2 0 0 0
THE PROSPECT EXCHANGE
TELUS CONVENTION CENTRE CALGARY, ALBERTA APRIL 27 & 28, 2000
Don’t miss the opportunity to attend one of the most exciting Industry events of the year! With an anticipated 150 Exhibitorsand an expected attendance of over 2,000, you’ll want to be sure that your company is represented at this premier event!
Prospect Exchange Highlights:• Canadian and U.S. Prospects • International Opportunities• Acquisition and Divestiture Properties • Pre-event on-line access• Large networking forum • Host Government presentations
“Ongoing discussions with Chevron accelerated as a result of properties being shown at The Prospect Exchange, result-ing in a large exploration Farm-in and Joint Venture valued at greater than $100 million Canadian.”
Rob Jefferies Poco Petroleums Ltd. Senior Landman
"As an Exhibitor at the 1999 Prospect Exchange, our company realized over $20MM worth of farmout and divestment offers.We were delighted The Prospect Exchange exceeded our expectations, and look forward to participating and seeing strong
industry participation again next year."Ray Heptonstall Crestar Energy Inc. Director Land
Exhibitor Fee:Up to January 31, 2000: Booth prices ranging from $1,000 - $1,500
Effective February 1, 2000: Booth prices ranging from $1,250 - $1,800
Viewer Fee:Up to January 31, 2000: $80.25 (Canadian funds, including GST)
Effective February 1, 2000: $133.75 (Canadian funds, including GST)
For more information or registration forms, please contact:
THE CANADIAN ASSOCIATION OF PETROLEUM LANDMEN2800, 500 – 4th Avenue S.W. Calgary, Alberta, Canada T2P 2V6
Phone: (403) 237-6635 Fax: (403) 263-1620 Website: http://www.landman.ca/pex
Where Oil and Gas Explorersof the World Meet
N Pa g e 2 8mar. 2000
MarchSunday Monday Tuesday Wednesday Thursday Friday Saturday
Calendar of Events
AprilSunday Monday Tuesday Wednesday Thursday Friday Saturday
1
2 3 4 5 6 7 8
CurlingBonspiel
CAPLSquash
Tournament
AEUBRegulation
G56/60NegotiatorDeadline
EconomicConsiderationsfor Land Deals
ExecutiveMeeting
Gregg Scott, President900, 202-6th Avenue SWCalgary, Alberta T2P 2R9Telephone: 403-261-1000Fax: 403-263-5263ow is the time to selectively lease or option freehold land in your prospect areas.
Over one-third of all freehold leases expire within the next year. Choose Scott Land &Lease to cost-effectively option or lease your priority lands now before competition andprices heat up. Our freehold leasing experts are based in all the right locations.For more information call 261-1000 or visit us at www.scottland.ca.
EdmontonTelephone: (780) 428-2212Facsimile: (780) 425-5263
ReginaTelephone: (306) 359-9000Facsimile: (306) 359-9015
LloydminsterTelephone: (780) 875-7201Facsimile: (780) 808-5263
Grande Prair ieTelephone: (780) 513-8540Facsimile: (780) 513-8541
Brandon Telephone: (204) 727-1511Facsimile: (204) 728-1622
NT h e F r e e h o l d E x p e r t s !
ConventionalExplorationAgreements
1 2 3 44
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31
President’sSpring Ball
Introductionto PetroleumAgreements
Oil and GasLaw
Cross CulturalRelations
FH Min. LeaseMerit Awards
Night
Introduction toSurface Rights
CAPL OperatingProcedure
Our customers asked for our vision.We replied: Any system. Any environment.
One partner. The journey has begun. Join us.
Calgary • Dallas • Houston403.218.8300 972.788.0400 713.339.2220
900, 800 - 5 Avenue S.W. Calgary, Alberta T2P 3T6www.atsi.com
Business systems that put the energy of informationto work for you now.
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