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Chrysten Perry & Alan Harvie
Macleod Dixon LLP
Buying a direct interest in oil and gas (also known as "acquiring mineral rights") in Alberta is not as straight forward as, say, buying a house. Petroleum and natural gas, or "PNG" is, by nature, fugacious, and under Alberta law these substances cannot typically be "owned" until reduced to possession. As such, the acquiror generally obtains a lease - an instrument that allows the lessee the right to explore for and produce the minerals. In Western Canada, the industry has developed on the basis that these leases, sometimes known as "tenure agreements", may be transferred from person to person and constitute an interest in land, an important distinction in Canadian law.
In many countries, mineral resources belong to the state. In Canada, prior to 1869, all minerals in Alberta and a number of other provinces were owned by the Hudson's Bay Company, one of the oldest merchant companies in the English‑speaking world. In 1869, the Hudson's Bay transferred the majority of its minerals to the Dominion of Canada and, as part of the bargain, obtained title to some lands opened for settlement, including the mineral rights associated with those lands. Until 1930, all Crown minerals in Alberta were controlled by the Federal Government of Canada. Today, these mineral resources are generally owned and administered by the provincial government, although a small minority of oil and gas rights are owned by individuals or organizations in "fee simple" or as "freehold estates". The Federal Government also owns and administers certain oil and natural gas rights in Canada for Canada's aboriginal people.
In Alberta, approximately 81% of the Province's mineral rights are owned by the Alberta Government, or as we refer to it, the "Crown", and they are administered by the Alberta Department of Energy. The remaining 19% are freehold mineral rights.