Announcing Oil and Gas Contracts: An ABlawg ebook

Editor’s Note

ABlawg is pleased to announce the launch of the first in a series of ebooks which we will put together from time to time when we have a critical mass of posts in a particular area. Our first ebook, compiled by Nigel Bankes, concerns oil and gas contracts. Other ebooks that are currently planned will cover oil and gas leases, the Alberta Energy Regulator, Charter equality rights, standing, and carbon law and policy.

Our ebooks will be accessible from a new tab at the top of the ABlawg website, and each ebook will be introduced with a post that will go out by email, RSS feed, and Twitter to our subscribers. Each ebook will have a table of contents with hyperlinks to the collected posts and will be fully searchable.

If readers have ideas for ebooks in particular areas or other feedback on this initiative we would be pleased to hear from you.

The introduction to our first ebook happens to be Nigel Bankes’ 200th post for ABlawg, and we congratulate him for being the first ABlawgger to reach this milestone. We also thank Evelyn Tang (JD 2016) for her hard work in producing the ebook.

Introduction: By Nigel Bankes

Oil & Gas Contracts Ebook

This ebook collects a set of ABlawg posts dealing with upstream oil and gas contracts between 2007 and June 2015.

Most of the posts in this collection deal with the standard form agreements of the Canadian Association of Petroleum Landmen (CAPL) including the farmout agreement (EOG Resources v UCRC, Solara v Richmount), the operating agreement (Adeco v Hunt) and, the property transfer agreement (Nexxtep v Talisman). Other posts cover unitization arrangements (Signalta v Dominion), gas processing agreements, pooling agreements (Hunt v Shell) and agreements to construct, own and operate facilities (e.g. Talisman v Esprit). Most of the posts deal with lands in Alberta and decisions of the Alberta courts but there are also decisions from other provinces, one decision which deals with an AIPN (Association of International Petroleum Negotiators) form (BG International v Canadian Superior) and even one post which covers a decision of the High Court of Australia (EGC v Woodside).

Many of these posts deal with issues of contract interpretation, but many also shed light on particular terms and concepts used in the industry including independent operations, rights of first refusal (ROFR) (Bearspaw v Conoco, Blaze v Imperial), the operator’s lien, the obligations of the operator to non-operators, the gross negligence standard (Re Trident; Bernum v Birch Lake), fiduciary obligations, (Brookfield v Vanquish) and the removal or challenge of an operator (Diaz v Penn West).

I am not sure that I can identify common themes within these cases and perhaps it is more important that the reader be sensitive to the need to read and examine these cases in light of more general developments in contract law as well as the law on summary judgement. As for general contract law, two cases are of particular note: Bhasin v Hrynew, 2014 SCC 71 and Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53. Professor Watson Hamilton posted on the relevance of Sattva for arbitration award appeals here. Professor Girgis posted on the Alberta Court of Appeal’s arcane decision here but we have no post on the Supreme Court of Canada’s decision overturning that of the Court of Appeal.

The Bhasin decision is important because it recognizes (at para 93) that “There is a general organizing principle of good faith that underlies many facets of contract law” and recognizes as a manifestation of that general principle “a new common law duty …. of honest performance which requires the parties to be honest with each other in relation to the performance of their contractual obligations.” In light of this it will be important to consider the implications of this decision for the implementation of discretionary obligations under oil and gas contracts. The Court does refer to one oil and gas case (a pooling case Mesa Operating Limited Partnership v Amoco Canada Resources Ltd (1994), 149 AR 187) (Alta CA)) in its decision but the case also has implications for inter alia the ROFR provisions of the operating agreement: see Chase Manhattan Bank of Canada v Sunoma Energy Corp., 2002 ABCA 286. A paper prepared by Neil Finkelstein, Brandon Kain, Craig Spurn, Seán C. O’Neill and Justin H. Nasseri for the Jasper Energy Law Foundation Conference (June 2015) provides an excellent discussion of Bhasin in the oil and gas contract context: “Honour Among Businesspeople: The Duty of Good Faith and Contracts in the Energy Sector”.

The Sattva decision is principally important, as Professor Watson Hamilton notes, for changing the law on the deference to be accorded to arbitrators and trial judges in the interpretation of contracts. The Court decided that, given the importance of the commercial and factual matrix within which a contract is negotiated, the interpretation of the resulting arrangements will give rise to mixed questions of law and fact. Consequently, the standard of review to be applied to such interpretations is likely to be reasonableness rather than correctness. It remains to be seen whether this deferential standard of review will be equally applicable to both bespoke and standard form contracts.

Developments in the law on summary judgement (the principal case here is Hryniak v Mauldin, 2014 SCC 7) will have profound implications for the way in which parties litigate all manner of commercial disputes. One interesting example in this ebook is provided by the post on Justice Jo’Anne Strekaf’s recent decision in SemCAMS ULC v Blaze Energy Ltd.

This ebook is organized chronologically by date of post (oldest first) except that we have grouped together trial and appellate decisions so that any appellate decisions are printed immediately after the trial or first instance decision. Where appropriate the text also includes any commentary and response received on the individual posts. There is no index to the volume but it should be readily searchable in this electronic form using key words and the “find” function in adobe acrobat or equivalent.

I am responsible for the selection of posts for this volume. Evelyn Tang (JD 2016) has been responsible for the hard work in knitting this all together.

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