PDF version: How should society deal with the question of long term liability for carbon capture and storage?

Report commented on: Report of the Interagency Task Force on Carbon Capture and Storage, August 2010

I don’t often sing the praises of government reports. Often written in turgid prose, they seem more concerned to find the lowest common denominator that all can live with rather than to identify and evaluate the policy problem and policy options to address that problem. This is even more likely to be the case where you have an “inter-agency” report; a report cobbled together by multiple cooks and authors, where the LCD really is the way to go. But I like this report of the United States federal Interagency Task Force on Carbon Capture and Storage, which came out earlier this month. It should be compulsory reading, not just for CCS wonks, but also for anybody engaged in formulating public regulatory policy in response to any new technology.

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PDF version: The Supreme Court of the United Kingdom (fka the House of Lords) decides an oil and gas case 

Case considered: Star Energy Weald Basin Limited v Bocardo SA, [2010] UKSC 35

It is not every day, or even every year, that the highest court in the United Kingdom passes judgement in an oil and gas case. But the Supreme Court of the United Kingdom did so at the end of July and while much of the Court’s reasoning turns on the details of the UK’s petroleum legislation, and in particular on the terms of the Crown vesting legislation in that jurisdiction, the Court also had something to say about the common law ownership rights of the surface owner. These comments merit carefully scrutiny in the context of the ongoing debate in Alberta and elsewhere about ownership rights in relation to pore space, an important issue in the context of carbon capture and storage (CCS).

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PDF version: Mutatis Mutandis: The ERCB speaks (in Latin) on the subject of carbon capture and storage

Considered: ERCB Bulletin 2010 - 22, ERCB Processes Related to Carbon Capture and Storage (CCS) Projects, June 29, 2010

After a long period of cogitation the chief energy regulator in the province has finally provided a statement of how it proposes to approach the regulation of carbon capture and storage (CCS) projects. The message is simple: apply the current rules, so far as they are applicable to CCS (the basic idea of mutatis mutandis). The issue is important: several task forces and many commentators have emphasised that the proponents of CCS projects need regulatory certainty if they are to plan and implement commercial scale CCS operations. Whether this ERCB Bulletin provides sufficient guidance to industry and sufficient comfort to the citizens of the province that CCS projects will be handled safely remains to be seen.

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PDF version: Estoppel arguments fail once again in an oil and gas lease case 

Case considered: Desoto Resources Limited v. Encana Corporation, 2010 ABQB 448

In this case Justice William Tilleman dismissed an appeal from Master Jodi Mason’s decision in chambers in which she had granted summary judgement in favour of the defendant in the action, Encana. Desoto had been seeking a declaration that it had a number of valid leases notwithstanding that the primary term of the leases had expired in the 1970s and that there had been no production on the leases for a period beginning in the late 1990s. This was apparently, at least at the outset, as a result of the properties being shut-in by order of the Energy Resources Conservation Board because of the failure of the then lessee to pay well abandonment deposits.

I blogged on Master Mason’s decision - see Successful application for summary dismissal in an oil and gas lease validity case.

On appeal, Desoto focused on estoppel arguments urging that the leases should survive on the basis of promissory estoppel, estoppel by acquiescence, or estoppel by deed.

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PDF version: A century of liability for an abandoned well

Case considered: Dalhousie Oil Company Limited, Section 40 Review of Abandonment Cost Order No. ACO 2008-1, Turner Valley Field, ERCB Decision 2010-19

In this decision the Energy Resources Conservation Board (ERCB, the Board) confirms that the current owner of an abandoned well has a continuing responsibility to pay for the re-abandonment costs associated with that well even though the well in question had not produced since the 1920s. The decision is particularly interesting in the context of the current discussion surrounding who should assume responsibility for the long term liabilities associated with carbon capture and storage projects.

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PDF version: Ontario Court of Appeal holds that oil and gas lease continued by virtue of (late) payments under a unitization agreement 

Case considered: Tribute Resources v McKinley Farms, 2010 ONCA 392

The Court of Appeal has varied in part the decision in Tribute Resources v McKinley Farms that I blogged here. The trial judge held that any rights that Tribute held under the terms of an oil and gas lease or under the terms of a gas storage agreement (GSA) had terminated.

The Court of Appeal agreed with the trial judge on the GSA point but held that trial judge had erred in holding that the lease was continued by the terms of the unitization agreement. The Court of Appeal concluded that this was an ordinary commercial contract and that the Court must give effect to its terms. The agreement provided that payments under the unitization agreement were effective to deem production on the leased lands. The fact that some payments were late was not significant since the lease did not provide for automatic termination; the default clause was evidence of that and the default clause seemed to allow the lessee the right to notice and the opportunity to cure a default. There had been no notice of default and ergo the deeming was effective.

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PDF version: Maintaining space for autonomy? Environmental assessments in the context of aboriginal land claims agreements

Case considered: Quebec (Attorney General) v. Moses, 2010 SCC 17

This is the first decision of the Supreme Court of Canada to examine a modern land claims agreement; in this case the James Bay and Northern Quebec Land Claim Agreement (JBNQA or the Agreement) between Canada, Quebec and the James Bay Cree and the Northern Quebec Inuit. The argument in the case happens to relate to the nature of the environmental assessment process that should be applied to a particular project but there is a much broader issue at stake which is the capacity of federal and provincial governments to continue to make and apply laws within the territory covered by the Agreement to matters “covered” by the terms of the Agreement. By adopting an artificial distinction between that which is covered by the Agreement and that which falls outside it, the majority recognize that governments have retained significant authority to “supplement” the terms of the Agreement. But the government’s authority to do so is not completely unlimited since the majority also recognizes that such authority must be exercised consistently with the Crown’s duty to consult. By contrast, the dissent takes a more robust view of the coverage of the land claims agreement and as a result limits the capacity of governments to create a parallel normative world that sidelines negotiated arrangements for autonomy.

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Case considered: Tsuu T’ina Nation v Alberta (Environment), 2010 ABCA 137

PDF version: Water management planning and the Crown’s duty to consult and accommodate

The Court of Appeal, in a reasons for judgement reserved decision written by Justice Clifton O’Brien on behalf of a unanimous three person panel (Justices Ellen Picard and Patricia Rowbotham concurring), has rejected the challenge made by two First Nations, the Tsuu T’ina and the Samson Cree, to the South Saskatchewan Water Management Plan (SS WMP). The First Nations challenged the Plan on the basis that the Crown had not fulfilled its constitutional duty to consult and accommodate when it developed and adopted that Plan. The Court found that: (1) the Crown did have a duty to consult (certainly with respect to the Tsuu T’ina, less clearly so with respect to the Samson Cree, at para.70), (2) the content of the duty to consult was at the very low end of the scale “having regard to the nature of the proposed government action, the seriousness of the appellants’ rights and claims, and the potential adverse impacts upon those rights and claims” (at para. 95), and (3) the duty to consult had been satisfied (at paras 130 and 136).

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Case considered: Bearspaw Petroleum Ltd v Encana Corporation, 2010 ABQB 225

PDF version: Yes folks the language of the habendum does matter

In this decision Justice Terry McMahon held that a petroleum and natural gas lease that provides for continuation at the end of its primary term where leased substances are “producible” will be continued where the lessee has drilled a well that has discovered natural gas in commercial quantities; the lease will be continued even though that well has not been tied in and is therefore not capable of actual production. The decision also offers a comment on implied and express covenants to market.

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Case considered: Hunt Oil Company of Canada Inc v. Galleon Energy Inc, 2010 ABQB 212

PDF version: The rule of capture is not the only no liability rule in the oil and gas business

This decision confirms that where B intervenes in an ERCB (Energy Resources Conservation Board) application commenced by C and the result of that intervention is that C incurs delays in being able to achieve increased levels of oil or natural gas production, C has no cause of action against B for damages that C suffers as a result of the delay. Furthermore, any effort by C to use the courts to effect a recovery from B may be an abuse of process.

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