The National Post recently ran a feature choosing different election theme songs for the federal political parties (see http://www.nationalpost.com/news/story.html?id=822081). Critics of Alberta’s dismal turnout on voting day (52.9% of eligible voters) might suggest that the election itself deserved its own theme song in this province - Pink Floyd’s “Comfortably Numb” comes to mind, or perhaps “I’m Only Sleeping” by the Beatles (I am dating myself here - other suggestions welcome). This complacence is troubling in light of the fact that many issues of potential concern to Albertans were discussed during the election, some of which we explored in constitutional law this term.

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Cases Considered: Provident Energy Ltd. v. Alberta (Utilities Commission), 2008 ABCA 316

PDF Version:  Obtaining Leave to Intervene in a Leave to Appeal Application

This decision deals with a unique and interesting point of civil procedure. It answers the following question: what is the test for obtaining leave to intervene in a leave to appeal application before Alberta’s Court of Appeal?

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PDF Version:  When does a royalty owner not have to pay for a share of processing costs?When does a royalty owner not have to pay for a share of processing costs? The answer of course should be that the royalty owner does not have to pay unless it is required to do so by the terms of the agreement that created the royalty. And that in fact is exactly what Justice Alan Macleod concludes in this judgement. Just as there is no rule of law that precludes an oil and gas lease from being kept in force beyond the end of its primary term by the mere existence of a shut-in well in “accordance with oil field practice” (see Kensington Energy Ltd v. B & G Energy Ltd 2008 ABCA 151
and my post on this decision), so too there is no rule of law that requires a royalty owner to pay a share of post-severance processing costs. This judgement confirms that processing costs are issues of contract between the parties and that the job of the court is to give effect to the terms of the agreement that the parties have negotiated. (more…)

Cases Considered: In re Desoto Resources, Joffre Field, ERCB Decision 2008-47

PDF Version:   The ERCB asserts its jurisdiction to determine the validity of an oil and gas lease

In an unusual decision the ERCB has asserted its jurisdiction to determine the validity of an oil and gas lease. While the Board has in recent years been forced to make rulings on complex questions of property law such as the competing rights of coal owners and natural gas owners to coal bed methane (In re Bearspaw Petroleum, EUB Decision 2007-24) as well as the competing interests of bitumen producers and natural gas producers (Alberta Energy Company Ltd. v. Goodwell Petroleum Corporation Ltd., 2003 ABCA 277, reviewing EUB Decision 2000-21) this is, so far as I am aware, the first reasoned decision of the Board in which it has passed on the validity of an oil and gas lease. Desoto’s application in the Court of Queen’s Bench for a declaration as to the validity of the leases was pending at the time of the Board’s decision.

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Cases Consiered: Husky Oil Operations Limited v. Gulf Canada Resources Limited 2008 ABQB 390

PDF Version: What happens when parties operate an oil battery without a formal agreement?

Husky Oil has complicated facts, some complex law (unjust enrichment, fiduciary obligation, rectification) and a confusing judgment, but surely only one possible result. Indeed, we wonder why it ever went to court at all.

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Cases Considered: Nexxtep Resources Ltd. v. Talisman Energy Inc et al, 2007 ABQB 788; aff’d 2008 ABCA 246

PDF Version: What happens when the deep rights you just purchased are being drained by the vendor’s shallow rights well?

What happens when a purchaser obtains the deep rights under certain oil and gas leases (along with a producing horizontal well) and the parties exclude another vertical well on the basis that it is producing from the shallow rights retained by the vendor and later the purchaser forms the view that the well is producing from the deep rights and not the shallow rights? That is the issue on the merits in Nexxtep - barring disagreements as to just where the vertical well was producing from. At present the case is reported only on certain preliminary matters, Nexxtep’s request for an injunction and Talisman’s request for summary judgment.

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Cases Considered: Adeco Exploration Company Ltd. v. Hunt Oil Company of Canada Inc. 2008 ABCA 214, varying unreported oral reasons for judgement of May 3, 2007.

PDF Version: The legal implications of failing to continue a Crown oil and gas lease: the duty of the operator to its joint operators and to the holder of a royalty interest

One of the most important events in the life of a Crown oil and gas lease or licence in Alberta is the point of continuation at the end of the primary term (a lease) or at the end of the intermediate term (a licence). It is important because a lease or licence lapses at the end of its primary or intermediate term except to the extent that it is continued (Mines and Minerals Act, R.S.A. 2000, c. M-17, s.82(1)). And when a lease lapses as to some or all of the leased area so too will any royalty interests with respect to that area of the lease.

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Cases Considered: Imperial Oil Resources Ventures Limited v. Pembina Institute for Appropriate Development et al, 2008 FC 598, Pembina Institute for Appropriate Development v. Canada (Attorney General), 2008 FC 302,

PDF Version:  Back on track to socio-ecological ruin: Kearl oil sands project re-authorized

My initial post on the Kearl project (see Just a Bump on the Road to Socio-Ecological Ruin) was accurate after all. Madame Justice Tremblay-Lamer’s decision in Pembina Institute for Appropriate Development v. Canada (Attorney General), 2008 FC 302, that held the Kearl joint panel breached section 34 of the Canadian Environmental Assessment Act, S.C. 1992, c. 37, was simply a brief foray into environmental bliss. On June 6, 2008, the Department of Fisheries and Oceans re-issued the requisite authorization under the Fisheries Act, R.S.C. 1985, c. F-14, to Imperial Oil, reportedly on identical terms and conditions as set out in the original authorization (see my previous post Federal Court upholds nullification of Kearl oil sands authorization for more discussion on the nullification of the initial authorization). (more…)

PDF Version: Royalty Changes in Alberta: Why are we waiting? (to the tune of “O Come All ye Faithful”)

One of the most damning indictments contained in the Report of the Royalty Review Panel in the fall of last year was the revelation that the current royalty regime for conventional oil and gas loses any sensitivity to increased prices at extraordinarily low levels. The Government itself acknowledged this deficiency in its own proposal for a new Royalty Framework where it states that sensitivity is lost for oil at about $30 per barrel and for natural gas at about $3.70/GJ.

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Cases Considered: Imperial Oil Resources Ventures Limited v. Pembina Institute for Appropriate Development et al, 2008 FC 598

PDF Version: Federal Court upholds nullification of Kearl oil sands authorization

The Federal Court’s decision in Pembina Institute for Appropriate Development v. Canada (Attorney General), 2008 FC 302, is proving to have more significance than I anticipated in my initial blog (see Just a Bump on the Road to Socio-Ecological Ruin). In that judgment, Madame Justice Tremblay-Lamer held the Kearl joint panel erred in law by failing to comply with one of the duties imposed upon it by section 34 of the Canadian Environmental Assessment Act, S.C. 1992, c. 37. Shortly thereafter, the Federal Department of Fisheries and Oceans informed Imperial Oil that, as a consequence of the joint panel’s error in law, the Kearl project authorization issued by the Minister pursuant to the Fisheries Act, R.S.C. 1985, c. F-14, was a nullity. In correspondence addressed to Imperial Oil, the Department of Fisheries and Oceans stated in part:

Please be advised that the Department of Fisheries and Oceans is of the view that, as a result of the Honourable Madam Justice Tremblay-Lamer’s decision, the Authorization for Works or Undertakings Affecting Fish Habitat and the Authorization to Destroy Fish by any means other than Fishing (ED-03-2806) which was issued by the Minister of Fisheries and Oceans pursuant to subsection 35(2) of the Fisheries Act to Imperial Oil Resources Ventures Limited on February 12, 2008, is a nullity.
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