Case considered: Canpar Holdings Ltd v Petrobank Energy and Resources Ltd and Gentry Resources Ltd, unreported transcript of reasons for judgement October 9, 2009 and December 11, 2009, available here.
PDF version: Damages for production on a dead oil and gas lease
In this case Justice Miller decided that: (1) a an oil and gas lease that contains a no-deduction form of royalty clause (royalty calculated by reference to sales price and not by reference to value at the wellhead) means just that – no deductions (whatever the industry custom or practice to the contrary), (2) a lessor can terminate a lease by following the default clause of the lease where the lessee has not being paying royalty in accordance with the terms of the lease, and (3) at least in the circumstances of this case, a lessee that produces on a lease that has been terminated by the lessor triggering the default clause may be exposed to an accounting on the basis of sales value of production minus operating costs. Given the importance of each of these issues it is unfortunate that Justice Miller decided to dispose of the matter by way of oral reasons from the bench.