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Author: Nigel Bankes Page 20 of 89

Nigel Bankes is emeritus professor of law at the University of Calgary. Prior to his retirement in June 2021 Nigel held the chair in natural resources law in the Faculty of Law.

Considerations in the Design of a Royalty Regime for Helium

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On May 21, 2020

In Energy, Oil & Gas

By: Nigel Bankes

PDF Version: Considerations in the Design of a Royalty Regime for Helium

Matters commented on: Press Release, “New royalty rate responds to soaring helium interest” Minister of Energy, May 13, 2020; Department of Energy, Information Letter IL 2020-22 , Helium Royalty Rate, May 13, 2020; Natural Gas Royalty Regulation, 2009 (AR 221/2008) as amended by OC 154/2020; and Natural Gas Royalty Regulation, 2017 (AR 211/2016) as amended by OC 155/ 2020.

On May 13, 2020 Minister Sonya Savage announced the establishment of a new royalty rate for helium produced from Crown lands. The new rate (5% minus a 0.75% helium royalty adjustment factor, for an effective rate of 4.25%) replaces a zero royalty rate for helium production. The press release suggests that the proposed royalty structure “helps set the stage for investment” by providing some certainty while “ensuring a fair price for Albertans.” (This is misleading. The market will set the price not the royalty.) The press release goes on to indicate that, “[t]his effective royalty rate is set for an initial period of five years. At that time, the rate will be reviewed to ensure it remains competitive and allows for any necessary adjustments.” The accompanying Information Letter issued by the Department (IL 2020-22) suggests that the review is to be limited to the appropriateness of the 0.75% adjustment factor, not the entire rate.

The new royalty is implemented by amendments to the Natural Gas Royalty Regulations of 2009 and 2017 (each applies to different ‘vintages’ of production) and made retroactive to April 1, 2020. (Prior to these amendments there was a requirement (see IL 2018-25, now revoked), that “operators producing and selling helium must report monthly helium production volumes and monthly average selling prices ….”) The new royalty will only apply to helium produced from lands where the mines and minerals are vested in the Crown. If helium is produced, saved and sold from private mineral lands, the applicable royalty will be established by the terms of the lease between the owner of the mines and minerals and the working interest owners.

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AER Refuses Transfer of Foothills Sour Gas Approvals from Shell Canada to Pieridae Energy

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On May 15, 2020

In Energy, Oil & Gas

By: Shaun Fluker and Nigel Bankes

PDF Version: AER Refuses Transfer of Foothills Sour Gas Approvals from Shell Canada to Pieridae Energy

Decision Commented On: Alberta Energy Regulator Decision, Shell Canada Limited Transfer of Ownership Including the Waterton Sour Gas Plant EPEA Application No 021-258 and Jumping Pound Sour Gas Plant EPEA Application No. 015-11587, May 13, 2020

On May 13, the Alberta Energy Regulator (AER) denied an application by Shell Canada to transfer regulatory approvals with respect to its foothills sour gas assets (facilities, wells, pipelines, and related infrastructure) to Pieridae Energy. The subject approvals are issued under a host of energy and environmental legislation, including the Environmental Protection and Enhancement Act, RSA 2000, c E-12 (EPEA). This post comments on the rationale given by the AER for this decision.

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The Discipline of Vavilov? Judicial Review in the Absence of Reasons

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On May 12, 2020

In Administrative Law

By: Nigel Bankes

PDF Version: The Discipline of Vavilov? Judicial Review in the Absence of Reasons

Decision commented on: Alexis v Alberta (Environment and Parks), 2020 ABCA 188 (CanLII)

One of the “wait-and-sees” following the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 (CanLII) was the question of whether or not (and if so, to what extent) the Court’s guidance as to reasonableness review (where applicable) would result in a greater degree of scrutiny of the reasoning supporting administrative decisions. Another but related question was the application of that guidance to decisions for which there is no duty to provide reasons, and where the decision-maker provides no such reasons. This recent decision of the Court of Appeal (unanimous in terms of the decision to quash – some difference between the members of the Court as to the remedy) provides guidance on both questions.

The decision does suggest that reasonableness scrutiny will be more searching and that the failure to provide reasons may not render the decision inscrutable or presumptively reasonable. One possible result of this is that it might lead government lawyers acting for statutory decision makers to advise their clients to provide reasons, even where not obliged to do so by statute or natural justice. The rationale for doing so would be to make sure that as convincing a case as possible can be made for the decision in question, and to forestall the possibility that a reviewing court will draw inferences or identify unbridgeable gaps in reasoning between an application and an ultimate decision. If so that would be a good outcome. As another panel of the Court of Appeal has observed in another recent decision (Mohr v Strathcona (County), 2020 ABCA 187 (CanLII) at para 35 (per Slatter JA)), reasons serve “(a) to tell the parties why a decision was made; (b) to provide public accountability for that decision; and (c) to permit effective appellate review.” See also an earlier post on the importance of reasons in administrative decision-making in a somewhat different context: “Reasons, Respect and Reconciliation.”

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The AER Must Consider the Honour of the Crown

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On April 28, 2020

In Energy

By: Nigel Bankes

PDF Version: The AER Must Consider the Honour of the Crown

Decision Commented On: Fort McKay First Nation v Prosper Petroleum Ltd, 2020 ABCA 163

In this important decision, a unanimous panel of the Court of Appeal concluded that the Alberta Energy Regulator (AER) has an obligation to take into account the honour of the Crown when deciding whether to recommend approval of a new oil sands project under s 10 of the Oil Sands Conservation Act, RSA 2000, c O-7 (OSCA). The AER had not done so in this case. Accordingly, the Court vacated the AER’s approval of Prosper’s Rigel project and referred the matter back to the AER. The decision is an important decision on the implications of the honour of the Crown in the context of a regulatory tribunal, but it is also an important decision on cumulative impacts and the limits that cumulative impacts may impose on the Crown’s power to take up lands under the numbered treaties. Previous posts on ABlawg have emphasized the importance of this point for the prairie provinces and other provinces with numbered treaties within their boundaries: see here, here, here and here.

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Governance and Accountability: Preconditions for Committing Public Funds to Orphan Wells and Facilities and Inactive Wells

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On April 24, 2020

In Environmental, Oil & Gas

By: Nigel Bankes, Shaun Fluker, Martin Olszynski and Drew Yewchuk

PDF Version: Governance and Accountability: Preconditions for Committing Public Funds to Orphan Wells and Facilities and Inactive Wells

Announcement commented on: Department of Finance Canada, Canada’s COVID-19 Economic Response Plan: New Support to Protect Canadian Jobs, April 17, 2020

As any resident of this province knows, the Alberta oil and gas sector’s problem of underfunded environmental liabilities has been growing for decades. On April 17, 2020, in response to the impact of both the COVID-19 pandemic and the Saudi/Russian price war, the federal government announced an injection of $1.7 billion of public funds to support the ‘clean up’ of inactive and orphan wells in Saskatchewan, Alberta and British Columbia. With respect to Alberta, $200 million will go to the Orphan Well Association as a loan to deal with orphan wells (i.e. wells that have no owner) while $1 billion will go to the Government of Alberta to deal with inactive wells (i.e. wells that are not producing but have not been properly closed and remediated).

The first part of this post examines the background to the Orphan Well Association and how it has moved from being an industry funded organization to the recipient of significant public funds. We suggest that this change in the source of funding is likely permanent and thus demands a complete rewrite of the governance structure for orphan wells in the interests of transparency and accountability. The second part of this post offers comments on the proposed program for inactive wells. This part of the post is shorter and more speculative because the announcement is remarkably vague and lacking in important details on this part of the program.

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