Author: Nigel Bankes Page 21 of 87

By: Nigel Bankes

PDF Version: Relationship Between a Farmout Agreement and a Joint Operating Agreement

Case Commented On: Apache North Sea Ltd v Euroil Exploration Ltd [2019] EWHC 3241 (Comm) (England and Wales)

Under the terms of a farmout agreement, the farmor, the holder of a working interest in an oil and gas property (i.e. a lease, licence, concession or other form of agreement), affords the farmee an opportunity to earn a share of that working interest in return for performing a work obligation – typically the drilling of a well. In some cases (sometimes termed a farmout and participation agreement) the farmee earns an interest by contributing a share of the costs of a drilling operation to be conducted by the farmor itself rather than the farmee. It is standard practice in either case to attach a joint operating agreement (JOA) to the farmout agreement to address the legal relationship between the farmor and farmee (and perhaps other parties) once the farmee has earned its interest. It is crucial to do this since, once the farmee has earned, the farmor and farmee will then be co-owners of the lease or licence etc, i.e. they will be holders of an undivided interest in that property as tenants in common. But until the farmee earns, the parties are not co-owners. One issue that the parties need to address as clearly as possible in these arrangements is the applicability of the JOA before the farmee has earned. Perhaps a working hypothesis might be that the JOA is of no application until the point of earning since the JOA is fundamentally concerned with co-ownership. However, there is frequently a lot of detail in the JOA that the parties may want to incorporate or make reference to during earning and this may be especially the case where the farmout is better characterized as a farmout and participation agreement rather than a pure farmout where the earning well is drilled at the sole cost, risk and expense of the farmee.

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By: Nigel Bankes

PDF Version: Public Inquiry Into Anti-Alberta Energy Campaigns: Interim Report

Matter Commented On: Allan Inquiry Interim Report, January 31, 2020

ABlawg has published a number of posts on the Allan Inquiry: The Alberta Inquiry and Freedom of Expression; Everything You Wish You Didn’t Need to Know About the Alberta Inquiry into Anti-Alberta Energy Campaigns; and Procedural Fairness and the Alberta Inquiry into Anti-Alberta Energy Campaigns.

Mr. Allan has now delivered his interim report to Minister Savage as required by his terms of reference (ToR). According to the ToR the interim report is to deal with “advice, proposals, recommendations, analyses or policy options related to the Inquiry …”.

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By: Nigel Bankes

PDF Version: AUC Announces a Second Round of Consultations on Self-Supply and Export

Matters Commented On: AUC Bulletin 2020-01, Exploring market concerns and tariff issues related to self-supply and export reform, January 9, 2020; and AUC Decision 24979-D01-2020, International Paper Canada Pulp Holdings ULC, Industrial System Designation and Permanent Connection Order for the Grande Prairie Pulp Mill Complex, January 10, 2020.

The Electric Utilities Act, SA 2003, c E-5.1, (EUA; and regulations) and the Hydro and Electric Energy Act, RSA 2000, c H-16, (HEEA) oblige generators in Alberta to offer their generation to the power pool and to exchange energy through the pool. There are a number of exceptions to these requirements but in a series of decisions during 2019 the AUC concluded that these exceptions are narrowly framed. These decisions are EPCOR Water Services Inc., EL Smith Solar Power Plant, February 20, 2019, Decision 23418-D01-2019; AUC Decision 23756-DOI-2019, Advantage Oil and Gas Ltd. Glacier Power Plant Alteration, April 26, 2019; AUC Decision 24393-D01-2019, International Paper Canada Pulp Holdings ULC Request for Permanent Connection for 48-Megawatt Power Plant, June 6, 2019; and AUC Decision 24126-D01-2019, Keyera Energy Ltd, Cynthia Gas Plant Power Plant Application, June 25, 2019. I commented on those decisions in Opening a Can of Worms and here and here.

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