Author: Nigel Bankes Page 27 of 88

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.

Decision Commented On: AUC Decision 24126-D01-2019, Keyera Energy Ltd, Cynthia Gas Plant Power Plant Application, June 25, 2019

In its Smith decision earlier this year, the Alberta Utilities Commission (AUC) concluded that a self-generator could only avoid the general “must offer, must exchange” obligations imposed by 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) if it fell within one of the prescribed exceptions in the legislative scheme. ABlawg commented on the Smith decision here: Opening a Can of Worms. The AUC followed its Smith decision with two further interconnection applications in April and early June: AUC Decision 23756-DOI-2019, Advantage Oil and Gas Ltd. Glacier Power Plant Alteration, April 26, 2019; and AUC Decision 24393-D01-2019, International Paper Canada Pulp Holdings ULC Request for Permanent Connection for 48-Megawatt Power Plant, June 6, 2019. I commented on these latter two decisions here.

Royalty Certainty for the Oil and Gas Industry?

By Nigel Bankes

On June 26, 2019

In Oil & Gas

By: Nigel Bankes

PDF Version: Royalty Certainty for the Oil and Gas Industry?

Legislation Commented On: Alberta Bill 12: Royalty Guarantee Act

On June 20, 2019 Alberta’s Legislature gave first reading to Bill 12, The Royalty Guarantee Act. The Bill aims to fulfil a commitment made as part of the United Conservative Party’s (UCP) election platform:

Royalty Guarantee

Recent Alberta governments shook investor confidence with royalty reviews. A United Conservative government will guarantee in law that the royalty regime in place when a well is permitted will remain in place for that project in perpetuity. (at 30)

In the press release accompanying introduction of the Bill, Minister Sonya Savage reiterated the concerns that led to its introduction:

Frequent royalty reviews have had a significant negative impact on the energy industry and our province’s ability to compete with other energy jurisdictions. Alberta has competitive royalty rates and investors need certainty when making long-term decisions that the rates will not change on a whim. This legislation would provide the guarantee that stability isn’t just something we talk about in Alberta, it is the law.

This post examines the current rules in relation to changes in Crown royalties and then considers the scope and effect of Bill 12.

The Implications of the AUC’s Smith Decision

By Nigel Bankes

On June 18, 2019

In Energy, Oil & Gas

By: Nigel Bankes

PDF Version: The Implications of the AUC’s Smith Decision

Decisions commented on: AUC Decision 23756-DOI-2019, Advantage Oil and Gas Ltd. Glacier Power Plant Alteration, April 26, 2019; and AUC Decision 24393-D01-2019, International Paper Canada Pulp Holdings ULC Request for Permanent Connection for 48-Megawatt Power Plant, June 6, 2019.

In its Smith decision earlier this year, the AUC concluded that a self-generator could only avoid the general must offer, must exchange obligations imposed by 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) if it fell within one of the prescribed exceptions in the legislative scheme. ABlawg commented on the Smith decision here: Opening a Can of Worms.

In these decisions, two AUC panels have confirmed the Smith decision, and in doing so further explore the implications of Smith for both new generation and for existing generation.

Gross Overriding Royalty Payable on 100% of Production

By Nigel Bankes

On June 10, 2019

In Civil Procedure, Energy

By: Nigel Bankes

PDF Version: Gross Overriding Royalty Payable on 100% of Production

Case Commented On: Obsidian Energy Partnership v Grizzly Resources Ltd, 2019 ABQB 406

In this decision, Master J.T. Prowse granted summary judgment in favour of Obsidian (formerly Penn West Petroleum) against Grizzly Resources, concluding that Obsidian’s gross overriding royalty interest (GORR) of 2.75% was payable on 100% of production from the encumbered properties rather than on Grizzly’s working interest in the properties.

Summary Judgment Not Available in a Farmout Case

By Nigel Bankes

On May 15, 2019

In Oil & Gas

By: Nigel Bankes

PDF Version: Summary Judgment Not Available in a Farmout Case

Cases commented on: (1) Teine Energy Limited v Audax Investments Ltd, unreported oral judgment delivered from the bench October 2, 2018 (Transcript of Proceedings), (2) Teine Energy Limited v Audax Investments Ltd, unreported oral judgment delivered from the bench March 21, 2019 (ABQB), and (3) Teine Energy Limited v Audax Investments Ltd, 2019 ABQB 334 (ABQB Ruling on Costs)

Teine and Audax entered into a farmout agreement on November 24, 2016. The agreement took the form of a proposal from Teine (as the farmor) to Audax as the proposed farmee, which proposal Audax accepted. The agreement contemplated that in return for drilling the commitment well (or wells), Audax would earn a 100% interest in Taine’s Saskatchewan Crown petroleum and natural gas lease, subject to a 17.5% gross overriding royalty in favour of Teine. The agreement incorporated by reference the 1997 Canadian Association of Petroleum Landmen Farmout and Royalty Procedure.

The case turns on clauses 3 and 4 of the farmout agreement:

Author: Nigel Bankes Page 27 of 88

Another Interconnection Application Crashes Out

Royalty Certainty for the Oil and Gas Industry?

The Implications of the AUC’s Smith Decision

Gross Overriding Royalty Payable on 100% of Production

Summary Judgment Not Available in a Farmout Case