Author Archives: Nigel Bankes

About Nigel Bankes

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.

Food for thought: Judgment of the European Court of Justice on Capacity Market Issues

By: Nigel Bankes

PDF Version: Food for thought: Judgment of the European Court of Justice on Capacity Market Issues

Case Commented On: Tempus Energy Ltd v European Commission, Judgment of the General Court (Third Chamber, Extended Composition), 15 November 2018, Case T-793/14.

Those engaged in the challenging job of designing a capacity market for Alberta’s electricity sector might be interested in this recent judgment of the European Court of Justice in which the Court concluded that the European Commission (EC) had been too hasty in approving the design of the UK’s proposed capacity market. The case arises in the particular context of the primary law of the European Union (EU), the Treaty on the Functioning of the European Union and specifically that treaty’s provisions on “State aid” – better known to the rest of the world as unlawful state subsidies. The UK’s proposed capacity market had to be notified to the EC for its approval because a capacity market, despite the “market” label, represents a departure from a “purer” version of an electricity market (an energy only market). A capacity market involves a degree of central planning (estimating the required capacity) and then “out of market” payments to those who post winning bids to provide that capacity. See my earlier post on Alberta’s capacity market legislation here. Continue reading →

Payout under Alberta’s Oil Sands Royalty Regulation

By: Nigel Bankes

PDF Version: Payout under Alberta’s Oil Sands Royalty Regulation

Case Commented On: Fort Hills Energy Corporation v Alberta (Minister of Energy), 2018 ABQB 905

A year ago, ABlawg posted a case comment on a dispute related to the determination of payout with respect to the Hibernia project on the East Coast. That case, Newfoundland and Labrador v ExxonMobil Canada Properties, 2017 NLDT(G) 147, 2017 CanLII 56724 (NL SCTD), involved an arbitration followed by an unsuccessful application by the Province of Newfoundland and Labrador to have the court overturn the arbitral award. Fort Hills, perhaps more conventionally, involves the definition of payout under the terms of Alberta’s Oil Sands Royalty Regulation, 2009, Alta Reg 223/2008, (OSRR). In this case the matter arises as an application for judicial review with respect to the Minister’s decision on one element of the payout account for the Fort Hills Oil Sand Project (FHOS Project), namely a category of expenses referred to as ‘prior net cumulative balance’ (PNCB). The differences between the parties were massive. Suncor had originally claimed a PNCB of $1,898,205,145; the minister allowed a PNCB of a little more than $33 million, and a further review and audit reduced this to $NIL. Definitely worth fighting about!

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A Vesting Order Cannot Create Title

By: Nigel Bankes

PDF Version: A Vesting Order Cannot Create Title

Case Commented On: Quicksilver Resources Canada Inc (Re), 2018 ABQB 653

Quicksilver Resources (QRCI) owned oil and gas assets and associated infrastructure in the Horn River basin. In 2011, QRCI joined the Fortune Creek Partnership (FCP) and agreed, by way of a Contribution Agreement, to contribute certain infrastructure assets to the FCP. Those assets were described as follows:

The “Assets” are set forth on Exhibit 1 (Maxhamish Pipeline), Exhibit 2 (Compression Assets) and shall include the following:

(a)   all permits, licenses, authorizations, surface rights (including easements, licenses of occupation and rights-of-way), and buildings, structures, appurtenances and tangible depreciable property situate thereon that are used or useful in connection with the operation of the Maxhamish Pipeline; but

(b)   specifically exclude any rights or interests in or relating to petroleum or natural gas or the production thereof, or in wells or wellsite facilities, or in the operation of the foregoing. [The emphasis is supplied by Justice Jones.]

The FCP became insolvent in 2016 and MNP was appointed as Trustee in Bankruptcy. QRCI and its subsidiaries followed FCP into insolvency and obtained protection under the Companies Creditors Arrangement Act, R.S.C. 1985, c C-36 (“CCAA”) and a stay of proceedings. FTI Consulting was appointed as the Monitor of QRCI.

In March 2016 QRCI entered into an Asset Purchase Agreement (APA) with Rockyview Resources Inc (RRI). Under the CCAA, the APA required the approval of the Court and that approval was granted in the ordinary course in April 2016 in the form of an Approval and Vesting Order.

A dispute then arose as to whether certain infrastructure assets were included in the APA. These “disputed assets” are described as follows:

  1. a metering station and building (the “Metering Station”) located at the downstream or outlet end of the Maxhamish Pipeline, the location being legally described as a-59-A/094-O-14 in the Province of British Columbia;
  2. a pig receiving station (the “Pig Receiver”) at the same location; and,
  3. a BC Oil and Gas Commission (“OGC”) Facility License for the Metering Station (the “Metering Station License”).

QRCI sought a declaration to the effect that RRI had no interest in the disputed assets.

There were three issues to resolve: (1) were the disputed assets covered by the partnership Contribution Agreement such that QRCI could not have sold them to RRI; (2) were the disputed assets included in the APA, and (3) did the Approval and Vesting Order give title of the disputed assets to RRI notwithstanding the conclusions to the first two questions.

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Public Interest Standing for NGOs to Test Whether CNLOPB can Effect an End-Run Around Maximum Term Provisions

By: Nigel Bankes

PDF Version: Public Interest Standing for NGOs to Test Whether CNLOPB can Effect an End-Run Around Maximum Term Provisions

Case Commented On: David Suzuki Foundation v Canada-Newfoundland Offshore Petroleum Board, 2018 NLSC 146

Corridor Resources Inc. (Corridor) received a nine year exploration licence (EL 1105) from the Canada-Newfoundland Offshore Petroleum Board (CNLOPB or Board) on January 15, 2008 under the terms of the federal and provincial legislation implementing the terms of the Atlantic Accord: Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, S.C.1987, Ch. 3 (Federal Act), and Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act, R.S.N.L. 1990, c. C-2 (Newfoundland Act). As is customary, the EL was divided into two periods: Period I, five years and Period II, 4 years. In order to validate the licence for Period 2 Corridor had to commence the drilling of a well within the Period I and diligently drill through to completion. Corridor’s proposal to drill proved controversial and triggered a time-consuming environmental assessment procedure. In response to this Corridor applied for and was granted an extension to Period I but in the end it was not able to drill a well as required by the EL.

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Relevant Considerations in Approving Assignments Under the CCAA

By: Nigel Bankes

PDF Version: Relevant considerations in approving assignments under the CCAA

Case Commented On: Dundee Oil and Gas Limited (Re), 2018 ONSC 3678

As part of approving a plan of compromise or arrangement under the Companies’ Creditors Arrangement Act, RSC 1985, c. C-36, s.11.3 (CCAA), the Court on an “application by a debtor company and on notice to every party to an agreement and the monitor, … may make an order assigning the rights and obligations of the company under the agreement to any person who is specified by the court and agrees to the assignment.” Section 11.3(3) provides the following guidance to the Court in exercising this power:

(3) In deciding whether to make the order, the court is to consider, among other things,

(a) whether the monitor approved the proposed assignment;

(b) whether the person to whom the rights and obligations are to be assigned would be able to perform the obligations; and

(c) whether it would be appropriate to assign the rights and obligations to that person.

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