Author: Nigel Bankes Page 29 of 87

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.

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!

A Vesting Order Cannot Create Title

By Nigel Bankes

On September 18, 2018

In Energy, Property

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:

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;
a pig receiving station (the “Pig Receiver”) at the same location; and,
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.

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

By Nigel Bankes

On July 17, 2018

In Energy

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.

Relevant Considerations in Approving Assignments Under the CCAA

By Nigel Bankes

On July 10, 2018

In Bankruptcy and Insolvency, Energy

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

Alberta Court follows Third Eye Capital v Dianor in a Royalty Characterization Case

By Nigel Bankes

On June 28, 2018

In Energy, Oil & Gas

By: Nigel Bankes

PDF Version: Alberta Court follows Third Eye Capital v Dianor in a Royalty Characterization Case

Case Commented On: Manitok Energy Inc (Re), 2018 ABQB 488 (CanLII)

In a welcome development Justice Karen Horner has followed the Ontario Court of Appeal’s recent decision in Third Eye Capital Corporation v Resources Dianor Inc., 2018 ONCA 253 (CanLII) (the subject of a post here) and concluded that the royalty agreements at issue in this case were intended to create an interest in land and did in law create such an interest notwithstanding that the royalty was described as in interest in oil volumes once produced rather than as in interest in the minerals themselves.

Author: Nigel Bankes Page 29 of 87

Payout under Alberta’s Oil Sands Royalty Regulation

A Vesting Order Cannot Create Title

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

Relevant Considerations in Approving Assignments Under the CCAA

Alberta Court follows Third Eye Capital v Dianor in a Royalty Characterization Case