Author: Nigel Bankes Page 41 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.

Making Sense of Nonsense? Or Perhaps Not

By Nigel Bankes

On November 25, 2016

In Contracts, Oil & Gas

By: Nigel Bankes and Heather Lilles

PDF Version: Making Sense of Nonsense? Or Perhaps Not

Case Commented On: Eon Energy Ltd v Ferrybank Resources Ltd, 2016 ABQB 585 (CanLII)

What happens when two oil and gas companies enter into a joint operating agreement (JOA) to which is attached the 1981 CAPL Operating Procedure and the PASWC Accounting Procedure and then proceed to operate the properties according to a completely different set of arrangements? As one might expect, things are fine for so long as each perceives some benefit from these de facto arrangements. But when relations deteriorate it’s a mess; and then both counsel, and ultimately the Court, have to try and make sense of what has happened. And in this case that evidently proved difficult for all concerned and likely, very, very expensive. The hearing of this case took 16 days and then Justice Kim Nixon took two years to render this judgement. There were also interlocutory injunctive proceedings (unreported) and there will be a series of accounting issues to be addressed as a result of this judgement. The result is extremely unedifying. The judgement is long (53 pages), meandering, fact laden, and convoluted. Perhaps the best that can be said for it is that it might serve as a salutary warning to be used by lawyers acting for junior oil and gas companies: “this is what happens when you make things up as you go along and act as if the written agreement is a mere inconvenience.” The case is also another illustration of the hard reality that co-ownership is a messy business and fundamentally an institution for those who can get along together. Sometimes the costs of maintaining and fighting about the relationship are not worth the benefits to be obtained.

In one of the more enigmatic paragraphs of her decision Justice Nixon suggests that the parties are asking her to re-write their agreement (at para 260 and again at para 397). But the question all along is which agreement? The written agreement? Or the agreement evidenced by the conduct of the parties?

In what follows we will do our best to distill the essential facts and legal reasoning from Justice Nixon’s judgement.

Bill 27: Financial Support for Renewable Electricity

By Nigel Bankes

On November 10, 2016

In Climate Change, Energy

By: Nigel Bankes

PDF Version: Bill 27: Financial Support for Renewable Electricity

Legislation Commented On: Bill 27, Renewable Electricity Act

Report Commented On: AESO, Renewable Electricity Program, Recommendations, dated May 2016, publicly released November 3, 2016

Press Release Commented On: Government of Alberta, Renewable electricity plan to create jobs, spur investment, November 3, 2016

Alberta’s Climate Leadership Plan (CLP) of November 2015 has four key planks:

Phasing out emissions from coal-generated electricity and developing more renewable energy
Implementing a new carbon price on greenhouse gas emissions
A legislated oil sands emission limit
Employing a new methane emission reduction plan

The government introduced legislation to implement an economy-wide carbon price in June (the Climate Leadership Implementation Act) and in the resumed session this fall (2016) it introduced first of all Bill 25: The Oil Sands Emission Limit Act to implement the third objective, a legislated oil sands emission limit (I commented on Bill 25 here) followed now by Bill 27, the Renewable Electricity Act to implement the second half of the first plank – developing more renewable energy. We have yet to see the detailed plans for phasing out coal generation.

Oil Sands Emission Limit Legislation: A Real Commitment or Kicking It Down the Road?

By Nigel Bankes

On November 3, 2016

In Climate Change, Energy, Environmental, Oil & Gas

By: Nigel Bankes

PDF Version: Oil Sands Emission Limit Legislation: A Real Commitment or Kicking It Down the Road?

Legislation Commented On: Bill 25: The Oil Sands Emission Limit Act

Alberta’s Climate Leadership Plan has four key planks:

Phasing out emissions from coal-generated electricity and developing more renewable energy
Implementing a new carbon price on greenhouse gas emissions
A legislated oil sands emission limit
Employing a new methane emission reduction plan

The province introduced legislation to implement an economy-wide carbon price in June (the Climate Leadership Implementation Act) and in the resumed session this fall (2016) it has introduced Bill 25: The Oil Sands Emission Limit Act to implement the third objective, a legislated oil sands emission limit. This was not something that the Leach Report had recommended but here is what the Government said in making this commitment:

Compulsory Conciliation under the Law of the Sea Convention: Rich Pickings in the Decision on Objections to Competence of the Timor-Leste/Australia Conciliation Commission

By Nigel Bankes

On October 27, 2016

In Law of the Sea

By: Nigel Bankes

PDF Version: Compulsory Conciliation under the Law of the Sea Convention: Rich Pickings in the Decision on Objections to Competence of the Timor-Leste/Australia Conciliation Commission

Decision commented on: Conciliation Commission, Between the Democratic Republic of Timor-Leste and the Commonwealth of Australia: Decision on Australia’s Objections to Competence, 19 September 2016 (Registry, the Permanent Court of Arbitration)

Background

Part XV of the Law of the Sea Convention (LOSC or Convention) provides, inter alia, for “compulsory conciliation” with respect to disputes concerning the interpretation or application of the Convention in a number of instances. This particular dispute concerns Articles 74, 83 and 298 of the Convention. Articles 74 and 83 are the well-known provisions dealing with the delimitation of the exclusive economic zone and the continental shelf where there are overlapping entitlements as between adjacent or opposite states. Timor-Leste and Australia are opposite states separated by the Timor Sea which is approximately 300 NM wide. On the same day that Timor-Leste regained its independence (20 May 2002) the two states concluded the Timor Sea Treaty which established a Joint Petroleum Development Area pending delimitation of the boundary. Further negotiations between the two states led to the adoption (2006) of the Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS). In separate arbitral proceedings Timor-Leste is contesting the validity of CMATS. The two states have yet to agree on a permanent maritime boundary.

Pre-Dynex Royalty Agreements Continue to Spawn Interest in Land Litigation

By Nigel Bankes

On October 13, 2016

In Contracts, Oil & Gas, Property

By: Nigel Bankes

PDF Version: Pre-Dynex Royalty Agreements Continue to Spawn Interest in Land Litigation

Decision Commented On: Re Walter Energy Canada Holdings, Inc., 2016 BCSC 1746 (CanLII)

In 2002 the Supreme Court of Canada handed down its decision in Bank of Montreal v Dynex Petroleum Ltd, 2002 SCC 7 (CanLII) in which it confirmed that a gross overriding royalty (GORR) carved out of a working interest in land was capable of subsisting as an interest in land as a matter of law. Whether any particular GORR created an interest in land, or simply a contractual claim, depends upon the intentions of the parties as revealed in the language adopted by the parties to describe the GORR. There is presumably no objection to expressing this intention with words such as “the parties intend that the right and interest created by clause x of this agreement is to be an interest in land” – so long as this intention is not contradicted by other language in the agreement when construed as a whole in accordance with the usual rules on the interpretation of contracts. See, Nigel Bankes, Private Royalty Agreements: A Canadian Viewpoint, Rocky Mountain Mineral Law Institute (2003). While Dynex definitively settled the issue of principle (can a GORR as a matter of law ever be an interest in land) it still requires an analysis of the intentions of the parties in any particular case, although this should be easier to demonstrate for post-2002 agreements than for pre-2002 agreements. That said, the matter had been widely litigated during the previous 40 years, and counsel should at least have been aware, well before then, of the need to use language appropriate to creating an interest in land rather than a contractual interest – if that was indeed the intention of the parties.