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.
Cases Considered: Husky Oil Operations Limited v. Gulf Canada Resources Limited 2008 ABQB 390
PDF Version: What happens when parties operate an oil battery without a formal agreement?
Husky Oil has complicated facts, some complex law (unjust enrichment, fiduciary obligation, rectification) and a confusing judgment, but surely only one possible result. Indeed, we wonder why it ever went to court at all.
Cases Considered: Nexxtep Resources Ltd. v. Talisman Energy Inc et al, 2007 ABQB 788; aff’d 2008 ABCA 246
PDF Version: What happens when the deep rights you just purchased are being drained by the vendor’s shallow rights well?
What happens when a purchaser obtains the deep rights under certain oil and gas leases (along with a producing horizontal well) and the parties exclude another vertical well on the basis that it is producing from the shallow rights retained by the vendor and later the purchaser forms the view that the well is producing from the deep rights and not the shallow rights? That is the issue on the merits in Nexxtep – barring disagreements as to just where the vertical well was producing from. At present the case is reported only on certain preliminary matters, Nexxtep’s request for an injunction and Talisman’s request for summary judgment.
Cases Considered: Adeco Exploration Company Ltd. v. Hunt Oil Company of Canada Inc. 2008 ABCA 214, varying unreported oral reasons for judgement of May 3, 2007.
One of the most important events in the life of a Crown oil and gas lease or licence in Alberta is the point of continuation at the end of the primary term (a lease) or at the end of the intermediate term (a licence). It is important because a lease or licence lapses at the end of its primary or intermediate term except to the extent that it is continued (Mines and Minerals Act, R.S.A. 2000, c. M-17, s.82(1)). And when a lease lapses as to some or all of the leased area so too will any royalty interests with respect to that area of the lease.
PDF Version: Royalty Changes in Alberta: Why are we waiting? (to the tune of “O Come All ye Faithful”)
One of the most damning indictments contained in the Report of the Royalty Review Panel in the fall of last year was the revelation that the current royalty regime for conventional oil and gas loses any sensitivity to increased prices at extraordinarily low levels. The Government itself acknowledged this deficiency in its own proposal for a new Royalty Framework where it states that sensitivity is lost for oil at about $30 per barrel and for natural gas at about $3.70/GJ.
Cases Considered: Kensington Energy Ltd v. B & G Energy Ltd 2008 ABCA 151
PDF Version: The Independent Operation Of The Shut-in Clause Of An Oil And Gas Lease
In this important decision (hereafter “Kensington”) the majority of the Alberta Court of Appeal (Hunt and Slatter JJA; Romaine JA dissenting) concluded that the third proviso to the habendum of an oil and gas lease does not establish a set of conditions precedent that the lessee must fulfill before it can rely upon the shut-in wells clause and shut-in well payment to deem production, thereby continuing the lease – at least, and this is an important caveat – where the language of the shut-in wells clause does not track that of the third proviso. In reaching this conclusion the Court effectively distinguished its earlier decision in Freyberg v. Fletcher Challenge Oil and Gas Inc, 2005 ABCA 46 (“Lady Freyberg”).
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