Author: Nigel Bankes Page 18 of 89

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.

Bill Commented On: Bill 36, Geothermal Resources Development Act, 2nd Sess, 30th Leg, Alberta, 2020 (first reading 20 October 2020)

The recognition of a “new” resource, whether that be the use of pore space for sequestering carbon dioxide or in this case the exploitation of geothermal energy (for a primer on geothermal energy see David Roberts, “Geothermal Energy Poised for a Big Breakout” Vox (21 October 2020)), often requires the creation of new legal and regulatory instruments (or adaptation of existing ones) to provide legal certainty for investors and to protect the public interest. Although the issues may vary for different “new” resources, such instruments will typically need to address the following types of questions: (1) who owns the resource in question and how may a developer acquire rights to the resource?; (2) what regulatory regime needs to be put in place to protect the public interest, including the environment? and; (3) what liability regime should we put in place to provide compensation in the event that third parties suffer harm and to ensure fulfillment of reclamation and abandonment obligations?

With the introduction of Bill 36, the Government of Alberta proposes to put in place a legal regime that will address these questions. In large part, the Bill addresses the second and third issues by drawing extensively on the Oil and Gas Conservation Act, RSA 2000 c O-6 as a model. I will not say much about that model in this post, but one well-known flaw of this model is that it has proven to be far too permissive. What I mean by permissive is that the model gives the Alberta Energy Regulator (AER) the power to make a lot of rules (e.g. rules for suspension and timely abandonment of wells) but it does not actually require that such rules be put in place. As a result, those rules may never be promulgated and the public interest not fully protected. See “Bill 12: A Small Step Forward in Managing Orphan Liabilities in Alberta”.

Another Manitoba Oil and Gas Lease Termination Decision

By Nigel Bankes

On October 16, 2020

In Energy, Oil & Gas

By: Nigel Bankes

PDF Version: Another Manitoba Oil and Gas Lease Termination Decision

Case Commented On: Fire Sky Energy Inc. v EverGro Energy Corporation, 2020 MBQB 133 (CanLII)

I am not sure what’s going on downstream of us these days, but we now have a third oil and gas lease termination case this year from “Friendly Manitoba.” I posted on the two earlier decisions here in April.

This one is fairly straightforward. EverGro held under a CAPL 88 MAN lease form with a three-year primary term commencing January 22, 2013 and filed a caveat to protect its interest. Fire Sky top leased the property on February 9, 2017 having formed the view that EverGro’s lease had expired.

The AUC Rejects an Application for an Industrial System Designation

By Nigel Bankes

On September 30, 2020

In Energy

By: Nigel Bankes

PDF Version: The AUC Rejects an Application for an Industrial System Designation

Decision Commented On: AUC Decision 25117-D01-2020, TA Kaybob 3 Generation Facility Inc. Generation Facilities Applications; SemCAMS Midstream ULC Industrial System Designation Application, Kaybob 3 Generation Facilities Project, September 25, 2020;

Discussion Paper Commented On: AUC, Self-supply and export – Alberta Utilities Commission discussion paper, June 5, 2020 (published July 29, 2020, AUC Bulletin 2020-28)

Under the terms of the Hydro and Electric Energy Act, RSA 2000, c H-16 (HEEA) and the Electric Utilities Act, SA 2003, c E-5.1 (EUA), the holder of an Industrial System Designation (ISD or IS designation) is entitled to meet its own electricity needs and export any surplus electricity to the grid. In other words, the holder of an ISD is exempt from the ‘must offer, must exchange’ rules of the EUA for any generation that it self-consumes (EUA, s117, and conditions included in ISD approvals). A principal advantage of the ISD for the holder is that the holder does not incur distribution and transmission tariffs for electricity that it consumes on site. As previously canvassed on ABlawg (see here), other exemptions from the power pool rules do exist, but these are smaller scale exemptions and recent decisions of the Alberta Utilities Commission (AUC or Commission) (see AUC Decision 23418-D01-2019, EPCOR Water Services Inc., E.L. Smith Solar Power Plant, February 20, 2019 (EL Smith decision) and related decisions) have reduced the availability of one of these exemptions, thereby increasing interest in the ISD (see for example AUC Decision 24979-D01-2020, International Paper Canada Pulp Holdings ULC, Industrial System Designation and Permanent Connection Order for the Grande Prairie Pulp Mill Complex, January 10, 2020; and for a more general discussion see AUC, Self-supply and export – discussion paper).

MSA Announces Investigation into the Bidding Practices of the Balancing Pool

By Nigel Bankes

On September 10, 2020

In Energy

By: Nigel Bankes

PDF Version: MSA Announces Investigation into the Bidding Practices of the Balancing Pool

Proceedings and Announcements Commented On: (1) MSA News Release, “MSA has issued a formal notice of investigation to the Balancing Pool related to offer strategies undertaken at PPA units”, September 2, 2020; and (2) AUC Decision 25809-D01-2020, Market Surveillance Administrator, Application to Make Public a Record that Identifies a Market Participant by Name, September 2, 2020

On September 2, 2020, the Market Surveillance Administrator (MSA) announced that it was initiating an investigation into the bidding practices of the Balancing Pool (BP) in relation to the remaining power purchase agreements (PPAs) for which it still has offer control. This follows an earlier MSA investigation into the BP’s bidding practices that resulted in a settlement agreement between the BP and the MSA that was ultimately approved (on the second go-around) by the Alberta Utilities Commission (AUC). For the two AUC decisions see: AUC Decision 23828-D01-2019, Market Surveillance Administrator, Application for Approval of a Settlement Agreement Between the Market Surveillance Administrator and the Balancing Pool, August 1, 2019; and AUC Decision 23828-D02-2020, Market Surveillance Administrator, Application for Approval of a Revised Settlement Agreement Between the Market Surveillance Administrator and the Balancing Pool January 14, 2020. The settlement agreement itself, from October 1, 2019, is posted here (you will need a free AUC account to access).

Consent Provisions in Long-Term Relational Contracts

By Nigel Bankes

On September 8, 2020

In Contracts, Oil & Gas

By: Nigel Bankes

PDF Version: Consent Provisions in Long-Term Relational Contracts

Case Commented On: Apache North Sea Ltd v Ineos FPS Ltd, [2020] EWHC 2081 (Comm)

The drafters of long-term relational contracts often have to deal with the uncertainties of future developments. One technique for doing so is to accord one party to the contract (A) a power to propose some development or other while affording to the other party (B) a power to withhold its consent to the development, but disciplining the consent power by stipulating that B cannot unreasonably withhold its consent. Such provisions have long been common in the landlord and tenant context but they are also common in other commercial contracts, including oil and gas contracts. For a recent Canadian example see IFP Technologies (Canada) Inc v EnCana Midstream and Marketing, 2017 ABCA 157 (CanLII) and my post on that decision here.

Author: Nigel Bankes Page 18 of 89

A Legal Regime for the Development of Geothermal Resources in Alberta

Another Manitoba Oil and Gas Lease Termination Decision

The AUC Rejects an Application for an Industrial System Designation

MSA Announces Investigation into the Bidding Practices of the Balancing Pool

Consent Provisions in Long-Term Relational Contracts