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.