Author Archives: Nigel Bankes

About Nigel Bankes

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.

Deep Rights, Shallow Rights, and the Interpretation of a Purchase and Sale Agreement

PDF version: Deep rights, shallow rights and the interpretation of a purchase and sale agreement

Case commented on: Nexxtep Resources Ltd v Talisman Energy Inc, 2012 ABQB 62

The oil and gas industry splits petroleum and natural gas rights by substances to create severed estates in gas and petroleum but it also splits rights along the vertical axis into different formations. Split rights may be created along the vertical axis for several reasons. In some cases the Crown or other lessor initiates the severance in order to encourage exploration (e.g. deep and shallow rights reversions – explore non-producing horizons in your lease or lose them). In other cases rights will be severed as part of farmout agreements since farmors will be reluctant to allow the farmee to earn interests in formations that are deeper (and in some cases shallower) than those formations to which the test well is to be drilled. But these vertical splits cannot always be determined with accuracy and in some cases the Energy Resources Conservation (ERCB) may be asked to classify or reclassify whether a pool is part of deeper rights or shallower rights for the purposes of different conservation rules including, spacing rules, first well in the pool rules etc.: see Oil and Gas Conservation Act, RSA 2000, c O-6, s 33.

Continue reading →

The severance of a water right from a purchase and sale of land

PDF version: The severance of a water right from a purchase and sale of land 

Case commented on: Royal Bank of Canada v Hirsche Herefords, 2012 ABQB 32 

This decision concludes that a provincial water licence can be contingently severed from the land or undertaking to which it is appurtenant by way of an agreement of sale and the subsequent registered transfer. The contingency is the Director’s approval of the transfer of the water licence to another party under the terms of sections 81 – 82 of the Water Act, RSA 2000, c W-5. The decision also confirms the emergence of a water rights market in southern Alberta.

Continue reading →

The Northern Gateway Joint Review Panel and the Governor in Council

 PDF version: The Northern Gateway Joint Review Panel and the Governor in Council

Documents commented on: (1) An open letter from the Honourable Joe Oliver, Minister of Natural Resources, on Canada’s commitment to diversify our energy markets and the need to further streamline the regulatory process in order to advance Canada’s national economic interest, January 9, 2012;

(2) National Energy Board Act, RSC 1985, c N-7, s 52;

(3) Canadian Environmental Assessment Act, SC 1992, c 37, s 37.

On January 9, 2012, the day before the hearings by a Joint Review Panel (JRP) were due to open for the proposed Northern Gateway pipeline (NGP), the federal Minister of Natural Resources, Joe Oliver took the extraordinary step of issuing an Open Letter to Canadians. He followed this up with a series of media appearances. In his letter Minister Oliver made four main points. First, Canada needs to diversify its export markets for many products including oil. Second, “environmental and other radical groups” seek to block this opportunity and any underlying projects. Third, these “radicals” will “hijack our regulatory system,” stack public hearings, “kill good projects,” exploit any opportunity they can to delay project reviews. These radicals have access to foreign money to implement their goals. The delays that ensue are unacceptable. Fourth, Canada needs a fair and independent process to assess projects based on science and the facts – but the current system is out of balance and “is broken.”

Continue reading →

Carbon Capture and Storage in Alberta: Draft Offset Protocol

By: Nigel Bankes

PDF Version: Carbon Capture and Storage in Alberta: Draft Offset Protocol

Document and Regulations Commented On: Government of Alberta, Draft Quantification Protocol for the Capture of CO2 and Storage in Deep Saline Aquifers, December 2011; Specified Gas Emitters Amendment Regulation, Alta Reg 139/2007, Alta Reg 127/2011 at pp. 448-451

While there has been some suggestion that the post-Stelmach provincial government is less enthusiastic than its predecessor about carbon capture and storage (CCS) as a silver bullet to deliver on provincial plans to reduce greenhouse gas emissions, the province will go ahead with at least three of the four short-listed CCS projects that are to receive provincial government financial support: the Alberta Carbon Trunkline Project, Shell’s Quest Project and the Swan Hills Synfuels project. The one outstanding project is TransAlta’s (TAU) Project Pioneer. The province has yet to finalize a deal with TAU (and may never do so) but I gather that this has more to do with problems with the technology that TAU\Alstom has been proposing to use than any provincial cold feet.

Continue reading →

The theory and the practice of well abandonment and surface reclamation in Alberta: the latest episode in the dismal saga of Sarg Oils Limited

PDF version: The theory and the practice of well abandonment and surface reclamation in Alberta: the latest episode in the dismal saga of Sarg Oils Limited

Decision commented on: Sarg Oils Limited, Review of Abandonment Orders AD 2006-17, AD 2006-17A, AD 2006-18, AD 2006-19 and AD 2006-20, November 15, 2011, 2011 AERCB 032.

Well over ten years ago Sarg Oils sold oil and gas assets to another party. The Energy Resources Conservation Board (ERCB) refused to consent to the transfer of the well licences associated with those assets and as a result Sarg was left with the responsibility of abandoning those facilities. And when Sarg refused, the ERCB did the job itself and sent the bill to Sarg; and when Sarg didn’t pay (and the Court of Appeal ruled that this was a lawful debt owing to the Board: ERCB v Sarg Oils Ltd, 2002 ABCA 174) the ERCB garnisheed other assets of Sarg (the Southern Alberta assets). Sarg didn’t like that and shut the facilities in – owing by this time in excess of $1 million. The Board informed the province of this dastardly deed and the province triggered the procedures under the Petroleum and Natural Gas Tenure Regulation (Alta Reg 267/1997, s18) to terminate the leases on those Southern Alberta assets. Since Sarg no longer had the right to exploit the resources on those terminated leases, the ERCB ordered Sarg (2006) to abandon the related wells and facilities. Sarg did nothing about this except to seek a section 40 review (this application) under the Energy Resources Conservation Act, RSA 2000, c E-10) of the Board orders. And now, five years later, the Board has concluded that the orders “are valid and will be upheld” (at para 148). And now, Sarg must really get on with it! Whew! Unless of course Sarg seeks leave to appeal.

Continue reading →