Category Archives: Energy

Alberta Court of Appeal Opines That Federal Carbon Pricing Legislation Unconstitutional

By: Martin Olszynski, Nigel Bankes and Andrew Leach

PDF Version: Alberta Court of Appeal Opines That Federal Carbon Pricing Legislation Unconstitutional

Decision Commented On: Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74

Last month, the Alberta Court of Appeal released its decision in Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74, Alberta’s challenge to the constitutionality of the federal government’s Greenhouse Gas Pollution Pricing Act, SC 2018, c 12 (GGPPA). Writing for a majority of three judges, Chief Justice Catherine Fraser concluded that the GGPPAcould not be upheld on the basis of Parliament’s residual power over matters of “peace, order, and good government” (POGG), nor any other potentially relevant federal head of power. Concurring in the result but not the analysis, Justice Wakeling also held that the GGPPA was unconstitutional. Justice Feehan, dissenting, would have upheld the law on the basis of POGG, and the “national concern” branch of that power in particular. The Alberta Court of Appeal’s decision thus stands in contrast to the earlier decisions of the Courts of Appeal of both Saskatchewan (Reference re Greenhouse Gas Pollution Pricing Act 2019 SKCA 40) (Saskatchewan Reference) and Ontario (Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544) (Ontario Reference), where a majority of judges in each court upheld the law as a valid exercise of the national concern branch of the POGG power. Continue reading →

Net Profits Interest Decision

By: Nigel Bankes

PDF Version: Net Profits Interest Decision

Case Commented On: Hudson King v Lightstream Resources Ltd, 2020 ABQB 149 (CanLII)

William Hudson (WH) of Texas discovered hydrocarbons in a reservoir near Rocanville, Saskatchewan. Lacking the resources to develop the discovery WH assigned the Rocanville properties to Triton (a Texas based corporation) in 1977 in return for $900,000 and a net profits interest (NPI). The NPI Agreement was executed in favour of a trust that WH and his wife had established for the benefit of their three children EHK, AH and CH. The trust was collapsed in 1986 when the youngest child reached 21 and the three children became the counterparties to the NPI Agreement. AH assigned his interest to ACH Holdings in 2009. I refer to EHK, AH, CH and ACH Holdings as the Hudson parties or as the plaintiffs. On the Triton side of the NPI Agreement the interests in the Rocanville properties passed through several hands including TriStar which continued as Petrobakken Energy which changed its name to Lightstream Resources. In September 2014 Lightstream sold and assigned its entire interest to Crescent Point. Lightstream, Crescent Point and the Hudson parties entered into an assignment and novation agreement (reproduced and discussed further below). In what follows, I sometimes refer for the sake of simplicity to the party from time to time holding the Triton interest in the NPI Agreement as the operator. Continue reading →

No Implied Duties When Voting to Discharge an Operator

By: Nigel Bankes

PDF Version: No Implied Duties When Voting to Discharge an Operator

Case Commented On: TAQA Bratani Ltd et al v RockRose UKCS8 LLC, [2020] EWHC 58 (Comm)

The operator serves a crucial role in the operation of any jointly owned oil and gas property and yet, depending on the terms of the joint operating agreement (JOA), it may be quite difficult to remove and replace an operator. In this decision of the Commercial Division of the High Court (England and Wales), Judge Pelling QC sitting as a judge of the High Court concluded that a group of dissentient joint operators (TAQA, JX and Spirit) (the claimants) were entitled to use a unanimous voting provision in the JOA to replace Marathon oil (MOUK) (acquired by RockRose (RRUK) effective 1 July 2019). Furthermore, there were no implied conditions that the claimants had to fulfill before they could exercise this power. Accordingly, Judge Pelling granted the claimants the declaration that they sought to the effect that the notices by which they purported to terminate the operatorships of various JOAs pertaining to the Brae Fields in the North Sea were valid and take effect in accordance with their terms. Continue reading →

Relationship Between a Farmout Agreement and a Joint Operating Agreement

By: Nigel Bankes

PDF Version: Relationship Between a Farmout Agreement and a Joint Operating Agreement

Case Commented On: Apache North Sea Ltd v Euroil Exploration Ltd [2019] EWHC 3241 (Comm) (England and Wales)

Under the terms of a farmout agreement, the farmor, the holder of a working interest in an oil and gas property (i.e. a lease, licence, concession or other form of agreement), affords the farmee an opportunity to earn a share of that working interest in return for performing a work obligation – typically the drilling of a well. In some cases (sometimes termed a farmout and participation agreement) the farmee earns an interest by contributing a share of the costs of a drilling operation to be conducted by the farmor itself rather than the farmee. It is standard practice in either case to attach a joint operating agreement (JOA) to the farmout agreement to address the legal relationship between the farmor and farmee (and perhaps other parties) once the farmee has earned its interest. It is crucial to do this since, once the farmee has earned, the farmor and farmee will then be co-owners of the lease or licence etc, i.e. they will be holders of an undivided interest in that property as tenants in common. But until the farmee earns, the parties are not co-owners. One issue that the parties need to address as clearly as possible in these arrangements is the applicability of the JOA before the farmee has earned. Perhaps a working hypothesis might be that the JOA is of no application until the point of earning since the JOA is fundamentally concerned with co-ownership. However, there is frequently a lot of detail in the JOA that the parties may want to incorporate or make reference to during earning and this may be especially the case where the farmout is better characterized as a farmout and participation agreement rather than a pure farmout where the earning well is drilled at the sole cost, risk and expense of the farmee. Continue reading →

AER Commissioners Grant Summary Dismissal of Applications for Common Carrier and Rateable Take Orders

By: Nigel Bankes

PDF Version: AER Commissioners Grant Summary Dismissal of Applications for Common Carrier and Rateable Take Orders

Decisions Commented On: (1) 2020 ABAER 002, Bearspaw Petroleum Ltd. Common Carrier and Rateable Take Order Applications, Applications 1877294 and 1878333, and (2) Re: Proceeding 360 Harvest Operations Ltd., Decision on Motion to Dismiss, Bearspaw Petroleum Ltd. Applications 1877294 and 1878333, January 24, 2020

In January 2017 Bearspaw filed applications with the Alberta Energy Regulator (AER) seeking common carrier and rateable take orders against Harvest Operations Ltd with respect to gas produced from the Crossfield Basal Quartz C Pool (BQC pool). The matter was originally set down for hearing in September 2018 but was adjourned pending other legal proceedings in which Bearspaw had to establish its rights to produce from its 02/11 well in the BQC pool (so far as I am aware those proceedings are not reported). The current hearing was scheduled to begin January 13, 2020, but on November 14, 2019 Harvest filed a motion asking the AER to dismiss Bearspaw’s applications or adjourn the proceedings. On January 24, 2020 the Commission hearing panel chaired by Cecilia Low granted Harvest’s motion and dismissed the applications. On January 30, 2020 the Commissioners issued a decision cancelling the scheduled hearing; the cancellation decision contains a hyperlink to the Commissioners’ decision on the motion. Continue reading →