Category: Oil & Gas Page 10 of 54

The AER is Seeking Public Input on its Proposed Regulatory Solution for the Growing Orphan Well and Other Unfunded Liabilities Problem in Alberta’s Oil and Gas Sector

On February 10, 2021

PDF Version: The AER is Seeking Public Input on its Proposed Regulatory Solution for the Growing Orphan Well and Other Unfunded Liabilities Problem in Alberta’s Oil and Gas Sector

Matter Commented On: Proposed amendments to AER Directive 067: Eligibility Requirements for Acquiring and Holding Energy Licences and Approvals

On January 13, 2021 the Alberta Energy Regulator (AER) issued Bulletin 2021-01 seeking public comments on proposed amendments to Directive 067: Eligibility Requirements for Acquiring and Holding Energy Licences and Approvals. These amendments are an implementation component of Alberta’s policy initiative, announced in July 2020 as the new Liability Management Framework, to improve the effectiveness of laws intended to address Alberta’s growing (and already enormous) problem of unfunded end-of-life closure and reclamation liabilities in the energy sector. The proposed amendments to Directive 067 constitute the details of the Licensee Capability Assessment System – the AER’s replacement for the catastrophic failure known as the Licensee Liability Rating program used in the oil and gas sector. The AER will receive public comments on the proposed changes to Directive 067 until and through February 14, and this post constitutes our comments – which will be submitted to the AER in its requested form (which can be downloaded here and sent via email to Directive067@aer.ca – alternatively you can submit the comments form by mail to the AER, Directive 067 Feedback, Suite 1000, 250 – 5 Street SW, Calgary, AB T2P 0R4).

The Sequoia Bankruptcy Part 2: The Appeal of the Motions to Strike and Dismiss

By Drew Yewchuk

On February 2, 2021

In Civil Procedure, Energy, Oil & Gas

By: Drew Yewchuk

PDF Version: The Sequoia Bankruptcy Part 2: The Appeal of the Motions to Strike and Dismiss

Cases Commented On: PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABQB 513 (CanLII); PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2021 ABCA 16 (CanLII)

This is part two of a series on the litigation resulting from the bankruptcy of Sequoia. The first part covered the first application to strike, and the applications to intervene in the appeal of that decision at the Court of Appeal.

This part covers two decisions in the Sequoia bankruptcy saga: 2020 ABQB 513 (CanLII), a costs decisions at the Queen’s Bench level, and 2021 ABCA 16 (CanLII), the Court of Appeal decision overturning that costs decision and the decision to strike the majority of the Trustee’s claims.

The Sequoia Bankruptcy Part 1: The Motion to Strike and the Interveners

By Drew Yewchuk

On January 18, 2021

In Civil Procedure, Energy, Oil & Gas

By: Drew Yewchuk

PDF Version: The Sequoia Bankruptcy Part 1: The Motion to Strike and the Interveners

Cases Commented on: PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABQB 6 (CanLII) and PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABCA 417 (CanLII)

The Orphan Well Association (OWA) was back in court on December 10, 2020 for the appeal of PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABQB 6 (CanLII). The OWA is concerned about the interpretation of the Supreme Court’s decision in Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 (CanLII) (Redwater), and specifically whether the finding that abandonment and reclamation obligations (ARO) are not “provable claims” in bankruptcy implies that ARO are not “liabilities” for the purposes of determining the financial situation of a corporation and hence whether a corporation is solvent.

The Redwater decision concluded that a trustee for a bankrupt oil and gas company had to use the bankrupt estate’s assets to pay for the ARO of non-producing wells, and could not “disclaim” them. Redwater started as a bankruptcy case under the name Redwater Energy Corporation (Re), 2016 ABQB 278 (CanLII). (I recommend Nigel Bankes’ earlier posts on the Queen’s Bench decision and the Court of Appeal decision in Redwater, and Jassmine Girgis’s post on the Supreme Court decision for a complete background.)

Court of Appeal (England and Wales) Confirms High Court Decision on the Relationship Between a Farmout Agreement and an Operating Agreement

By Nigel Bankes

On January 4, 2021

In Oil & Gas

By: Nigel Bankes

PDF Version: Court of Appeal (England and Wales) Confirms High Court Decision on the Relationship Between a Farmout Agreement and an Operating Agreement

Decision Commented On: Apache North Sea Limited v Euroil Exploration Limited and Edison SPA, [2020] EWCA Civ 1397

In this decision, the Court of Appeal of England and Wales confirmed Judge Pelling’s decision in the High Court with respect to the drilling costs Apache was entitled to recover from Euroil under the terms of a farmout agreement (FOA) and its related joint operating agreement (JOA). I commented on Judge Pelling’s decision here and I refer readers to that earlier post for a more detailed statement of the facts, as well as references to Canadian decisions dealing with the relationship between an FOA and the JOA.

In that earlier post I suggested that the FOA at issue here would likely be denominated as a “farmout and participation agreement” in a Canadian context insofar as the drilling obligation was not a sole risk obligation of the farmee (Euroil) but rather was a shared risk operation for which Euroil was to cover only a percentage of the costs. The farmor, Apache, was to carry out the drilling operation as operator and was also responsible for a percentage of the costs.

A Legal Regime for the Development of Geothermal Resources in Alberta

By Nigel Bankes

On October 24, 2020

In Energy, Oil & Gas

By: Nigel Bankes

PDF Version: A Legal Regime for the Development of Geothermal Resources in Alberta

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”.