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Another Manitoba Oil and Gas Lease Termination Decision

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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. 

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The 2020/2021 Orphan Fund Levy and the Missing Consultation on Environmental Liability Management Reform

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On September 22, 2020

In Oil & Gas

By: Drew Yewchuk

PDF Version: The 2020/2021 Orphan Fund Levy and the Missing Consultation on Environmental Liability Management Reform

Document Commented On: 2020/2021 Orphan Fund Levy Bulletin, Alberta Energy Regulator, September 10 2020

The Orphan Fund Levy is a levy imposed by the Alberta Energy Regulator (AER) on all holders of licensees or approvals issued by the AER. The levy is authorized by sections 72 to 75 of the Oil and Gas Conservation Act, RSA 2000, c O-6. The levy funds the work of the Orphan Well Association cleaning up oil and gas assets that have no solvent owners and no financial security set aside for their clean-up . The AER released a bulletin setting the 2020/2021 Orphan Fund Levy on September 10, 2020. The prescribed levy is $65 million for 2020/2021, up from $60 million in 2019/2020, $45 million in 2018/2019, and $30 million in 2017/2018 (when it was still collected in two parts).

The good news is that the Orphan Fund Levy is going up, which should help cover the substantial costs of cleaning up Alberta’s growing orphaned well inventory. The bad news is that in $3.4 million of the levy was not received in 2019 due to the insolvency of some operators (Orphan Well Association Annual Report, 2019). The ugly news is that, despite Alberta’s commitment to implement new regulations to significantly reduce the prospect of a growing inventory of orphan wells (see the announcement of April 17, 2020), and the provincial government’s press release of July 30, 2020 about of the new framework to manage oil and gas liabilities, there have yet to be any public details or public consultation on the design of the new liability management system. Alberta is drifting along with the old system despite acknowledging its massive problems.

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Consent Provisions in Long-Term Relational Contracts

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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.

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Court Confirms that Offshore Board Cannot Extend a Licence Term by Issuing a Replacement Licence

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On July 14, 2020

In Administrative Law, Environmental, Oil & Gas

By: Nigel Bankes 

PDF Version: Court Confirms that Offshore Board Cannot Extend a Licence Term by Issuing a Replacement Licence

Case commented on: David Suzuki Foundation v Canada-Newfoundland and Labrador Offshore Petroleum Board, 2020 NLSC 94 (CanLII).

This decision involves the terms of the federal and provincial legislation implementing the Atlantic Accord: Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, SC 1987, Ch 3 (Federal Act), and Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act, RSNL 1990, c C-2 (Newfoundland Act) (collectively the Accord legislation). I commented on earlier proceedings in this litigation (David Suzuki Foundation v Canada-Newfoundland Offshore Petroleum Board, 2018 NLSC 146 (CanLII)) confirming the public interest standing of the applicant here. That earlier post also provides the factual background:

Corridor Resources Inc. (Corridor) received a nine year exploration licence (EL 1105) from the Canada-Newfoundland Offshore Petroleum Board (CNLOPB or Board) on January 15, 2008 under the terms of the Accord legislation. … As is customary, the EL was divided into two periods: Period I, five years and Period II, 4 years. In order to validate the licence for Period 2 Corridor had to commence the drilling of a well within the Period I and diligently drill through to completion. Corridor’s proposal to drill proved controversial and triggered a time-consuming environmental assessment procedure. In response to this Corridor applied for and was granted an extension to Period I but in the end it was not able to drill a well as required by the EL.

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Oil Sands Approvals and Bill 22, the Red Tape Reduction Implementation Act, 2020

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On June 15, 2020

In Energy, Oil & Gas

By: Nigel Bankes

PDF Version: Oil Sands Approvals and Bill 22, the Red Tape Reduction Implementation Act, 2020

Bill Commented On: Bill 22, Red Tape Reduction Implementation Act, 2020

This post deals with one aspect of this large omnibus bill, namely the proposed amendment to the Oil Sands Conservation Act, RSA 2000, c O-7 (OSCA). This amendment will remove the need to seek Cabinet authorization for the approval of new oil sands projects and related processing facilities. More specifically, this post assesses whether the amendment will have any implications for the Crown’s duty to consult First Nations and Métis communities, and to observe the honour of the Crown in its dealings with those communities. The main conclusion is that these proposed changes will not simplify or shorten the steps that the Crown needs to take to discharge its constitutional responsibilities. None of these responsibilities constitute “red tape.” Any shortening in project review timelines as a result of removing the opportunity for Cabinet review will be no more than a few months (a drop in the bucket in the time frame for characterizing and developing a new oil sands prospect), a steep price to pay for the loss of an opportunity to hit pause, or to impose additional terms and conditions to protect the public interest.

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