Category: Oil & Gas Page 11 of 54

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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By: Nigel Bankes

PDF Version: The Implementing Regulation for Bill 12: The Liabilities Management Statutes Amendments Act, 2020

Matter Commented On: Orphan Fund Delegated Administration Amendment Regulation, OC 174/2020

Bill 12, the Liabilities Management Statutes Amendments Act, 2020, amongst other things, authorized the delegation of additional responsibilities to the Orphan Well Association (OWA). I provided commentary on Bill 12 in a previous post here. The entry into force of Bill 12 is set for June 15, 2020, and this amendment to the Orphan Fund Delegated Administration Regulation, Alta Reg 45/2001 (Delegation Regulation), effective the same day, implements that incremental delegation and clarifies some additional issues.

This post draws attention to four elements of the amendment: (1) the definitions of “holder of the mineral rights” and of “person who has the right to win, work and recover a mineral”; (2) the limitation of liability provisions of the Delegation Regulation; (3) the applicability of the audit and inspection provisions of the Government Organization Act, RSA 2000 c G-10 (GOA); and (4) the enhanced authority of the OWA to enter into and expend funds pursuant to “agreements” with other parties.

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By: Nigel Bankes

PDF Version: Considerations in the Design of a Royalty Regime for Helium

Matters commented on: Press Release, “New royalty rate responds to soaring helium interest” Minister of Energy, May 13, 2020; Department of Energy, Information Letter IL 2020-22 , Helium Royalty Rate, May 13, 2020; Natural Gas Royalty Regulation, 2009 (AR 221/2008) as amended by OC 154/2020; and Natural Gas Royalty Regulation, 2017 (AR 211/2016) as amended by OC 155/ 2020.

On May 13, 2020 Minister Sonya Savage announced the establishment of a new royalty rate for helium produced from Crown lands. The new rate (5% minus a 0.75% helium royalty adjustment factor, for an effective rate of 4.25%) replaces a zero royalty rate for helium production. The press release suggests that the proposed royalty structure “helps set the stage for investment” by providing some certainty while “ensuring a fair price for Albertans.” (This is misleading. The market will set the price not the royalty.) The press release goes on to indicate that, “[t]his effective royalty rate is set for an initial period of five years. At that time, the rate will be reviewed to ensure it remains competitive and allows for any necessary adjustments.” The accompanying Information Letter issued by the Department (IL 2020-22) suggests that the review is to be limited to the appropriateness of the 0.75% adjustment factor, not the entire rate.

The new royalty is implemented by amendments to the Natural Gas Royalty Regulations of 2009 and 2017 (each applies to different ‘vintages’ of production) and made retroactive to April 1, 2020. (Prior to these amendments there was a requirement (see IL 2018-25, now revoked), that “operators producing and selling helium must report monthly helium production volumes and monthly average selling prices ….”) The new royalty will only apply to helium produced from lands where the mines and minerals are vested in the Crown. If helium is produced, saved and sold from private mineral lands, the applicable royalty will be established by the terms of the lease between the owner of the mines and minerals and the working interest owners.

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