Category Archives: Oil & Gas

Governance and Accountability: Preconditions for Committing Public Funds to Orphan Wells and Facilities and Inactive Wells

By: Nigel Bankes, Shaun Fluker, Martin Olszynski and Drew Yewchuk

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Announcement commented on: Department of Finance Canada, Canada’s COVID-19 Economic Response Plan: New Support to Protect Canadian Jobs, April 17, 2020

As any resident of this province knows, the Alberta oil and gas sector’s problem of underfunded environmental liabilities has been growing for decades. On April 17, 2020, in response to the impact of both the COVID-19 pandemic and the Saudi/Russian price war, the federal government announced an injection of $1.7 billion of public funds to support the ‘clean up’ of inactive and orphan wells in Saskatchewan, Alberta and British Columbia. With respect to Alberta, $200 million will go to the Orphan Well Association as a loan to deal with orphan wells (i.e. wells that have no owner) while $1 billion will go to the Government of Alberta to deal with inactive wells (i.e. wells that are not producing but have not been properly closed and remediated).

The first part of this post examines the background to the Orphan Well Association and how it has moved from being an industry funded organization to the recipient of significant public funds. We suggest that this change in the source of funding is likely permanent and thus demands a complete rewrite of the governance structure for orphan wells in the interests of transparency and accountability. The second part of this post offers comments on the proposed program for inactive wells. This part of the post is shorter and more speculative because the announcement is remarkably vague and lacking in important details on this part of the program. Continue reading →

Two Manitoba Oil and Gas Lease Termination Cases

By: Nigel Bankes

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Cases Commented On: Corex Resources Ltd. et al. v 2928419 Manitoba Ltd., 2020 MBQB 47 (CanLII) and 6660894 Canada Ltd. v 57110 Manitoba Ltd., 2020 MBQB 50 (CanLII)

Two Manitoba oil and gas lease termination cases; two days apart – March 10, 2020 and March 12, 2020; same judicial district (Brandon); same outcome (leases terminated); but different judges and significantly different analytical and doctrinal approaches. The Corex decision is grounded in the specialized body of case law which recognizes that oil and gas leases can terminate automatically in accordance with their terms. The 6660 decision takes a contractual approach and frames the case in terms of fundamental breach and repudiation. While both decisions get to the same point (the lease in each case had terminated), the reasoning in Corex is far more consistent with the relevant authorities. Continue reading →

Alberta Court of Appeal Opines That Federal Carbon Pricing Legislation Unconstitutional

By: Martin Olszynski, Nigel Bankes and Andrew Leach

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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 →

Provincial Cabinet has prima facie “engaged in unfair and abusive delay”

By: Nigel Bankes

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Case Commented On: Prosper Petroleum Ltd v Her Majesty the Queen in Right of Alberta, 2020 ABQB 127 (CanLII)

Justice Romaine’s oral decision in this matter was released on February 10 and was widely reported in the press. We now have her written memorandum of decision (February 21).

In this case Prosper applied to the Alberta Energy Regulator (AER) for the approval of its Rigel oilsands project under theOil Sands Conservation Act, RSA 2000, c 0-7 (OGCA). Under section 10(3)(a) of that Act the AER may approve an oil sands project on any terms and conditions that it considers appropriate if it considers the project to be in the public interest and with “the prior authorization of the Lieutenant Governor in Council”. Continue reading →

No Implied Duties When Voting to Discharge an Operator

By: Nigel Bankes

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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 →