Category: Oil & Gas Page 12 of 54

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.

Considerations in the Design of a Royalty Regime for Helium

By Nigel Bankes

On May 21, 2020

In Energy, Oil & Gas

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.

AER Refuses Transfer of Foothills Sour Gas Approvals from Shell Canada to Pieridae Energy

By Shaun Fluker

On May 15, 2020

In Energy, Oil & Gas

By: Shaun Fluker and Nigel Bankes

PDF Version: AER Refuses Transfer of Foothills Sour Gas Approvals from Shell Canada to Pieridae Energy

Decision Commented On: Alberta Energy Regulator Decision, Shell Canada Limited Transfer of Ownership Including the Waterton Sour Gas Plant EPEA Application No 021-258 and Jumping Pound Sour Gas Plant EPEA Application No. 015-11587, May 13, 2020

On May 13, the Alberta Energy Regulator (AER) denied an application by Shell Canada to transfer regulatory approvals with respect to its foothills sour gas assets (facilities, wells, pipelines, and related infrastructure) to Pieridae Energy. The subject approvals are issued under a host of energy and environmental legislation, including the Environmental Protection and Enhancement Act, RSA 2000, c E-12 (EPEA). This post comments on the rationale given by the AER for this decision.

COVID-19 and the Suspension of Environmental Monitoring in the Oil Sands

By Shaun Fluker

On May 7, 2020

In COVID-19, Energy, Environmental, Oil & Gas

By: Shaun Fluker

PDF Version: COVID-19 and the Suspension of Environmental Monitoring in the Oil Sands

Decisions Commented On: Alberta Energy Regulator Decisions 20200505A, 20200501C, 20200501B, and 20200501A

Last week the Alberta Energy Regulator (AER) issued decisions 20200429D (subsequently replaced with 20200505A), 20200501C, 20200501B, and 20200501A, which suspend environmental monitoring requirements associated with oil sands mines operated by Canadian Natural Resources Limited, Suncor Energy, Fort Hills Energy Corporation, Syncrude Canada, and Imperial Oil Resources Limited. These decisions relieve the named operators from environmental monitoring on matters such as groundwater, surface water, sulphur emissions, wildlife, and wetlands. The suspension is in place until further notice. Similar to Order 17/2020 issued by the Minister of Environment and Parks under section 52.1 of the Public Health Act, RSA 2000, c P-37, which suspended routine environmental reporting by industry, these AER decisions were made in response to COVID-19 but offer little justification for granting such extraordinary relief from regulatory requirements.

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

By Nigel Bankes

On April 24, 2020

In Environmental, Oil & Gas

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

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

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.

Category: Oil & Gas Page 12 of 54

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

Considerations in the Design of a Royalty Regime for Helium

AER Refuses Transfer of Foothills Sour Gas Approvals from Shell Canada to Pieridae Energy

COVID-19 and the Suspension of Environmental Monitoring in the Oil Sands

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