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Category: Oil & Gas Page 17 of 54

Ontario Court of Appeal Decision Provides Guidance on the Application of Dynex

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On April 3, 2018

In Oil & Gas

By: Nigel Bankes

PDF Version: Ontario Court of Appeal Decision Provides Guidance on the Application of Dynex

Case Commented On: Third Eye Capital Corporation v Ressources Dianor Inc, 2018 ONCA 253 (CanLII)

In 2002 the Supreme Court of Canada handed down its decision in Bank of Montreal v Dynex Petroleum Ltd, 2002 SCC 7 (CanLII) in which it confirmed that a gross overriding royalty (GOR) carved out of a working interest in oil and gas rights was capable of subsisting as an interest in land as a matter of law. In an earlier post on post-Dynex litigation I observed that:

Whether any particular GORR created an interest in land, or simply a contractual claim, depends upon the intentions of the parties as revealed in the language adopted by the parties to describe the GOR. There is presumably no objection to expressing this intention with words such as “the parties intend that the right and interest created by clause x of this agreement is to be an interest in land” – so long as this intention is not contradicted by other language in the agreement when construed as a whole in accordance with the usual rules on the interpretation of contracts.

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Not Your Grandfather’s Cooperative Federalism: Constitutional Themes at the Supreme Court Hearing of Redwater

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On April 2, 2018

In Constitutional, Oil & Gas, Supreme Court of Canada

By: Scott Carrière

PDF Version: Not Your Grandfather’s Cooperative Federalism: Constitutional Themes at the Supreme Court Hearing of Redwater

Case Commented On: Orphan Well Association, et al v Grant Thornton Limited, et al, 2017 ABCA 124 (CanLII), leave granted 2017 CanLII 75023 (SCC), webcast available here, factums on appeal available here

Background

The Orphan Well Association and Alberta Energy Regulator’s action against a now-defunct oil and gas company’s bankruptcy trustee and primary creditor— commonly known as Redwater—was heard before the Supreme Court in February, and with the facts of the case disclosing a number of significant issues pertaining to the division of powers, the constitutional themes took centre stage throughout the oral and written submissions to the court. The arguments put forward by the parties and interveners represent significant considerations of Canada’s doctrinal approach to federalism as they pertain to contemporary natural resource governance. This post focuses on these substantial doctrinal issues put to the court by the parties and interveners, as it is likely that the case will be decided on narrower bases than the full suite of considerations put to the Court given its general restraint on constitutional matters that could represent a shift in the established doctrine dealing with the division of federal and provincial powers.

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Lifting the Stay to Allow the CAPL Operator Replacement Provisions to Run their Course

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On March 9, 2018

In Oil & Gas

By: Nigel Bankes

PDF Version: Lifting the Stay to Allow the CAPL Operator Replacement Provisions to Run their Course

Case Commented On: Firenze Energy Ltd v Scollard Energy Ltd, 2018 ABQB 126 (CanLII)

In this decision Justice Corina Dario granted Firenze’s application to lift a stay of proceedings imposed as part of a receivership order pertaining to Scollard in order to allow Firenze to issue a notice or notices with respect to the replacement of Scollard as operator of a number of oil and gas properties subject to the 2007 CAPL Operating Procedure. This decision, together with Justice Macleod’s earlier decision in Bank of Montreal v Bumper Development Corp, 2016 ABQB 363 (CanLII) (commented on here), calls into question the proposition that it will be difficult to replace an operator under the CAPL operating agreements once a receivership order is in place.

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TMX v Burnaby: When Do Delays by a Municipal (or Provincial) Permitting Authority Trigger Paramountcy and Interjurisdictional Immunity?

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On January 24, 2018

In Constitutional, Municipal Law, Oil & Gas

By: Nigel Bankes and Martin Olszynski

PDF Version: TMX v Burnaby: When Do Delays by a Municipal (or Provincial) Permitting Authority Trigger Paramountcy and Interjurisdictional Immunity?

Decision Commented On: National Energy Board, Reasons for Decision (18 January 2018) in support of Order MO-057-2017 (6 December 2017) re Trans Mountain Expansion Project

The National Energy Board (NEB) has now issued its reasons for decision for an Order that it issued in December 2017 allowing Trans Mountain to proceed with certain activities associated with the Trans Mountain Expansion Project (TMX) without having first complied with bylaw requirements of the City of Burnaby.

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Specific Performance of a Right of First Refusal in the Context of a Facilities Agreement

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On January 17, 2018

In Oil & Gas, Property

By: Nigel Bankes

PDF Version: Specific Performance of a Right of First Refusal in the Context of a Facilities Agreement

Decision Commented On: Canlin Resources Partnership v Husky Oil Operations Limited, 2018 ABQB 24 (CanLII)

Canlin and Husky are successors in interest to a Construction, Ownership and Operation (CO & O) Agreement for the Erith Dehydration and Flow Splitter Facility (Facility Agreement). The agreement was based on the standard form CO & O Agreement (1999) developed by the Petroleum Joint Venture Association (PJVA). The Facility Agreement provides both parties with mutual rights of first refusal (ROFR) in the event that either decides to sell the facility but also provides a number of exceptions. In particular, the Agreement provided that the ROFR would not be triggered in the event of (at para 3) “(a) disposition made by an Owner of all or substantially all … of its petroleum and natural gas rights in wells producing to the Facility …”. Husky was disposing of its interests in the area (the Ikkuma transaction) but the challenge was that there had been no wells producing into the facility since 2016 when Husky installed a “jumper” pipeline. This pipeline served to by-pass the Erith Facility with the result that gas previously processed at Erith was now processed at the Blackstone Facility. The question therefore was whether Husky could rely on the exception, there being no wells producing into the facility. Husky took the view that the exception was triggered since the wells in question were still associated with the Erith Facility in the sense of being tied-in to the Facility. Justice Romaine concluded that the exception was not triggered and accordingly declared that Canlin could exercise the ROFR; furthermore she concluded that Canlin was entitled to an order of specific performance.

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