Category: Oil & Gas Page 18 of 54

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.

Cowper-Smith and the Law of Proprietary Estoppel: Implications for the Oil and Gas Lease?

By Nigel Bankes

On January 10, 2018

In Oil & Gas, Wills and Estates

By: Nigel Bankes

PDF Version: Cowper-Smith and the Law of Proprietary Estoppel: Implications for the Oil and Gas Lease?

Case Commented On: Cowper-Smith v Morgan, 2017 SCC 61 (CanLII)

The Supreme Court of Canada handed down its decision in Cowper-Smith v Morgan in December 2017. The decision is an important decision on proprietary estoppel. While it arises in the context of a family dispute it deserves to be read by commercial lawyers including oil and gas lawyers. It is one of the curiosities of the Canadian law of estoppel that some of our leading cases have come out of fact patterns involving the “unless” form of the oil and gas lease from the 1960s and 1970s from Alberta and Saskatchewan. These cases include Canadian Superior Oil Ltd. v Paddon-Hughes Development Co., [1970] S.C.R. 932, 1970 CanLII 3 (SCC) and Sohio Petroleum Co. v Weyburn Security Co., [1971] S.C.R. 81, 1970 CanLII 137 (SCC). These cases continue to be influential in oil and gas lease matters and beyond. The typical fact pattern involves a missed or late payment during the primary term or a missed or late shut-in payment during the secondary term which automatically terminates the lease unbeknownst to either party. The parties continue to act as if the lease is in force and in some cases the lessee expends considerable monies on the leased lands including drilling a new well. But in the end, all is for naught. The lease is dead and to this point estoppel arguments aimed at reviving the lease have largely failed; in some cases on the basis that estoppel cannot be used as a sword (to create a new lease), and in other cases, and most commonly, on the basis that the lessee never acted to its detriment on the basis of a representation made by the lessor that the lease was still in effect; typically there was no such representation, the lessee was simply proceeding on the basis of its own understanding of the legal position.

Confidentiality Agreements and Brokerage Opportunities in the Context of the Sale of Oil and Gas Properties

By Nigel Bankes

On January 2, 2018

In Contracts, Oil & Gas, Property

By: Nigel Bankes

PDF Version: Confidentiality Agreements and Brokerage Opportunities in the Context of the Sale of Oil and Gas Properties

Case Commented On: Beaumont Resources Ltd. v Cardinal Energy Ltd., 2017 ABCA 416 (CanLII), aff’g unreported reasons for judgment of Justice Anderson, September 26, 2016, aff’g unreported reasons for judgment of Master Farrington, January 22, 2016

In 2012 Beaumont Resources made some preliminary inquiries of Felcom Resources about a possible acquisition of some oil and gas properties. In the course of those inquiries Beaumont and Felcom entered into a confidentiality agreement (the Felcom CA) with respect to information provided by Felcom to Beaumont. The agreement included the following terms:

The False Security of Commingled Trust Accounts

By Nigel Bankes

On December 8, 2017

In Bankruptcy and Insolvency, Oil & Gas

By: Nigel Bankes

PDF Version: The False Security of Commingled Trust Accounts

Case Commented On: Alberta Treasury Branches v Exall Energy Corporation, 2017 ABQB 602 (CanLII)

Working interest owners in the western sedimentary basin have long sought to have the best of both worlds: the convenience of allowing an operator to commingle joint account monies from multiple properties in a single general account, while offering (through the provisions of the Canadian Association of Petroleum Landmen (CAPL) operating procedures) the contractual assurance to non-operators that their funds were impressed with a trust while in that commingled account. The weakness of such an assurance is that its underlying premise is that the operator will always have a balance in that commingled general account equal to or greater than the amounts represented by the “monies of the joint operator”, whether those monies are monies contributed by a joint operator to fund joint operations or whether they represent monies received by the operator on account of the sale of a joint operator’s share of production. If that premise turns out not to be the case then a joint operator’s proprietary claim evaporates. The premise of course is most likely to be false when the operator is in financial difficulty – the precise point in time when a joint operator would like to have access to a proprietary remedy.

Balancing Pool Must Fulfil its Statutory Obligations

By Nigel Bankes

On November 24, 2017

In Oil & Gas

By: Nigel Bankes

PDF Version: Balancing Pool Must Fulfil its Statutory Obligations

Case Commented On: ENMAX PPA Management Inc v Balancing Pool, 2017 ABQB 718 (CanLII)

In this decision Justice Karen Horner has directed the Balancing Pool (BP) to fulfil its statutory obligations and reach a decision as to whether ENMAX had validly terminated its Keephills Power Purchase Arrangement (PPA) on the basis of the change of law clause in the PPA.