Category: Oil & Gas Page 18 of 54

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.

Precision Drilling Canada Limited Partnership v Yangarra Resources Ltd, 2017 ABCA 378: Fraud and Limitation of Liability Clauses

By Jassmine Girgis

On November 23, 2017

In Contracts, Oil & Gas

By: Jassmine Girgis

PDF Version: Precision Drilling Canada Limited Partnership v Yangarra Resources Ltd, 2017 ABCA 378: Fraud and Limitation of Liability Clauses

Case Commented On: Precision Drilling Canada Limited Partnership v Yangarra Resources Ltd, 2017 ABCA 378 (CanLII)

Introduction

This is a case about the legal test for civil fraud and whether a limitation of liability clause in a contract can and should exclude liability for fraud. The Alberta Court of Appeal allowed the appeal of the summary judgment and sent it to trial (see earlier Ablawg posts about lower court decisions here and here).

A court can only find fraud after weighing the evidence and applying the proper legal test. Assuming there is fraud, the court will then have to determine whether a proper interpretation of the exclusion of liability clause excludes fraud. If so, can a party that has engaged in fraud be allowed the benefit of the clause? In my opinion, it cannot, as doing so would be contrary to public policy and it would breach the duties of honest performance and good faith articulated by the Supreme Court in Bhasin v Hrynew, 2014 SCC 71 (CanLII).

Orphan Well Association v Grant Thornton Limited: What’s at Stake in Redwater

By Fenner Stewart

On November 15, 2017

In Bankruptcy and Insolvency, Oil & Gas

By: Fenner L. Stewart

PDF Version: Orphan Well Association v Grant Thornton Limited: What’s at Stake in Redwater

Case Commented On: Orphan Well Association v Grant Thornton Limited, 2017 ABCA 124 (CanLII) (leave granted)

I. Introduction

This week, the Supreme Court of Canada (SCC) granted leave to the Alberta Energy Regulator (AER) to hear its appeal of Orphan Well Association v Grant Thornton Limited (Redwater) (for more on the Redwater decision, see Nigel Bankes’ post). The Court of Appeal’s decision in Redwater has punched a hole in the AER’s program for ensuring that licencees of oil and gas wells have the capital necessary to satisfy their reclamation and abandonment obligations. The ruling effectively allows trustees in bankruptcy to disclaim worthless assets (e.g., non-producing wells where the abandonment process is not yet complete), while selling valuable assets (e.g., producing wells). Redwater grants secured creditors the best chance possible to be compensated from the bankrupt’s assets, while guaranteeing that Alberta’s oil and gas industry (and potentially taxpayers) pay the cost for the bankrupt’s reclamation and abandonment obligations. As things stand today, if Redwater is not reversed, even more wells will be orphaned, adding to the already alarming number on the books of the Orphan Well Association (OWA).