Category Archives: Oil & Gas

GRTAs, Patch Agreements, Indefeasible Title and Collapse Orders

By: Nigel Bankes

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Case Commented On: Chesterworld Holdings Ltd v Computershare Trust Company of Canada, 2017 ABQB 43 (CanLII)

This decision involves the interpretation of a will from 1949 as well as the validity of a gross royalty trust agreement (GRTA) and a subsequent patch agreement. Justice Park concluded that the patch agreement was incapable of saving the GRTA because it was executed by the incorrect parties (or by the correct parties but not in their correct capacity). The case may call into question the efficacy of other patch agreements that were intended to revive or extend GRTAs affected by the decision in Guaranty Trust Co. of Canada v Hetherington, 1989 ABCA 113 (CanLII). Continue reading →

Hibernia Payout Account Dispute

By: Nigel Bankes

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Case Commented On: Newfoundland and Labrador v ExxonMobil Canada Properties, 2017 NLDT(G) 147, 2017 CanLII 56724 (NL SCTD)

This case involves an unsuccessful application by the Government of Newfoundland and Labrador to set aside an arbitral award dealing with the calculation of royalties with respect to the Hibernia project. Continue reading →

An Operator of Gas Processing Facilities Does Not Have a Possessory Lien Under the Possessory Liens Act

By: Nigel Bankes

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Case Commented On: Cansearch Resources Ltd v Regent Resources Ltd, 2017 ABQB 535 (CanLII)

Cansearch and Regent jointly owned the Joffre Facility under the term of an agreement for the construction, ownership and operation (CO & O) of that facility (2008). Cansearch was appointed as operator. The CO & O agreement afforded Cansearch as operator an operator’s lien (cl 602(a)) in the following terms:

Effective from the Effective Date, Operator shall have a lien and charge, which is first and prior to any other lien, charge, mortgage or other security interest, with respect to the Function Unit Participations of each Owner in the Facility and such Owner’s share of Facility Products, to secure payment of such Owner’s proportionate share of the costs and expenses incurred by Operator for the Joint Account.

Cansearch never registered its Operator’s Lien pursuant to the Personal Property Security Act, RSA 2000, c P-7 (PPSA). Continue reading →

Abandonment Expenses are for the Joint Account

By: Nigel Bankes

PDF Version: Abandonment Expenses are for the Joint Account

Case Commented On: Spyglass Resources Corp v Bonavista Energy Corporation, 2017 ABQB 504 (CanLII)

In this decision Justice Jones rejected a series of technical arguments raised by the receiver of Spyglass (Ernst and Young) to resist payment of abandonment costs. The receiver had argued that Bonavista had abandoned co-owned assets for its own account rather than the joint account and that Bonavista was not able to set-off revenues attributable to Spyglass’s interest against Spyglass’s share of abandonment obligations. Continue reading →

The Effect of Well Abandonment and Reclamation Obligations for the Valuation of Matrimonial Property

By: Nigel Bankes

PDF Version: The Effect of Well Abandonment and Reclamation Obligations for the Valuation of Matrimonial Property

Case Commented On: Walker v Walker, 2017 SKQB 195 (CanLII)

Judicial decisions on the legal nature of abandonment and reclamation obligations may arise in the strangest of ways. Take this matrimonial property case, for example, in which Mr. Walker (Darcy) was seeking to argue that his assets should be discounted on the basis that a small oil and gas company (Outback) that he controlled had net abandonment and reclamation liabilities. Part of the challenge that he faced in making this argument was of course that the liabilities in question were the liabilities of the corporation. While a director or controlling mind of a corporation might ordinarily take some comfort from this state of affairs, in this case counsel for Darcy tried to suggest that his client would inevitably face personal liability under the terms of Saskatchewan’s The Environmental Management and Protection Act, 2010, SS 2010, c E-10.22 [EMPA] and The Oil and Gas Conservation Act, RSS 1978, c O-2 [OGCA] and s 59 of The Oil and Gas Conservation Regulations, 2012, RRS c O-2 Reg 6 [OGCR]. Actually the argument was even stranger insofar as Mrs. Walker (Becky) was also a director of the company (Outback) and thus might face the same liability should Darcy be correct. Continue reading →