Category: Oil & Gas Page 24 of 54

The Power of a Trustee in Bankruptcy to Disclaim Unproductive Oil and Gas Properties and the Implications for the AER’s Liability Management Program

On June 17, 2016

In Bankruptcy and Insolvency, Constitutional, Oil & Gas

By: Nigel Bankes

PDF Version: The Power of a Trustee in Bankruptcy to Disclaim Unproductive Oil and Gas Properties and the Implications for the AER’s Liability Management Program

Case commented on: Redwater Energy Corporation (Re), 2016 ABQB 278 (CanLII)

In a much anticipated decision Chief Justice Neil Wittmann has concluded that there is an operational conflict between the abandonment and reclamation provisions of the province’s Oil and Gas Conservation Act, RSA 2000, c O-6 (OGCA) and Pipeline Act, RSA 2000, c P-15 and the federal Bankruptcy and Insolvency Act, RSC 1985, c B-3 (BIA). Thus, a trustee in bankruptcy is free to pick and choose from amongst the assets in the estate of the bankrupt by disclaiming unproductive oil and gas assets even where (and especially so) those assets are subject to abandonment orders from Alberta’s oil and gas energy regulator, the Alberta Energy Regulator (AER). As a result, the value of the bankrupt’s productive assets is preserved for the benefit of secured creditors. AER abandonment orders do not bind a trustee with respect to the disclaimed properties and do not constitute costs of administration of the bankrupt’s estate. Since the trustee has no responsibility for disclaimed assets, the trustee should be in a position to transfer non-disclaimed producing assets to a third party purchaser without objection from the AER on the basis of any deterioration in the liability rating associated with the unsold non-producing assets. If either the AER or the Orphan Well Association (OWA) carries out the abandonment of the disclaimed assets such costs may constitute a provable claim in bankruptcy but, as a general creditor, the AER/OWA would likely only recover cents on the dollar.

The practical effect of this decision is that the AER’s authority to enforce abandonment orders at the cost of the licensee is unenforceable at precisely the time when the AER most needs to be able to exercise that power i.e. when the licensee is insolvent.

The AER Provides Useful Guidance in a New Pool Delineation Decision

By Nigel Bankes

On June 10, 2016

In Natural Resources, Oil & Gas

By: Nigel Bankes

PDF Version: The AER Provides Useful Guidance in a New Pool Delineation Decision

Decision commented on: Proceeding 336 Application 1820596 Pool Delineation, Crossfield Basal Quartz C & V Pools, June 2, 2016, 2016 ABER 007

Alberta’s Oil and Gas Conservation Act, RSA 2000, c O-6 (OGCA) defines a pool as “(i) a natural underground reservoir containing or appearing to contain an accumulation of oil or gas, or both, separated or appearing to be separated from any other such accumulation”. Wells are identified as producing from particular pools and many provisions of the OGCA and the Oil and Gas Conservation Rules, Alta Reg 151/1971 (OGCR) turn on the question of whether or not a particular well is producing from a particular pool. For example, s 15(3) of the OGCA provides that “No person shall apply for a licence for a well for the purpose of obtaining production from the same pool as that from which another well is obtaining or capable of obtaining production in the same drilling spacing unit …”.

In this particular case, the applicant, Bearspaw Petroleum Ltd wanted its well classified as producing from the Crossfield Basal Quartz C Pool (BQ C Pool) rather than the single well BQ V pool in order to be able to gain access to the gas processing plant operated by the C Pool working interest owners – if necessary by means of a common processor order under s 53 of the OGCA. Since it is usually necessary to establish drainage as a pre-condition to obtaining a common processor order (i.e. that H’s well or wells are draining production from underneath B’s leased lands) (see Directive 065, Resources Applications for Oil and Gas Reservoirs, Unit 1, Equity) B first had to establish that its well was in the same pool as H’s wells.

Stewart Estate: Finalizing The Judgment Roll and Costs

By Nigel Bankes

On May 17, 2016

In Contracts, Oil & Gas

By: Nigel Bankes

PDF Version: Stewart Estate: Finalizing The Judgment Roll and Costs

Decisions commented on: Stewart Estate v TAQA North Ltd, 2016 ABCA 143 and Stewart Estate v TAQA North Ltd, 2016 ABCA 144

The Court of Appeal handed down its main decision in Stewart Estate v TAQA North Ltd, 2015 ABCA 357 (hereafter the main decision) in November 2015. In my post on the main decision I suggested that “while Stewart Estate is certainly a significant decision (which grapples with important issues including, the standard of review applicable to lease interpretation questions, the rules surrounding the termination of oil and gas leases and the question of remedies for wrongful production), it is ultimately a disappointing decision because, in the end, with three separate judgments, this three person panel of the Court agrees on very little.”

We now have two further decisions from the panel of the Court that heard the case, one decision settling the judgement roll (hereafter the judgment roll decision) and the second dealing with the costs award (the costs decision). The judgment roll decision expressly describes itself (at para 1) as providing supplementary reasons to the main decision. This post not does provide a systematic account of either of these decisions but it does aim to identify where these decisions have added to the reasoning in the main decision or have provided dicta that may be of interest beyond this case.

Expiration of Confidentiality also gives Boards the Liberty to Copy and Distribute

By Nigel Bankes

On April 27, 2016

In Intellectual Property, Oil & Gas, Property, Statutory Interpretation

By: Nigel Bankes

PDF Version: Expiration of Confidentiality also gives Boards the Liberty to Copy and Distribute

Case Commented On: Geophysical Services Incorporated v Encana Corporation, 2016 ABQB 230

This decision involves rights to seismic data. Under Canadian law (and here specifically the rules established for federal lands in the north and the east coast offshore) seismic data filed with government is treated as privileged or confidential for a period of years. The principal issue in this case was the question of what rules apply once that protection comes to an end. Is it open season or do the creators of the seismic data retain some rights and in particular their copyright entitlements? In her decision Justice Kristine Eidsvik has decided that it is open season.

The decision is part of complex case-managed litigation commenced by Geophysical Services Inc (GSI) in 25 actions against the National Energy Board (NEB), the Canada-Newfoundland Offshore Petroleum Board (CNOPB) (the Boards) and numerous oil and gas companies, seismic companies and companies providing copying services. GSI claims that copyright subsists in seismic data and that its copyright protection survives the confidentiality period. Furthermore, it claims that access to the seismic information after the loss of confidentiality is governed by the Access to Information Act, RSC 1985, c A-1 (AIA) and that there is no open season on access or copying.

Extractive Sector Transparency Measures Act: Reporting Without Context Will Subvert Reconciliation Efforts

By Emily Stanhope

On April 22, 2016

In Aboriginal, Oil & Gas

By: Emily Stanhope

PDF Version: Extractive Sector Transparency Measures Act: Reporting Without Context Will Subvert Reconciliation Efforts

Legislation Commented On: Extractive Sector Transparency Measures Act, SC 2014, c 39, s 376

Canada’s new Extractive Sector Transparency Measures Act (ESTMA), which came into force on June 1, 2015, requires companies engaged in the commercial development of oil, gas or minerals to publically report certain payments made to governments in Canada and abroad. Notably, in February of this year, Natural Resources Canada (NRCan) released an information sheet responding to long-standing concerns surrounding ESTMA and payments to Indigenous governments.

There has been significant dialogue around whether Indigenous governments should be included as “payees” under ESTMA (see Open Canada here). Regardless of one’s opinion on that broader issue, this post argues that reporting the quantum of funds paid to Canadian Aboriginal governments through confidential impact and benefit agreements (IBA), without providing essential context, is folly. In other words, the contents of IBAs should be publicly disclosed in full or remain entirely confidential.