Category Archives: Oil & Gas

Unpaid AFE Amounts Constitute Liquidated Demands With No Right of Set-Off Under the 1990 CAPL Operating Procedure

By: Nigel Bankes

PDF Version: Unpaid AFE Amounts Constitute Liquidated Demands With No Right of Set-Off Under the 1990 CAPL Operating Procedure

Case Commented On: Talisman Energy Inc v Questerre Energy Corporation, 2015 ABQB 775 (MC)

This decision of Master Prowse offers an interesting example of careful parsing of the pleadings, and the agreed and contested facts, with a view to identifying possible issues for which summary judgment may be granted – while leaving the factually contested issues for a later trial. As in SemCAMS ULC v Blaze Energy Ltd. 2015 ABQB 218, (and see my post on that decision here) contractual language deeming billings to be liquidated demands and the “no set-off” provisions commonly found in oil and gas and other commercial agreements were important elements in the decision.

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BC Court Confirms That a Municipality Has No Authority With Respect to the Routing of an Interprovincial Pipeline

By: Nigel Bankes

PDF Version: BC Court Confirms That a Municipality Has No Authority With Respect to the Routing of an Interprovincial Pipeline

Case Commented On: Burnaby (City) v Trans Mountain Pipeline ULC, 2015 BCSC 2140

The Trans Mountain Expansion Project is still before the National Energy Board (NEB) (see the comment by Kirk Lambrecht QC here) and all the while spawning lots of litigation, some in the Federal Court of Appeal and some in the provincial superior courts. I have commented on most of that litigation in “Pipelines, the National Energy Board and the Federal Court” (2015), 3 Energy Regulation Quarterly 59 – 73.

In this most recent case the City of Burnaby was trying to get the support of the Supreme Court of British Columbia for an issue that it had already lost before the NEB and which, to put it in neutral terms, had failed to attract the interest of the Federal Court of Appeal. To review the facts briefly, TM as part of its expansion proposals, was considering alternative routing for its pipeline through Burnaby Mountain. In order to assess that route it required access to the relevant lands to carry out geotechnical and other studies. The City of Burnaby actively opposed the expansion project and served notices on TM’s contractors alleging violation of various Burnaby by-laws. That led TM to seek a ruling from the NEB confirming that the Board had the jurisdiction to authorize TM’s activities, and, to the extent that Burnaby’s by-laws were making it impossible for TM to carry out the necessary tests, a ruling that the by-laws were constitutionally inapplicable, or if not inapplicable, were in conflict with the provisions of the National Energy Board Act and therefore inoperative on the basis of the paramountcy doctrine. The Board provided that ruling in its well-reasoned Ruling No. 40. The Federal Court of Appeal denied leave without giving reasons, a practice that I have criticized in earlier posts here and here.

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Court of Appeal Assesses Damages for Production on a Dead Oil and Gas Lease: An Important but Ultimately Disappointing Decision

By: Nigel Bankes

PDF Version: Court of Appeal Assesses Damages for Production on a Dead Oil and Gas Lease: An Important but Ultimately Disappointing Decision

Case Commented On: Stewart Estate v TAQA North Ltd, 2015 ABCA 357

Courts of Appeal have at least two important functions. The first is a corrective function – the power and the authority to take a second look at a problem and to reach a decision which more properly accords with the law. For a recent example which demonstrates the crucial importance of this role see the Court of Appeal’s review of Judge Camp’s infamous decision in R v Wagar, 2015 ABCA 327, which was the subject of important commentary by my colleagues, Professors Koshan and Woolley here and here. In many cases, the scope of that corrective function turns on the applicable standard of review: correctness, unreasonableness or overriding and palpable error. One of the important issues in Stewart Estate v TAQA North Ltd was the application of the Supreme Court of Canada’s decision in Creston Moly Corp v Sattva Capital Corp, 2014 SCC 53 (CanLII), [2014] 2 SCR 633 (Sattva) to the interpretation of oil and gas leases. Sattva is generally cited as authority for the proposition that unless there is an “extricable question of law”, a trial judge’s interpretation of a contract should generally be accorded deference. Thus, an appellate court should only intervene if it is of the view that the trial judge has made an overriding and palpable error – the traditional test for an appellate court’s assessment of a trial judge’s findings of fact. The principal rationale for applying the same test to contract interpretation issues as well as to findings of fact is that the rules on contractual interpretation allow a trial judge to take into account the factual and commercial matrix when assessing the intentions of the parties as revealed in the language used in the contract.

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What Happens When an Insolvent Energy Company Fails to Pay its Surface Rent to a Landowner? Part 2

By: Shaun Fluker

PDF Version: What Happens When an Insolvent Energy Company Fails to Pay its Surface Rent to a Landowner? Part 2

Cases Commented On: PetroGlobe Inc v Lemke, 2015 ABSRB 740; Portas v PetroGlobe Inc, 2015 ABSRB 708; Rodin v PetroGlobe Inc, 2015 ABSRB 737

This comment is an update to my July 2014 post What happens when an insolvent energy company fails to pay its surface rent to a landowner?. Readers are directed to this earlier comment for more background to this case and for this comment. In short, the matter involves the failure by PetroGlobe to pay its 2013 rent under a surface lease to the lessors Doug and Marg Lemke. The Lemkes filed an application with the Alberta Surface Rights Board (“Board”) under section 36 of the Surface Rights Act, RSA 2000 c S-24 to recover the unpaid rent. PetroGlobe was assigned into bankruptcy in 2013 under the federal Bankruptcy and Insolvency Act, RSC 1985, c B-3, and in its 2014 Lemke decision 2014 ABSRB 401 the Board ruled this federal legislation precludes the Board from proceeding with the Lemkes’ section 36 application under the Surface Rights Act. In April 2015, then Premier Jim Prentice announced he was asking the Board to reconsider its 2014 Lemke decision. The Board subsequently struck a new panel to hear additional submissions, and earlier this month the Board rescinded 2014 ABSRB 401 and replaced it with 2015 ABSRB 740. This new ruling from the Board upholds its earlier decision not to proceed with the Lemkes’ section 36 application, but does so with more reasons. This comment examines this new reasoning.

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The Synthetic Transportation of Natural Gas

By: Nigel Bankes

PDF Version: The Synthetic Transportation of Natural Gas

Case Commented On: Apache Canada Ltd v TransAlta Cogeneration LP, 2015 ABQB 650

In this decision Master Robertson concluded that the synthetic transportation of natural gas through a series of swap arrangements does not trigger the seller’s right of first refusal in a natural gas sales contract so as to allow the seller to re-acquire the gas, or that volume of gas, at the contract price and re-sell for its own account at the market price.

Apache agreed to sell natural gas to TAU for the specific purpose of fueling a cogeneration facility in Windsor, Ontario (the Windsor facility). The point of sale (i.e. where TAU took delivery of the gas) was Empress, Alberta. The contract had a 15-year term commencing in 1996. At that time, natural gas prices were depressed and Apache agreed to accept a fixed price with an escalation clause rather than a price determined by reference to an evolving spot market. Both parties clearly contemplated that TAU, having taken delivery of the gas at Empress, would transport that gas to its Windsor facility using TransCanada’s mainline and Union Gas’s facilities in Ontario. Indeed, the contract required TAU to arrange take-away pipeline capacity through agreements with “Buyer’s Transporters” (s.9.03) that were (at para 39):

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