Category Archives: Oil & Gas

The Federal Crown Fulfilled its Consultation Obligations when the National Energy Board Approved a Seismic Program in Baffin Bay

By: Nigel Bankes

PDF Version: The Federal Crown Fulfilled its Consultation Obligations when the National Energy Board Approved a Seismic Program in Baffin Bay

Case Commented On: Hamlet of Clyde River, Nammautaq Hunters and Trappers Organization – Clyde River and Jerry Natanine v TGS-NOPEC Geophysical Company, Petroleum Geoservices Inc, Multi Klient Invest AS and the Attorney General of Canada, 2015 FCA 179

This case is of interest for two principal reasons: (1) issues of standing (although the Court seems to have ducked the hard issues), and (2) the circumstances in which the Crown can rely on the procedures of a regulatory board to fully and completely discharge the Crown’s constitutional obligation to consult and accommodate.

The Facts

TGS-NOPEC Geophysical Company ASA (TGS), Petroleum Geo-Services Inc. (PGS) and Multi Klient Invest AS (MKI) (the proponents) applied to the National Energy Board (NEB, the Board) for a Geophysical Operations Authorization (GOA) under the terms of paragraph 5(1)(b) of the Canada Oil and Gas Operations Act, R.S.C. 1985, c. O-7 (COGOA). The proponents proposed to undertake a 2-D offshore seismic survey program in Baffin Bay and the Davis Strait (the Project) over a period of five years. The Board granted the GOA subject to terms and conditions. As part of its decision-making on the GOA, the Board also had responsibilities under the Canadian Environmental Assessment Act, S.C. 1992, c. 37 (CEAA, 1992) (no longer in force but it was at the relevant time and none of the parties took issue with its applicability (at para 53).) In fulfillment of its responsibilities under that statute the Board conducted an environmental assessment (EA) and reached the conclusion that (at para 6):

…. with the implementation of [the project operator’s] commitments, environmental protection procedures and mitigation measures, and compliance with the Board’s regulatory requirements and conditions included in this [Environmental Assessment] Report, the Project is not likely to result in significant adverse environmental effects.

The EA report is available on the Board’s website here. The applicants, Hamlet of Clyde River, Nammautaq Hunters and Trappers Organization (HTO) – Clyde River and Jerry Natanine (a resident and the Mayor of Clyde River) brought this application for judicial review. The application belongs before the Federal Court of Appeal because of section 28(1)(f) of the Federal Courts Act, RSC 1985, c F-7. For more general discussion of judicial supervision of the NEB see my earlier post here.

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Implementing the New Liability and Financial Assurance Rules for Oil and Gas Operations on Federal Lands in the Arctic and for the East Coast Offshore

By: Nigel Bankes

PDF Version: Implementing the New Liability and Financial Assurance Rules for Oil and Gas Operations on Federal Lands in the Arctic and for the East Coast Offshore

Regulations Commented On: [Draft] Canada Oil and Gas Operations Financial Requirements Regulations and accompanying Regulatory Impact Assessment Statement (RIAS), Canada Gazette, vol. 149, No. 28, July 11, 2015, [Draft] Canada-Newfoundland and Labrador Petroleum Financial Requirements Regulations, Canada Gazette, vol. 149, No. 28, July 11, 2015 and [Draft] Canada-Nova Scotia Petroleum Financial Requirements Regulations, Canada Gazette, vol. 149, No. 28, July 11, 2015

The current liability and assurance rules for oil and gas operations on federal lands and for the east coast offshore are, by any account, outdated and inadequate. The federal government undertook to review these rules following the Montara and Macondo spills and the National Energy Board (NEB) undertook its own review, The Past is Always Present: Review of Offshore Drilling in the Canadian Arctic, Preparing for the Future (2011). As a result of these initiatives the government introduced Bill C-22 which became the Energy Safety and Security Act, SC 2015 c.4 (ESSA). ESSA obtained Royal Assent on February 26, 2015 but will not (s.119) enter into force until 12 months after Assent or on an earlier date prescribed by Order in Council. The delay permits the development of the necessary regulations, including the three related regulations (supported by a common RIAS), that are the subject of this post. Bill C-22 once in force will, inter alia amend the liability and financial assurance provisions of the Canada Oil and Gas Operations Act, RSC 1985, c. O-7 (COGOA), the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, SC 1987, c.3 and the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, SC 1988, c.28. This post will focus on the COGOA rules although what is said here for the most part applies equally to the areas covered by the Accord Acts. The first part summarizes the current COGOA provisions. The second part summarizes the changes that ESSA makes to COGOA. The third part discusses the regulations and the accompanying RIAS. The fourth part offers some comments on the regulations while the final part asks what is missing from this regime.

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Alberta Decision on Knock-for-Knock Allocation of Liability in a Standard Form Drilling Contract

By: Nigel Bankes

PDF Version: Alberta Decision on Knock-for-Knock Allocation of Liability in a Standard Form Drilling Contract

Case Commented On: Precision Drilling Canada Limited Partnership v Yangarra Resources Ltd, 2015 ABQB 433

This case involves the interpretation of a standard form drilling contract. Under that contract, said (at para 5) to be negotiated between the Canadian Association of Oilwell Drilling Contractors and the Canadian Association of Petroleum Producers, the drilling contractor (here Precision) and the oil and gas operator (here Yangarra) agreed to accept an allocation of risks and liabilities based essentially on ownership interests rather than fault. Thus, Article 10.1 of the contract, subject to some listed exceptions, provided that:

Precision shall at all times assume all of the risk of and be solely liable for any damage to, loss of, or destruction of Precision’s Surface Equipment, regardless of the negligence or other fault of Yangarra or howsoever arising and Precision specifically releases Yangarra in regard to any claims that Precision may otherwise have in regard thereto.

By the same token, Yangarra (Article 10.3 and 10.4) agreed to accept risks and provide an indemnity in relation to any downhole issues:

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Aboriginal Title Claim Against a Private Party Allowed to Continue

By: Nigel Bankes    

PDF Version: Aboriginal Title Claim Against a Private Party Allowed to Continue

Case Commented On: Ominayak v Penn West Petroleum Ltd, 2015 ABQB 342

Some forty or so years ago the Lubicon Lake Band and Chief Bernard Ominayak commenced an action for aboriginal title, and, in the alternative, a treaty reserve entitlement claim. Chief Ominayak also brought a petition before the United Nations Human Rights Committee (HRC) under the Optional Protocol of the International Covenant on Civil and Political Rights alleging a breach by Canada of Article 27 of that Covenant dealing with the cultural rights of minorities.

In the end, at least so far as I know, the title and treaty entitlement claim died after the Band failed in its attempts to obtain an interlocutory injunction: see Lubicon Indian Band v Norcen Energy Resources Ltd, [1985] 3 WWR 196 (Alta CA) – a matter I commented on very early in my academic career here. Chief Ominayak did however succeed, if that is the right word, in his petition before the HRC on the grounds that the degree and intensity of resource extraction occurring in the traditional territory of the Lubicon Cree was so extensive as to deprive the Lubicon of access to the material aspects of their culture. In another sense however, the petition was a failure since Ominayak’s concerns have never been adequately dealt with. It is true that Alberta has settled a treaty entitlement claim with at least some of the Lubicon Cree, but there remains an outstanding question (to which this litigation attests at para 5) as to whether or not the Lubicon Cree with whom Alberta negotiated were properly mandated to agree to the settlement.

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Section 27 of the Surface Rights Act and the Potential Fallout of Non-Compliance

By: Fenner Stewart

PDF Version: Section 27 of the Surface Rights Act and the Potential Fallout of Non-Compliance

Legislation Commented On: Surface Rights Act, RSA 2000, c S-24

Section 27 of Alberta’s Surface Rights Act obliges operators to notify landowners of the opportunity to renegotiate leases, but provides no enforcement measures for operator non-compliance. This post explores the potential fallout.

1. Introduction

Alberta’s Surface Rights Act helps to encourage the negotiation of surface leases between landowners and operators. Whether granting a producer the right of entry to drill for oil and gas or granting an energy company the right to place a pipeline or power transmission line across one’s property, many landowners would not allow such operators access to their land if the force of law did not compel the right of entry. In mining and drilling cases, the common law recognizes an implied right of entry in conjunction with the granting of mineral rights. In pipeline and transmission line cases, the Crown can exercise its power of expropriation to take private property for public use. In these situations, the legal authority for such rights of entry is not dependent on any power granted by the Surface Rights Act.

The primary purpose of the Surface Rights Act is to avoid litigation when an obstinate landowner rejects all reasonable offers for compensation in exchange for access to their property. When negotiations breakdown, the Surface Rights Board intervenes and establishes the terms, including compensation, of the surface lease. By offering an alternative to a privately negotiated lease, the Act promises to break deadlocks between lessor-landowners and lessee-operators resulting in expedited energy projects. Further, it is hoped that by providing an alternative to the more adversarial judicial system, more amicable relations between landowners and operators will develop even in less than ideal circumstances.

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