Category Archives: Oil & Gas

ITLOS Special Chamber Prescribes Provisional Measures with Respect to Oil and Gas Activities in Disputed Area in Case Involving Ghana and Côte d’Ivoire

By: Nigel Bankes

PDF Version: ITLOS Special Chamber Prescribes Provisional Measures with Respect to Oil and Gas Activities in Disputed Area in Case Involving Ghana and Côte d’Ivoire

Decision Commented On: International Tribunal on the Law of the Sea (ITLOS), Special Chamber, Dispute Concerning Delimitation of the Maritime Boundary between Ghana and Côte d’Ivoire in the Atlantic Ocean, Order with respect to the prescription of provisional measures, April 25, 2015, ITLOS Case No. 23

By way of a Special Agreement concluded on 3 December 2014, Ghana and Côte d’Ivoire submitted a dispute concerning their maritime boundary to a Special Chamber (SC) of ITLOS. The SC was fully constituted on 12 January 2015 and on 27 February 2015 Côte d’Ivoire made a request for the prescription of provisional measures under Article 290(1) of the Convention on the Law of the Sea (LOSC) requiring Ghana to:

  1. take all steps to suspend all ongoing oil exploration and exploitation operations in the disputed area;
  2. refrain from granting any new permit for oil exploration and exploitation in the disputed area;
  3. take all steps necessary to prevent information resulting from past, ongoing or future exploration activities conducted by Ghana, or with its authorization, in the disputed area from being used in any way whatsoever to the detriment of Côte d’Ivoire;
  4. and, generally, take all necessary steps to preserve the continental shelf, its superjacent waters and its subsoil; and
  5. desist and refrain from any unilateral action entailing a risk of prejudice to the rights of Côte d’Ivoire and any unilateral action that might lead to aggravating the dispute.

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Summary Judgment on Contested Amounts Owing under Natural Gas Processing and Related Agreements

By: Nigel Bankes

PDF Version: Summary Judgment on Contested Amounts Owing under Natural Gas Processing and Related Agreements

Case Commented On: SemCAMS ULC v Blaze Energy Ltd, 2015 ABQB 218

This is an important judgment on the interplay between the rules for the interpretation of contracts and the post Hryniak law on summary judgment: see Hryniak v Mauldin, 2014 SCC 7. The short version of the holding is that a producer cannot avoid summary judgment for outstanding amounts owing under a natural gas processing or related agreement on the basis that the producer has called for an audit of the operator’s accounts or otherwise disputes the amounts owing – at least where the agreements in question clearly oblige producers to settle invoices promptly, notwithstanding the existence of a dispute as to whether the invoices properly reflect the amounts owing.

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Crown Oil Sands Dispositions and the Duty to Consult

By: Nigel Bankes

PDF Version: Crown Oil Sands Dispositions and the Duty to Consult

Case Commented On: Buffalo River Dene Nation v Ministry of Energy and Resources and Scott Land and Lease Ltd, 2015 SKCA 31

The Saskatchewan Court of Appeal has confirmed Justice Currie’s decision (discussed here) to the effect that the grant of an oil sands exploration permit in Saskatchewan does not trigger the Crown’s duty to consult principally on the grounds that that there is no potential for conflict between the rights conferred by the permit and the First Nation’s treaty rights. This is because the permit alone gives the permittee no right to use the surface while the First Nation (at para 88) “does not advance here a treaty right or Aboriginal claim to subsurface rights or rights exercisable in relation to the subsurface of Treaty 10 lands.” Furthermore, at the time that the permit is granted there is no project on which to consult about; this will only become apparent when the permittee (if ever) develops a plan for its proposed exploration or development of the underlying minerals which requires surface access – at which time consultation will occur. And (at para 92) “It is at this point that the Crown and Buffalo River DN would have something meaningful, in the sense of quantifiable, to consult about, to reconcile.” Until then there is no project.

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Gross Negligence and Set-off Rights under the 2007 CAPL Operating Procedure

By: Nigel Bankes

PDF Version: Gross Negligence and Set-off Rights under the 2007 CAPL Operating Procedure

Case Commented On: Bernum Petroleum Ltd v Birch Lake Energy Inc., 2014 ABQB 652; unreported transcript of reasons of Master Robertson, July 31, 2013

Bernum and Birch Lake held interests (60:40) in five sections of land (sections 3, 7, 8, 17 and 19) governed by the 2007 version of the CAPL operating procedure. Bernum was the operator. Birch Lake elected to participate in drilling two horizontal wells, the 4-3 well and the 6-19 well. The 4-3 well was a success and is still producing. The 6-19 failed and was subsequently abandoned. Birch Lake failed to meet cash calls under the authorizations for expenditure (AFEs) for the two wells; Bernum commenced an action and applied for summary judgement. Bernum also set off Birch Lake’s share of production against Birch Lake’s indebtedness.

Birch Lake defended Bernum’s application for summary judgement on the basis that Bernum had been grossly negligent in drilling the two wells. The 2007 CAPL provides that:

4.02 The Operator … will not be liable to any of the Non-Operators for any Losses and Liabilities resulting from or in any way attributable to or arising out of any act, omission or failure to act, whether negligent or otherwise, of the Operator or its Affiliates and their respective directors, officers, agents, contractors or employees in the performance of the Operator’s duties under this Agreement (including those in planning or conducting any Joint Operation), except insofar as:

(a) those Losses and Liabilities are a direct result of, or are directly attributable to the Gross Negligence or Wilful Misconduct of the Operator …;

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What happens when A sells B a Working Interest in the Thermal or Enhanced Production from an Oil and Gas Property and A or its Successors in Interest Continue with Primary Production?

By: Nigel Bankes

PDF version: What happens when A sells B a working interest in the thermal or enhanced production from an oil and gas property and A or its successors in interest continue with primary production?

Case Considered: IFP Technologies (Canada) v Encana Midstream and Marketing, 2014 ABQB 470

What happens when A sells B a working interest in the thermal or enhanced production from an oil and gas property and A or its successors in interest continue with primary production? This was the issue at the heart of this decision. The answer is that B gets shafted; B should have taken better steps to protect itself rather than simply assuming that all future production from the property would take the form of enhanced or thermal production.

In the course of his lengthy 73 page judgement Chief Justice Neil Wittmann (acting in place of Justice Ron Stevens (deceased)) addressed a number of questions of oil and gas law which will be of interest to the energy bar including the following: (1) What property interest did IFP acquire? (2) What is the test for determining whether a working interest owner has reasonable grounds for refusing consent to an assignment of shared interest lands under the 1990 CAPL Operating Procedure? (3) What is the legal position where a working interest purports to withhold consent and the Court subsequently determines that the withholding of consent was unreasonable? (4) Did the development of the property through primary production techniques substantially nullify the benefit for which IFP (B) had bargained so as to amount to a breach of contract? (5) Assuming that there was a breach of contract how should damages be assessed? (6) Assuming liability should any claim for damages be capped by a contractual agreement between the parties? Continue reading →