Category Archives: Oil & Gas

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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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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