Category Archives: Oil & Gas

Supreme Court Broadly Interprets s. 99(1) of the National Energy Board Act

PDF version: Supreme Court Broadly Interprets s. 99(1) of the National Energy Board Act 

Case considered: Smith v Alliance Pipeline Ltd., 2011 SCC 7

In Smith v Alliance Pipeline Ltd., 2011 SCC 7 (Smith) all nine judges of the Supreme Court of Canada endorsed a broad view of the power of the federal Pipeline Arbitration Committee (PAC) established under the National Energy Board Act, RSC 1985 c N-7 (NEBA) to award costs to a claimant to an arbitration proceeding. Committee costs may include solicitor-client costs of related litigation. The Court grounded its finding in subsection 99(1) of the NEBA, which if triggered requires a company to pay “all legal, appraisal and other costs determined by the Committee to have been reasonably incurred by that person in asserting that person’s claim for compensation,” and in the history of statutory reform of the law of expropriation, specifically the principle of full compensation for expropriation. The Court was silent on the Federal Court of Appeal finding that matters for which a committee may award compensation are restricted by section 84 of the NEBA, under which litigation costs are not compensable (Alliance Pipeline Ltd. v Smith, 2009 FCA 110 at para. 55 (Smith FCA)). The impact of Smith may be limited to cases in which compensation awarded by the committee exceeds 85 percent of the value offered by the company, as the statutory basis for the Court’s decision is subsection 99(1), and the subsection is triggered only where the 85 percent threshold is exceeded.

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The Court of Appeal confirms that the word “producible” does not mean actual production

PDF version: The Court of Appeal confirms that the word “producible” does not mean actual production 

Case considered: Bearspaw Petroleum Ltd v Encana Corporation, 2011 ABCA 7

The Court of Appeal in a memorandum of judgement (Rowbotham, McDonald and Bielby JJA) has confirmed Justice McMahon’s decision at trial which I blogged here.  See that post for a summary of the facts.

There were two issues in this case: (1) the proper interpretation of the habendum (duration) of a petroleum and natural gas lease, and (2) the existence of a covenant to market. The Court finds for the lessee (Bearspaw) on both grounds.

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Clarification of CBM Ownership on Freehold Lands in Alberta

PDF version: Clarification of CBM Ownership on Freehold Lands in Alberta

Legislation commented on: Bill 26, Mines and Minerals (Coalbed Methane) Amendment Act, 2010, Legislative Assembly of Alberta, Third Session, 27th Legislature, 59 Elizabeth II

One of the obstacles to coalbed methane (CBM) development on freehold lands in Alberta has been uncertainty regarding ownership of CBM on split title freehold lands. CBM ownership disputes have arisen when one person holds the title to natural gas and a different person holds the coal rights for the same parcel of land. Ron Liepert, the Minister of Energy, introduced Bill 26 in the Alberta legislature on October 27, 2010. After the first and second readings of the Bill, the Committee of the Whole passed an amended version on November 23, which includes one additional section.

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Injunction Denied in Oil and Gas Right of First Refusal Case

PDF version: Injunction denied in oil and gas right of first refusal case

Case considered: NAL GP Ltd. v. BP Canada Energy Company, 2010 ABQB 626

NAL was the successor in interest to an agreement between BP and Spearpoint which afforded each party mutual rights of first refusal (ROFR). The agreement (which was not a Canadian Association of Petroleum Landmen (CAPL) form) apparently covered a number of different properties. In July 2010 BP announced that it had reached an agreement with Apache to sell certain assets including the assets subject to the ROFR. There were negotiations surrounding the possible waiver of the ROFR but on September 1 NAL requested that BP prepare the ROFR notices required by the agreement. BP did so. The notices (12) were delivered September 20. The aggregate value of the 12 packages was $1.56 billion. The total sale price was $3.25 billion (US). The agreement required the ROFR to be exercised within 15 days.

In this application NAL sought a declaration that the notices were deficient or alternatively a temporary injunction. NAL also sought to examine documents relating to the sale and oral discovery of representatives of BP and Apache and sought to abridge the 15 day notice period.

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What’s the Next Step when Shallow Rights Become Deep Rights?

PDF version: What’s the next step when shallow rights become deep rights?

Cases considered: Talisman Energy Inc. v Energy Resources Conservation Board, 2010 ABCA 258; ERCB Decision 2009-050, Nexxtep Resources Ltd., Pool Delineation Application: Redesignation of the Lower Mannville C Pool to Rock Creek, Wilson Creek Field, August 7, 2009; ERCB letter decision, June 23, 2010, unpublished, available here.

The purpose of this note is to update readers on the developments in a set of facts that first came before the courts in 2007 and on which I blogged in July 2008.

The Facts

The facts, as outlined in my earlier blog, were as follows:

“Nexxtep purchased certain petroleum and natural gas rights under Crown oil and gas leases from the base of the Mannville through the Rock Creek formation to the base of the Pekisko pursuant to a purchase and sale agreement (PSA) of March 2004 with Talisman. The assets included a horizontal well but not a more prolific vertical well which, at the time of the PSA, both parties assumed to be producing from above the base of the Mannville. Subsequent investigations by Nexxtep established that the vertical well was producing from the Rock Creek formation below the Mannville. When Nexxtep’s requests that Talisman shut in the vertical were unsuccessful, Nexxtep commenced an action [the QB action] and brought an application for an injunction requiring Talisman to shut in the vertical well below the Mannville. Talisman in turn sought an order for summary judgment and in the alternative security for costs.”

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