Unlike my colleagues I was not prepared to plump for just one case or event and so here are my thoughts on ten notable legal and regulatory events for the oil and gas sector in Alberta over the first decade of the millennium. They are in no particular order; I tried to group some together thematically but some are just here in the order in which they came to mind.
Category: Oil & Gas Page 48 of 54
Case considered: Lyatsky Geoscience Research and Consulting Ltd v. Geocan Energy Inc, 2009 ABPC 392
PDF version: Provincial Court royalty calculation decision
Very few oil and gas contract matters come before the Provincial Court, principally because of the cap of $25,000 on monetary awards (Provincial Court Act, R.S.A. 2000, c. P-31. s.9.6 and Provincial Court Civil Division Regulation, Alta. Reg. 329/1989, s.1.1). In this case the plaintiff claimed a gross overriding royalty (GORR) and sought to recover from the defendant the difference between a 3% royalty paid on 7.5% of production from a property and 3% royalty paid on 100% of production. According to the plaintiff, the difference amounted to some $17,000 between 2006 and November 2008. Presumably, the plaintiff would also use any judgement from the Provincial Court in their favour to argue (absent the right to obtain a declaration from that Court) that future payments should also be based upon the terms of the judgement. The case was complicated by the fact that there was no direct privity between the parties. Judge J.T. McCarthy ruled in favour of the plaintiffs.
By: Nigel Bankes & Trevor Ference
Case Commented On: Re: AltaGas Ltd, Applications for Two Pipeline Licences, An Amendment to a Facility Licence, and Approval for an Acid Gas Disposition Scheme, Pouce Coupe Field, ERCB Decision 2009-073
During the fall of 2009 the province of Alberta signed letters of intent for funding with four proponents for carbon capture and storage schemes (CCS): (1) Swan Hills Synfuel for an in situ goal gasification and enhanced oil recovery (EOR) project, (2) Enhance Energy and Northwest Upgrading for a CO2 trunkline, (3) Shell for the Quest project and (4) TransAlta for Project Pioneer. As these proponents move to implement their projects we will start to see how the existing and proposed regulatory scheme accommodates CCS projects. There are perhaps four types of legal and regulatory issues that project proponents face in relation to the storage elements of any project: (1) property issues (e.g. pore space ownership); (2) regulatory issues (Energy Resources Conservation Board (ERCB) approvals); (3) liability issues (will long term liability for storage sites transfer to the province?), and (4) crediting issues (how will CCS projects be treated within the context of Alberta’s Specified Gas Emitters Regulation, Alta. Reg. 139/2007; will CCS projects create emission performance credits or offset credits?). The Carbon Capture and Storage Development Council (Accelerating Carbon Capture and Storage Implementation in Alberta, Final Report, March 2009) has urged the province to provide guidance and regulatory certainty on these issues but, by and large, the province has yet to act.
Cases considered: Brookfield Bridge Lending Fund Inc. v. Vanquish Oil and Gas Corporation, 2008 ABQB 444, reversed 2009 ABCA 99, leave to appeal denied November 19, 2009
The Supreme Court of Canada has denied leave to appeal to the joint operators in the Brookfield Bridge case. The case involves the circumstances under which a joint operator might be able to establish a constructive trust over assets of the operator other than those already impressed with an express trust by the language of clause 507 of the CAPL Operating Procedure in a situation where the operator expends monies from the commingled account for its purposes.
Case considered: Hunt Oil Company of Canada Inc v. Shell Canada Limited, 2009 ABQB 627
PDF Version: When, if at all, does a pooling agreement trigger an area of mutual interest obligation?
In a 1994 decision, Luscar v Pembina Resources Ltd (1994), 162 AR 34, the Alberta Court of Appeal cast doubt on the proposition that Y, a lessee of a tract within a drilling spacing unit (DSU), who enters into a cross conveyance pooling agreement with Z, a lessee of a different tract within the same DSU, will invariably trigger an area of mutual interest (AMI) obligation that Y owes to X with respect to the undivided interest that Y acquired within Z’s tract by virtue of the pooling agreement.
In this decision, Justice Alan Macleod has extended that line of reasoning and has decided (subject to the language used in any particular case) that Y will not trigger an AMI obligation, not only in the narrow situation described above but also in the situation where Y and Z, holding adjacent lands, enter into a pooling agreement to improve project economics and not for the purpose of forming a drilling spacing unit.