Category: Oil & Gas Page 50 of 57

Case considered: Diaz Resources Ltd v Penn West Petroleum Ltd, 2010 ABQB 153

PDF version:  Challenge notices under the terms of the 1990 CAPL Operating procedure

This case will be of interest to the oil and gas bar for two reasons. First, the case provides some guidance as to the quality of the information that a joint operator must provide to support a challenge notice. Second, the case raises (but does not resolve) a question as to whether or not a challenging joint operator also carries the burden of establishing that it is capable of operating the property in a “good and workmanlike manner.”

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Matter considered: Alternatives North, Notice of Motion, Mackenzie Gas Project, asking the National Energy Board to order the proponent to provide the Board with an update on the North American gas market

PDF version:   The Mackenzie Gas Project and Shale Gas

The Joint Review Panel issued its assessment of the Mackenzie Gas Project (MGP) at the end of 2009 and attention now turns to the National Energy Board (NEB) which must decide whether (subject to the approval of the Governor in Council) to issue a certificate of public convenience and necessity for the pipeline.

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Case considered: Canpar Holdings Ltd v Petrobank Energy and Resources Ltd and Gentry Resources Ltd, unreported transcript of reasons for judgement October 9, 2009 and December 11, 2009, available here.

PDF version:  Damages for production on a dead oil and gas lease

In this case Justice Miller decided that: (1) a an oil and gas lease that contains a no-deduction form of royalty clause (royalty calculated by reference to sales price and not by reference to value at the wellhead) means just that – no deductions (whatever the industry custom or practice to the contrary), (2) a lessor can terminate a lease by following the default clause of the lease where the lessee has not being paying royalty in accordance with the terms of the lease, and (3) at least in the circumstances of this case, a lessee that produces on a lease that has been terminated by the lessor triggering the default clause may be exposed to an accounting on the basis of sales value of production minus operating costs. Given the importance of each of these issues it is unfortunate that Justice Miller decided to dispose of the matter by way of oral reasons from the bench.

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PDF version:  The ten biggest legal and regulatory developments for the oil and gas sector from the first decade of the new millenium

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.

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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.

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