Category: Oil & Gas Page 55 of 57

In this decision Justice Sheilah Martin concluded that a participant in a farmout and participation agreement did not earn an interest in the farmout property when it elected to go non-consent on an operation to frac a particular formation, even when that operation was proposed after the parties had already installed a well head, outlet valve and production tubing. However, Justice Martin went on to hold that the farmor was estopped from denying that the participant had earned in the circumstances of the particular case. The decision is an important one for several reasons. It is a first decision on the definition of “completion” in the 1990 CAPL operating procedure, but it also serves to draw attention to the vulnerability of a “participant” in a farmout and participation agreement, especially where the farmor (as here) is wearing multiple hats and serving as both farmor and as operator for the purposes of the test well to which the participant is contributing. The case also highlights some of the difficulties associated with borrowing definitions from other agreements.

Landowners, Procedural Fairness and Alberta’s Energy Resources Conservation Board

By Nickie Nikolaou

On August 21, 2008

In Constitutional, Oil & Gas

Cases Considered: Domke v. Alberta (Energy Resources Conservation Board), 2008 ABCA 232.

PDF Version: Landowners, Procedural Fairness and Alberta’s Energy Resources Conservation Board

In a break from what seemed to be a growing trend, Mr. Justice Keith Ritter has refused leave to appeal to a group of landowners with respect to an Energy Resources Conservation Board (“ERCB”) decision. Perhaps because of the unfortunate result in Graff v. Alberta (Energy and Utilities Board), 2008 ABCA 119 (see my post on this decision ), Justice Ritter focused on one component of the test for leave – whether the appeal was prima facie meritorious – and dismissed the application. He looked at the facts and at the evidence and decided there was no merit to any of the proposed grounds of appeal. While it is hard to quarrel with all of Justice Ritter’s conclusions, ultimately his decision raises some troubling questions about procedural fairness and the ability of landowners to participate effectively in ERCB proceedings.

When Does a Royalty Owner not have to Pay for a Share of Processing Costs?

By Nigel Bankes

On August 14, 2008

In Natural Resources, Oil & Gas

Case Considered: 570495 Alberta Ltd. v. Hamilton Brothers Exploration Company, 2008 ABQB 413

PDF Version: When does a royalty owner not have to pay for a share of processing costs?

When does a royalty owner not have to pay for a share of processing costs? The answer of course should be that the royalty owner does not have to pay unless it is required to do so by the terms of the agreement that created the royalty. And that in fact is exactly what Justice Alan Macleod concludes in this judgement. Just as there is no rule of law that precludes an oil and gas lease from being kept in force beyond the end of its primary term by the mere existence of a shut-in well in “accordance with oil field practice” (see Kensington Energy Ltd v. B & G Energy Ltd 2008 ABCA 151 and my post on this decision), so too there is no rule of law that requires a royalty owner to pay a share of post-severance processing costs. This judgement confirms that processing costs are issues of contract between the parties and that the job of the court is to give effect to the terms of the agreement that the parties have negotiated.

The ERCB asserts its jurisdiction to determine the validity of an oil and gas lease

By Nigel Bankes

On August 9, 2008

In Administrative Law, Natural Resources, Oil & Gas

Cases Considered: In re Desoto Resources, Joffre Field, ERCB Decision 2008-47

PDF Version: The ERCB asserts its jurisdiction to determine the validity of an oil and gas lease

In an unusual decision the ERCB has asserted its jurisdiction to determine the validity of an oil and gas lease. While the Board has in recent years been forced to make rulings on complex questions of property law such as the competing rights of coal owners and natural gas owners to coal bed methane (In re Bearspaw Petroleum, EUB Decision 2007-24) as well as the competing interests of bitumen producers and natural gas producers (Alberta Energy Company Ltd. v. Goodwell Petroleum Corporation Ltd., 2003 ABCA 277, reviewing EUB Decision 2000-21) this is, so far as I am aware, the first reasoned decision of the Board in which it has passed on the validity of an oil and gas lease. Desoto’s application in the Court of Queen’s Bench for a declaration as to the validity of the leases was pending at the time of the Board’s decision.

What Happens when Parties Operate an Oil Battery Without a Formal Agreement?

By Nigel Bankes

On July 17, 2008

In Aboriginal, Natural Resources, Oil & Gas, Unjust Enrichment

Cases Considered: Husky Oil Operations Limited v. Gulf Canada Resources Limited 2008 ABQB 390

PDF Version: What happens when parties operate an oil battery without a formal agreement?

Husky Oil has complicated facts, some complex law (unjust enrichment, fiduciary obligation, rectification) and a confusing judgment, but surely only one possible result. Indeed, we wonder why it ever went to court at all.

Category: Oil & Gas Page 55 of 57

When Does a “Participant” Earn Under the Terms of a Farmout and Participation Agreement?

Landowners, Procedural Fairness and Alberta’s Energy Resources Conservation Board

When Does a Royalty Owner not have to Pay for a Share of Processing Costs?

The ERCB asserts its jurisdiction to determine the validity of an oil and gas lease

What Happens when Parties Operate an Oil Battery Without a Formal Agreement?