Category Archives: Oil & Gas

Responding to Concerns that Alberta Does Not Collect Enough Security for Environmental Remediation the AER Chooses to Collect Less Security

By: Drew Yewchuk

PDF Version: Responding to Concerns that Alberta Does Not Collect Enough Security for Environmental Remediation the AER Chooses to Collect Less Security

Document Commented On: Mine Financial Security Program Standard, dated May 6, 2021

On May 6, 2021, the Alberta Government announced they would review and modify the Mine Financial Security Program (MFSP). The MFSP is Alberta’s system for ensuring (purportedly at least) that companies pay for the reclamation of their mines, both oilsands and coal. At first glance, a review and modification sounds like a good idea, since the MFSP has been criticized as severely deficient since at least 2015 when an Auditor General report identified numerous significant problems concluding that in the event that “a mine operator cannot fulfill its reclamation obligations… the province may have to pay a potentially substantial cost for this work to be completed” (at 2). Since then, the Alberta Energy Regulator (AER) has improved its administration of the program, but Alberta Environment and Parks (AEP), the primary department responsible for the policy and design of the MFSP, has not addressed the overall structure of the program (see the Auditor General’s 2019 report). Under the MFSP, the province held $1.57 billion in security against estimated reclamation liabilities of $20.8 billion in December 2014 and $1.46 billion in security against $28.35 billion in estimated reclamation liabilities in June 2018. So reform is long overdue, especially if Alberta is considering approving new coal mines. Continue reading →

The AER is Seeking Public Input on its Proposed Regulatory Solution for the Growing Orphan Well and Other Unfunded Liabilities Problem in Alberta’s Oil and Gas Sector

By: Shaun Fluker & Drew Yewchuk

PDF Version: The AER is Seeking Public Input on its Proposed Regulatory Solution for the Growing Orphan Well and Other Unfunded Liabilities Problem in Alberta’s Oil and Gas Sector

Matter Commented On: Proposed amendments to AER Directive 067: Eligibility Requirements for Acquiring and Holding Energy Licences and Approvals

 On January 13, 2021 the Alberta Energy Regulator (AER) issued Bulletin 2021-01 seeking public comments on proposed amendments to Directive 067: Eligibility Requirements for Acquiring and Holding Energy Licences and Approvals. These amendments are an implementation component of Alberta’s policy initiative, announced in July 2020 as the new Liability Management Framework, to improve the effectiveness of laws intended to address Alberta’s growing (and already enormous) problem of unfunded end-of-life closure and reclamation liabilities in the energy sector. The proposed amendments to Directive 067 constitute the details of the Licensee Capability Assessment System – the AER’s replacement for the catastrophic failure known as the Licensee Liability Rating program used in the oil and gas sector. The AER will receive public comments on the proposed changes to Directive 067 until and through February 14, and this post constitutes our comments – which will be submitted to the AER in its requested form (which can be downloaded here  and sent via email to Directive067@aer.ca – alternatively you can submit the comments form by mail to the AER, Directive 067 Feedback, Suite 1000, 250 – 5 Street SW, Calgary, AB T2P 0R4).

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The Sequoia Bankruptcy Part 2: The Appeal of the Motions to Strike and Dismiss

By: Drew Yewchuk

PDF Version: The Sequoia Bankruptcy Part 2: The Appeal of the Motions to Strike and Dismiss

Cases Commented On: PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABQB 513 (CanLII); PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2021 ABCA 16 (CanLII)

This is part two of a series on the litigation resulting from the bankruptcy of Sequoia. The first part covered the first application to strike, and the applications to intervene in the appeal of that decision at the Court of Appeal.

This part covers two decisions in the Sequoia bankruptcy saga: 2020 ABQB 513 (CanLII), a costs decisions at the Queen’s Bench level, and 2021 ABCA 16 (CanLII), the Court of Appeal decision overturning that costs decision and the decision to strike the majority of the Trustee’s claims.

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The Sequoia Bankruptcy Part 1: The Motion to Strike and the Interveners

By: Drew Yewchuk 

PDF Version: The Sequoia Bankruptcy Part 1: The Motion to Strike and the Interveners

Cases Commented on: PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABQB 6 (CanLII) and PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABCA 417 (CanLII)

The Orphan Well Association (OWA) was back in court on December 10, 2020 for the appeal of PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2020 ABQB 6 (CanLII). The OWA is concerned about the interpretation of the Supreme Court’s decision in Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 (CanLII) (Redwater), and specifically whether the finding that abandonment and reclamation obligations (ARO) are not “provable claims” in bankruptcy implies that ARO are not “liabilities” for the purposes of determining the financial situation of a corporation and hence whether a corporation is solvent.

The Redwater decision concluded that a trustee for a bankrupt oil and gas company had to use the bankrupt estate’s assets to pay for the ARO of non-producing wells, and could not “disclaim” them. Redwater started as a bankruptcy case under the name Redwater Energy Corporation (Re), 2016 ABQB 278 (CanLII). (I recommend Nigel Bankes’ earlier posts on the Queen’s Bench decision and the Court of Appeal decision in Redwater, and Jassmine Girgis’s post on the Supreme Court decision for a complete background.)

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Court of Appeal (England and Wales) Confirms High Court Decision on the Relationship Between a Farmout Agreement and an Operating Agreement

By: Nigel Bankes

PDF Version: Court of Appeal (England and Wales) Confirms High Court Decision on the Relationship Between a Farmout Agreement and an Operating Agreement

Decision Commented On: Apache North Sea Limited v Euroil Exploration Limited and Edison SPA, [2020] EWCA Civ 1397

In this decision, the Court of Appeal of England and Wales confirmed Judge Pelling’s decision in the High Court with respect to the drilling costs Apache was entitled to recover from Euroil under the terms of a farmout agreement (FOA) and its related joint operating agreement (JOA). I commented on Judge Pelling’s decision here and I refer readers to that earlier post for a more detailed statement of the facts, as well as references to Canadian decisions dealing with the relationship between an FOA and the JOA.

In that earlier post I suggested that the FOA at issue here would likely be denominated as a “farmout and participation agreement” in a Canadian context insofar as the drilling obligation was not a sole risk obligation of the farmee (Euroil) but rather was a shared risk operation for which Euroil was to cover only a percentage of the costs. The farmor, Apache, was to carry out the drilling operation as operator and was also responsible for a percentage of the costs.

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