Category Archives: Oil & Gas

A Legal Regime for the Development of Geothermal Resources in Alberta

By: Nigel Bankes

PDF Version: A Legal Regime for the Development of Geothermal Resources in Alberta

Bill Commented On: Bill 36, Geothermal Resources Development Act, 2nd Sess, 30th Leg, Alberta, 2020 (first reading 20 October 2020)

The recognition of a “new” resource, whether that be the use of pore space for sequestering carbon dioxide or in this case the exploitation of geothermal energy (for a primer on geothermal energy see David Roberts, “Geothermal Energy Poised for a Big Breakout” Vox (21 October 2020)), often requires the creation of new legal and regulatory instruments (or adaptation of existing ones) to provide legal certainty for investors and to protect the public interest. Although the issues may vary for different “new” resources, such instruments will typically need to address the following types of questions: (1) who owns the resource in question and how may a developer acquire rights to the resource?; (2) what regulatory regime needs to be put in place to protect the public interest, including the environment? and; (3) what liability regime should we put in place to provide compensation in the event that third parties suffer harm and to ensure fulfillment of reclamation and abandonment obligations?

With the introduction of Bill 36, the Government of Alberta proposes to put in place a legal regime that will address these questions. In large part, the Bill addresses the second and third issues by drawing extensively on the Oil and Gas Conservation Act, RSA 2000 c O-6 as a model. I will not say much about that model in this post, but one well-known flaw of this model is that it has proven to be far too permissive. What I mean by permissive is that the model gives the Alberta Energy Regulator (AER) the power to make a lot of rules (e.g. rules for suspension and timely abandonment of wells) but it does not actually require that such rules be put in place. As a result, those rules may never be promulgated and the public interest not fully protected. See “Bill 12: A Small Step Forward in Managing Orphan Liabilities in Alberta”.

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Another Manitoba Oil and Gas Lease Termination Decision

By: Nigel Bankes

PDF Version: Another Manitoba Oil and Gas Lease Termination Decision

Case Commented On: Fire Sky Energy Inc. v EverGro Energy Corporation, 2020 MBQB 133 (CanLII)

I am not sure what’s going on downstream of us these days, but we now have a third oil and gas lease termination case this year from “Friendly Manitoba.” I posted on the two earlier decisions here in April.

This one is fairly straightforward. EverGro held under a CAPL 88 MAN lease form with a three-year primary term commencing January 22, 2013 and filed a caveat to protect its interest. Fire Sky top leased the property on February 9, 2017 having formed the view that EverGro’s lease had expired. 

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The 2020/2021 Orphan Fund Levy and the Missing Consultation on Environmental Liability Management Reform

By: Drew Yewchuk

PDF Version: The 2020/2021 Orphan Fund Levy and the Missing Consultation on Environmental Liability Management Reform

Document Commented On: 2020/2021 Orphan Fund Levy Bulletin, Alberta Energy Regulator, September 10 2020

The Orphan Fund Levy is a levy imposed by the Alberta Energy Regulator (AER) on all holders of licensees or approvals issued by the AER. The levy is authorized by sections 72 to 75 of the Oil and Gas Conservation Act, RSA 2000, c O-6. The levy funds the work of the Orphan Well Association cleaning up oil and gas assets that have no solvent owners and no financial security set aside for their clean-up . The AER released a bulletin setting the 2020/2021 Orphan Fund Levy on September 10, 2020. The prescribed levy is $65 million for 2020/2021, up from $60 million in 2019/2020, $45 million in 2018/2019, and $30 million in 2017/2018 (when it was still collected in two parts).

The good news is that the Orphan Fund Levy is going up, which should help cover the substantial costs of cleaning up Alberta’s growing orphaned well inventory. The bad news is that in $3.4 million of the levy was not received in 2019 due to the insolvency of some operators (Orphan Well Association Annual Report, 2019). The ugly news is that, despite Alberta’s commitment to implement new regulations to significantly reduce the prospect of a growing inventory of orphan wells (see the announcement of April 17, 2020), and the provincial government’s press release of July 30, 2020 about of the new framework to manage oil and gas liabilities, there have yet to be any public details or public consultation on the design of the new liability management system. Alberta is drifting along with the old system despite acknowledging its massive problems.

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Consent Provisions in Long-Term Relational Contracts

By: Nigel Bankes

PDF Version: Consent Provisions in Long-Term Relational Contracts

Case Commented On: Apache North Sea Ltd v Ineos FPS Ltd, [2020] EWHC 2081 (Comm)

The drafters of long-term relational contracts often have to deal with the uncertainties of future developments. One technique for doing so is to accord one party to the contract (A) a power to propose some development or other while affording to the other party (B) a power to withhold its consent to the development, but disciplining the consent power by stipulating that B cannot unreasonably withhold its consent. Such provisions have long been common in the landlord and tenant context but they are also common in other commercial contracts, including oil and gas contracts. For a recent Canadian example see IFP Technologies (Canada) Inc v EnCana Midstream and Marketing, 2017 ABCA 157 (CanLII) and my post on that decision here.

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Court Confirms that Offshore Board Cannot Extend a Licence Term by Issuing a Replacement Licence

By: Nigel Bankes 

PDF Version: Court Confirms that Offshore Board Cannot Extend a Licence Term by Issuing a Replacement Licence

Case commented on: David Suzuki Foundation v Canada-Newfoundland and Labrador Offshore Petroleum Board, 2020 NLSC 94 (CanLII).

This decision involves the terms of the federal and provincial legislation implementing the Atlantic Accord: Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, SC 1987, Ch 3 (Federal Act), and Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act, RSNL 1990, c C-2 (Newfoundland Act) (collectively the Accord legislation). I commented on earlier proceedings in this litigation (David Suzuki Foundation v Canada-Newfoundland Offshore Petroleum Board, 2018 NLSC 146 (CanLII)) confirming the public interest standing of the applicant here. That earlier post also provides the factual background:

Corridor Resources Inc. (Corridor) received a nine year exploration licence (EL 1105) from the Canada-Newfoundland Offshore Petroleum Board (CNLOPB or Board) on January 15, 2008 under the terms of the Accord legislation. … As is customary, the EL was divided into two periods: Period I, five years and Period II, 4 years. In order to validate the licence for Period 2 Corridor had to commence the drilling of a well within the Period I and diligently drill through to completion. Corridor’s proposal to drill proved controversial and triggered a time-consuming environmental assessment procedure. In response to this Corridor applied for and was granted an extension to Period I but in the end it was not able to drill a well as required by the EL.

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