Standing at the ERCB without an interest in land, but “no costs for you!”

Case considered: Freehold Petroleum and Natural Gas Owners Association v. Alberta (Energy Resources Conservation Board), 2010 ABCA 125

In Freehold Petroleum and Natural Gas Owners Association, Madam Justice Elizabeth McFayden dismisses an application for leave to appeal an Energy Resources Conservation Board (ERCB) hearing costs decision that relates to an earlier ERCB decision concerning a mineral lease dispute. This Court of Appeal decision and the underlying ERCB decisions are noteworthy to me for two reasons: (1) the ERCB granted full hearing participation rights to the Freehold Petroleum and Natural Gas Owners Association (the Freehold Owners Association) despite the fact it does not have an interest in land; and (2) the Court of Appeal defers to the ERCB on what I consider to be an unreasonable exercise of its discretion on the costs matter. I will comment on each of these points in turn after briefly summarizing the facts.

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Arbitration for the Quick and Final Resolution of Disputes? Hardly.

Cases considered: Karaha Bodas Company, L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 2010 ABQB 172 and Flock v. Beattie, 2010 ABQB 193

PDF version: Arbitration for the Quick and Final Resolution of Disputes? Hardly.

At first glance, these two cases have almost nothing in common. One concerns a multimillion dollar Indonesian geothermal energy project dispute. The other involves a matrimonial property dispute following a marriage breakdown in Alberta. What they have in common is that both of them are cautionary tales for arbitration – tales of slow, expensive processes that include numerous court applications. The dispute in the former case arose in 1998 and notice of arbitration was given that same year. The dispute in the latter case arose in 1999, and the parties agreed to arbitrate in 2002. Yet we have two 2010 court decisions arising out of those arbitrations. What went wrong?

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Yes folks the language of the habendum does matter

Case considered: Bearspaw Petroleum Ltd v Encana Corporation, 2010 ABQB 225

PDF version: Yes folks the language of the habendum does matter

In this decision Justice Terry McMahon held that a petroleum and natural gas lease that provides for continuation at the end of its primary term where leased substances are “producible” will be continued where the lessee has drilled a well that has discovered natural gas in commercial quantities; the lease will be continued even though that well has not been tied in and is therefore not capable of actual production. The decision also offers a comment on implied and express covenants to market.

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The rule of capture is not the only no liability rule in the oil and gas business

Case considered: Hunt Oil Company of Canada Inc v. Galleon Energy Inc, 2010 ABQB 212

PDF version: The rule of capture is not the only no liability rule in the oil and gas business

This decision confirms that where B intervenes in an ERCB (Energy Resources Conservation Board) application commenced by C and the result of that intervention is that C incurs delays in being able to achieve increased levels of oil or natural gas production, C has no cause of action against B for damages that C suffers as a result of the delay. Furthermore, any effort by C to use the courts to effect a recovery from B may be an abuse of process.

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Ontario Court of Appeal confirms the exclusive jurisdiction of the Ontario Energy Board in relation to natural gas storage rights

Case considered: Snopko v Union Gas Ltd, 2010 ONCA 248

PDF version: Ontario Court of Appeal confirms the exclusive jurisdiction of the Ontario Energy Board in relation to natural gas storage rights

Gas storage schemes offer the opportunity to take maximum advantage of existing pipeline infrastructure. Storage also helps provide security of supply and extra deliverability at times of peak demand. While some storage remains regulated as a public utility the general trend is to deregulate storage where there is adequate competition. In some provinces pore space for natural gas storage is principally publicly owned (and then acquired by private operators by way of lease) as in British Columbia and Alberta and in other provinces as in Ontario the pore space is largely privately owned as in the facts of this case.

In either case there may be a need to deal with holdout problems and there will always be the question of how to compensate the private pore space owner for the use of the storage rights. That is what was at issue in this case; and we can expect this issue to become more contentious as gas storage increases in value.

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