THE RESOURCE: BLG ENERGY LAW BLOGJuly Digest 2015

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This blog is authored by members of BLG’s Oil and Gas Focus Group. We follow new and interesting legal issues as they emerge in the energy area. The wide range of direct and extensive energy experience held by our contributors lends itself to a diverse and insightful examination of current legal trends and topics. Our experience not only provides a source of valuable information and insight, but also assists in finding solutions to legal issues that arise in this dynamic and rapidly evolving area.

We welcome you to The Resource: BLG Energy Law Blog and encourage you to contact any of our contributors about their posts or in learning more about how BLG can serve your legal needs.

IN THIS ISSUE

1Alberta Court of Queen’s Bench Upholds Exclusion Clauses in Industry Standard AgreementKaren A. SalmonDaniel B.R. Johnson

3Case Summary: Yukon Zinc Corporation (Re), 2015 BCSC 836Dionysios RossiJessica Duhn

5Alberta Court Protects Regulatory Approvals from Collateral Attack but Allows Trespass Claim Founded on Aboriginal Title to Proceed (for Now…)Michael G. MassicotteMichael A. MarionLeanne Desbarats

7Separation Anxiety – Is a Divided Alberta Energy Regulator Around The Corner?Alan L. RossMichael G. MassicotteMichael A. Marion

11UPDATE: Canada Day Brings with it New AER Application Requirements Regarding First Nations ConsultationMichael G. Massicotte

12New Canada- Québec Energy Accord - Entente Cordiale?Alan L. Ross

14The CABC Announces New Board LeadershipMichael A. Marion

ALBERTA COURT OF QUEEN’S BENCH UPHOLDS EXCLUSION CLAUSES IN INDUSTRY STANDARD AGREEMENTTHURSDAY, JULY 23, 2015

In Precision Drilling Canada Limited Partnership v Yangarra Resources Ltd, 2015 ABQB 433 (QB Master) [found here] the Alberta Court of Queen’s Bench confirmed that a contractor can enforce its right to be paid for its work, even if that work is done in a less-than work-

manlike manner. Where a standard industry agreement allocates liabi-lity between the parties, even where that allocation seems contrary to the expected results under neg-ligence and tort law, the Court will enforce the parties’ negotiated allocation of liability.

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Precision Drilling Canada Limited Partnership (“Precision”) sued Yangarra Resources Ltd. (“Yangarra”) for payment on work it had done for Yangarra on three wells, one successful, one abandoned, and one drilled after the second was abandoned. Precision sought summary judgment asking the Court to force Yangarra to pay for work on the second and third wells, even though Precision had not drilled the second well in a good and workmanlike manner and the third well was only necessary because of Precision’s failure to drill the second well in a good and workmanlike manner. In response to Precision’s claim, Yangarra counterclaimed for the value of equipment lost in the second well. Yangarra also claimed that it was not required to pay for Precision’s ser-vices because Precision had not delivered a completed well.

THE DECISION

The Master disagreed, holding that Yangarra had agreed to pay for day work, not a completed well, so it had to pay for Precision’s services. Notwithstanding Precision’s failure (and there was clear evidence that it had not met the required standard), the Master ruled that Yangarra had to pay for the services Precision had performed. The Master dismissed the counterclaim because, by entering into the agreement it did with Precision, Yangarra bore the risk of loss of its own equipment downhole.

Although Yangarra objected to the matter being determined summarily, the Master, referencing the SCC decision in Hryniak v Mauldin 2014 SCC 7 and the Alberta Court of Appeal’s discussion of Alberta’s summary judgment rule in Maxwell v Wal-Mart Canada Corp. 2014 ABCA 383, decided that summary disposition was appropriate as a disposition that was fair and just to both parties could be made on the existing record.

Key to the Court’s ultimate decision was that Precision and Yangarra agreed that, no matter

what happened, each of them would bear the risk of their own losses for specified risks. Precision and Yangarra had entered into a standard form agreement negotiated between the Canadian As-sociation of Oilwell Drilling Contractors (CAODC) and the Canadian Association of Petroleum Pro-ducers. This was a primarily “no fault” agreement, under which Precision and Yangarra each bore their respective risks “regardless of the negligence or other fault of [the other party] or howsoever arising.” Yangarra also assumed the risk of re-drilling a lost or damaged hole, including fishing operations.

The Court, applying the leading decision of the SCC in Tercon Contractors Ltd v BC (Minister of Transportation and Highways) 2010 1 SCR 69, confirmed that the exclusion clauses in the agreement between Precision and Yangarra could be enforced. This was not a case where, as a result of unequal bargaining power, a party includes an exclusion clause, then seeks to rely on it to escape damages caused by its own fault. Rather, this was a case of two large and sophisticated parties choosing to enter into an industry-negotiated no-fault agreement. Because the standard form agreement was negotiated by industry represent-atives, enforcing the exclusion clauses was not commercially absurd. The Master also ruled that enforcing the exclusion clauses was not un-conscionable; the agreement went both ways and each party benefited from the no-fault provisions. Therefore, the agreement was not grossly unfair or improvident.

IMPLICATIONS

Industry participants will note the Master’s reliance on Precision and Yangarra’s choice, as commer-cially sophisticated entities, to enter into an industry negotiated agreement. Effectively, the Court has said that it will hold industry players to the wording of these agreements, even though the result may be contrary to what might ordinarily be expected under tort law. Industry participants should consider carefully whether an industry standard agreement is appropriate for their par-

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ticular circumstances. While relying on an industry standard agreement may be faster and easier than negotiating a unique agreement for every situation, the parties must ensure they can live with all the terms included, including the outcome directed by the contract when things go wrong. Oil and gas operators might also consider whether, in these challenging economic times, it may be possible to obtain terms from service providers that are more favourable to the operator than those contained in

standard form contracts like the CAODC standard form contract.

AUTHORS:

Karen A. SalmonPartner

Daniel B.R. JohnsonAssociate

CASE SUMMARY: YUKON ZINC CORPORATION (RE), 2015 BCSC 836TUESDAY, JULY 14, 2015

The recent British Columbia Supreme Court decision in Yukon Zinc Corporation (Re), 2015 BCSC 836, provides some rare insight into the operation of provincial “miners lien” legislation in an insolvency context.

BACKGROUND

The case arose out of the insolvency of Vancouver-based Yukon Zinc Corporation (“Yukon Zinc”). The dispute involved competing claims between Transamine Trading S.A. (“Transamine”) and Procon Mining and Tunnelling Ltd. (“Procon”) to approximately 14,126 MT of zinc concentrate owned by Yukon Zinc, worth an estimated US $8 million. The concentrate was situated in various locations: the mine located in Yukon Territory, in a bulk terminal in Stewart, British Columbia (“B.C.”), and in trucks that were in transit between the mine and the terminal.

Procon’s claim arose from a lien it filed under the Yukon Miners Lien Act, R.S.Y. 2002, c. 51 (the “MLA”) in respect of underground mining and production work for which it remained unpaid. Procon contended its lien took priority over the

claim of Transamine, a consignee. Procon also submitted that matter would be more appropriately heard by the Yukon Territory Supreme Court, rather than by the British Columbia Supreme Court. In response, Transamine claimed that title to the concentrate had already passed to it at the time Procon filed its lien (meaning that it was no longer the property of the debtor, Yukon Zinc).

THE DECISION

On the threshold question of jurisdiction, the court declined to cede jurisdiction to the Yukon courts, due to a number of factors: the urgency of the matter; the fact that the contracts between Yukon Zinc and Procon had a forum selection clause pointing to B.C.; that the majority of the zinc concentrate was already in B.C.; that insolvency proceedings benefit from all issues being decided in single forum; and that it was not possible to bifurcate the issues.

With respect to the priority of claims, the court concluded that a bona fide purchaser for value who takes title prior to the registration of the lien takes priority. Procon argued that all of the

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because it remained “in the hands of the owner.” The court, however, noted that by the time Procon had perfected the formalities of its lien, the majority of the concentrate was already in B.C. On this point, the court concluded that the phrase “in the hands of the owner” could only be applicable to severed minerals remaining within the Yukon at the time of perfection. Regarding the MLA, the court noted that “there is no intention – express or inferred – that the enforcement provisions have extraterritorial effect.”

Procon further argued that title to the concentrate had not passed to Transamine, and that Transamine was therefore only a holder of a security interest. In dismissing this argument, the court agreed with Transamine’s submissions that it was a bona fide purchaser for value. The court noted that Transamine and Yukon Zinc’s contracts contained express provisions stating when the transfer of title would occur.

Nor was Transamine’s claim defeated by an inability to ascertain the goods in question. In addition to the measures taken by Yukon Zinc to demarcate the concentrate to be sold to Transamine, by the time the lien was registered, all of the concentrate Yukon Zinc was producing and processing from the mine was solely for Transamine. In this regard, the court held that any element of control exercised by Yukon Zinc in the act of storage or shipping of the concentrate was required by its contracts with Transamine and was not indicative of Yukon Zinc maintaining title to the concentrate.

The court further expressed its reluctance to interpret statutes in a manner that would nullify the interests of innocent third parties (such as Transamine), absent express wording to this effect. In this regard, the court noted that the current version of the MLA had repealed a previous provision stating that a “lien shall attach and take effect against persons purchasing… material in respect of which the lien is claimed.” The court also confirmed the longstanding rule that statutes should not be construed too broadly if the inter-pretation would result in commercial uncertainty.

Both of these factors militated in favour of Transamine’s claim.

Finally, the court took notice of an earlier agree-ment between all parties in which Procon, among other things, surrendered all of its interest in the present and after-acquired zinc concentrates for valuable consideration. Specifically, the court noted the existence of a “no-interest letter” in which Procon agreed to the transfer of con-centrates between Yukon and Transamine free and clear of Procon’s interest. This agreement arose because Transamine took active steps with Yukon Zinc and Procon to ensure it would receive title to the zinc concentrate free of Procon’s previously existing liens.

In rejecting Procon’s argument that these agree-ments did not prevent it from registering subsequent liens, the court concluded: “Procon has now cast an interpretation of those arrange-ments [in a manner] which defies commercial logic.”

IMPLICATIONS

The decision is instructive, insofar as it provides a rare glimpse into the operation of provincial miners lien legislation in the context of an insolvency proceeding. Specifically, it confirms that where title to goods has already been transferred, a bona fide purchaser for value will take priority over a lien unless the latter has already been perfected. Given this, parties intending to file a claim of lien should do expeditiously. Conversely, contracts of purchase and sale should expressly define when title to severed minerals passes from a shipper to a consignee.

AUTHORS:

Dionysios RossiPartner

Jessica DuhnAssociate

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ALBERTA COURT PROTECTS REGULATORY APPROVALS FROM COLLATERAL ATTACK BUT ALLOWS TRESPASS CLAIM FOUNDED ON ABORIGINAL TITLE TO PROCEED (FOR NOW…)WEDNESDAY, JULY 8, 2015

On June 5, 2015, the Alberta Court of Queen’s Bench issued its decision in Ominayak v Penn West Petroleum Ltd., 2015 ABQB 342 (found here). On application by Penn West, the Court refused to strike a Statement of Claim in its entirety based on it being a duplicative of a similar claim against the Crown and an abuse of process. However, the Court ordered that the Claim must be amended to remove all allegations and relief sought which amounted to a collateral attack on regulatory approvals that had been previously obtained by Penn West.

The decision is a clear confirmation that Alberta courts will not allow claims, even when they are based on claims of aboriginal title, where they collaterally attack regulatory approvals when available steps were not taken to challenge those approvals directly. On the other hand, the decision did allow a claim for trespass, founded on aborigi-nal title claims, to proceed to the next stage of the litigation notwithstanding the regulatory approvals that were in place. If this matter proceeds to trial, and if aboriginal title is ultimately established, an Alberta court may have to resolve the competing claim of aboriginal title against the right of the oil and gas industry to carry on oil and gas operations in good faith reliance on valid and unchallenged regulatory approvals.

BACKGROUND FACTS

In Ominayak, Justice Simpson of the Alberta Court of Queen’s Bench considered an application by Penn West Petroleum Ltd. and Penn West Exploration (collectively, “Penn West”) to strike a Statement of Claim (the “Claim”) filed on November 29, 2013 (amended December 9, 2013) by the Lubicon Lake Nation (the “LLN”), in relation to

lands in the vicinity of Sawn Lake and Haig Lake, Alberta (the “Lands”). The Claim asserted aboriginal title and rights on lands described as “traditional lands”, and sought a declaration that all approvals that had been previously issued to Penn West for the production of oil on the Lands, were illegal and void. The Claim also included an allegation of trespass founded on the same claim of aboriginal title.

On June 7, 2013, the LLN had previously com-menced an action against the provincial and federal governments, which also asserted aboriginal title and rights, and which sought a declaration that the approvals previously issued were either illegal and of no effect, or burdened and encumbered by the LLN’s aboriginal rights (the “Crown Claim”).

Prior to conducting any activities related to the Sawn Lake Program, Penn West had obtained a number of regulatory approvals between April 2011 and December 2013 (the “Approvals”). During the course of its consultation with the LLN, Penn West had been advised by the Chief of the LLN that he had received a package of consultation materials from Penn West, and that he did not have any concerns with the Sawn Lake Program. Following this, Alberta Sustainable Resources and Development advised Penn West that consultation with respect to the Lands was adequate. Thereafter, the LLN apparently changed its position and, in May, June and August 2012, filed letters of objection with the ERCB. The objections were considered by the ERCB and rejected on the basis that the approvals did not directly and adversely affect the LLN. The LLN took no steps to challenge the ERCB’s decision, including filing an application for judicial review.

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that it was an abuse of process since it virtually duplicated the Crown Claim, and since it cons-tituted a collateral attack on regulatory approvals previously granted.

THE DECISION

After canvassing the applicable law, Justice Simpson held that while the Penn West action was identical to the Crown action in many respects, the causes of action were distinct, since the actions had been commenced against different defendants and involved different claims – private claims, in the case of the Claim against Penn West, and public claims, in the case of the Crown Claim. Accordingly, he concluded that duplication between the two actions did not constitute an abuse of process. Additionally, it was held that the LLN had to plead its right to possession in order to support its cause of action in trespass and as such, the duplication between the pleadings in the two actions in terms of the LLN’s assertion of aboriginal title and rights, did not constitute an abuse of process. It was held that these issues were, at best, procedural in nature and, to the extent the assertion of aboriginal title and rights overlapped, concerns about inconsistent verdicts could be dealt with by way of consolidation of the two actions or an adjournment of one action until the other was concluded.

However, on the issue of collateral attack, it was found that the portions of the Claim attacking the validity of the Approvals were invalid, constituting a collateral attack. The Court ordered that the Claim be amended to remove those allegations. Citing the Supreme Court of Canada decision in Behn v Moulton Contract Ltd. (found here) and the British Columbia Court of Appeal decision in Canadian Forest Products Ltd. v Sam (found here), both 2013 decisions, it was held that there was a process in place with respect to a tribunal providing decisions subject to judicial review and appellate review, and that this was the process which must be followed until aboriginal title is established,

neither of which, to date, had been done by the LLN. It was noted that since no issue was taken during consultation and, indeed, since Penn West was advised by the LLN that there was no problem with the Project, “it is even a stronger case of a repudiation of the duties of mutual good faith that animates the discharge to [sic] the Crown’s constitutional duty to consult First Nations.”

Interestingly, the Court went on to state that “[t]o allow a collateral attack on the open and transparent tribunal process with the additional protection of judicial review and appellate review, would give rise to a high degree of risk for corruption”, in that “[i]f the process can be collaterally attacked, it would create great temptation for corporations to offer payoffs to claimants or provide contracts to them for little or no service so as to avoid colla-teral attacks”.

INDUSTRY IMPLICATIONS

The allegations in the Claim attacking the validity of the regulatory approvals were ordered struck. On this point, the Court made the following comments:

Further, it creates legal and economic un-certainty if the tribunal process is not followed and the authorization process highjacked by later aboriginal rights claims. How can a corporation proceed with authorized develop-ment if some time later it might face legal action despite its best efforts to follow the law?

In this sense, despite mixed success by Penn West on its motion to strike the Claim in its entirety, the court’s application of the collateral attack doctrine may be viewed by industry as a positive step in terms of adding some degree of certainty and predictability to the Province’s regulatory approval process. A party will be precluded from challenging the validity of regulatory approvals previously obtained, outside of the procedure specifically established for a challenge of this nature.

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That said, this may have little practical effect in this particular case, given that the LLN has been left to establish its right of possession by way of aboriginal title and rights, and to pursue its claim in trespass.

The Court noted that at some point in the action, Penn West may wish to raise the validity of the Approvals as a defence, and that the issue of “statutory authority” may in turn be raised by the LLN in response, although these were “matters to wait for another day”. This is a critical component of the case, as it will bring directly into issue the question of whether the Alberta oil and gas industry is entitled to rely on the defence of statutory authority in response to a claim of trespass based on aboriginal title where oil and gas operations are conducted in good faith reliance on valid and unchallenged regulatory approvals. It seems that were a court to find otherwise, it would significantly impact regulatory certainty and the settled expectations of the oil and gas industry.

We also note that the decision raises the fact that it is the Lubicon Lake Band led by Chief Billy Joe Laboucan, and not the claimant LLN led by Chief

Bernard Ominayak, which is recognized by the provincial and federal governments as the elected representatives of the Lubicon Cree. We expect that at some point in this litigation, and in the related Crown Claim, the question will have to be addressed as to whether the LLN has the authority to make the aboriginal title claim.

We intend to continue following this litigation and to report any further developments, including any judicial dispositions following a possible amend-ment of pleadings by Penn West to claim a defence on the basis of the validity of the approvals previously issued.

AUTHORS:

Michael G. MassicottePartner

Michael A. MarionPartner

Leanne DesbaratsAssociate

Premier Notley is set to review the Alberta Energy Regulator’s (AER) mandate. Her government is undertaking an ambitious and comprehensive examination of Alberta’s energy regulatory framework. This includes a potential split of the

AER. A new policy direction is expected which will address the Premier’s concerns about the AER’s role as both “a promoter of energy and the primary vehicle of environmental protection” in Alberta.1

SEPARATION ANXIETY – IS A DIVIDED ALBERTA ENERGY REGULATOR AROUND THE CORNER?FRIDAY, JULY 3, 2015

1 http://calgaryherald.com/business/energy/premier-should-leave-alberta-energy-regulator-alone.

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decessors have a long history in Alberta. Proposals for a “one-window” regulatory approval system span well over a decade. On December 10, 2012, the Responsible Energy Development Act (REDA) – legislation that created a single regulator – received Royal Assent. The AER become opera-tional in June, 2013. It assumed the energy development regulatory functions previously ad-ministered by the Energy Resources Conservation Board, and Alberta Environment and Sustainable Resource Development. These span project application to reclamation. Reorganization was operationally completed in 2015.

The changes under REDA responded to complaints of inconsistencies and overly complicated and duplicative processes for resource development projects. REDA established a “one-stop” approval process. Moreover, REDA was enacted in response to the province’s Regulatory Enhancement Project (REP) and related recommendations that a single regulator be created. REDA – as well as federal legislation of the same era, including procedural streamlining amendments to the National Energy Board Act – were in large measure an attempt to reduce the time and expense required to obtain regulatory approvals, and to make the Canadian energy industry more competitive globally.

One intent of REDA is to ensure that the oil and gas policy development function would rest with the provincial government, specifically Alberta Energy, and Alberta Environment and Parks (formerly, Alberta Environment and Sustainable Resource Development). Section 67 of REDA allows the Energy Minister to direct the AER’s priorities.2

Policy assurance – the achievement of policy outcomes set by the government – is undertaken by the AER as regulator. The interface between the

government and the AER is the Policy Management Office, which was originally proposed under the REP to: (i) facilitate policy integration and com-munication; (ii) ensure a common risk management approach; and (iii) support a coordinated approach to public engagement. Furthermore, the AER’s corporate structure under REDA separates its governance from its regulatory function.

Under REDA, oil and gas policy development rests with the provincial government. Alberta Energy drives the AER’s priorities. All of this represents significant change from what was previously an independent provincial energy regulator. If the Premier or her Energy Minister wishes to effect further change to the mandate of the AER, it need not necessarily be split. Rather, the regulator could be provided new policy direction pursuant to section 67 of REDA –with a shortcoming. A chief criticism of REDA is that it reduced the independence of the AER from government.

Given its short period of time since its imple-mentation, it is not yet clear whether the potential for government influence on decision making by the AER has detracted from regulatory certainty, resulting in global investment dollars going elsewhere. Independent, arms-length, science-based decision making by Alberta’s energy regulator, which has historically been the norm in Alberta, has generally been viewed by global investors as an attractive feature of Alberta’s oil and gas landscape, to the extent that regulatory outcomes may be more predictable and objective. That said, decision-making based on policy administered by the government, so long as it is well-defined and consistently applied, may actually add to regulatory certainty, thereby enhancing investment potential.

2 Section 67 of REDA provides as follows: Direction to Regulator 67(1) When the Minister considers it to be appropriate to do so, the Minister may by order give directions to the Regulator for the

purposes of (a) providing priorities and guidelines for the Regulator to follow in the carrying out of its powers, duties and functions, and (b) ensuring the work of the Regulator is consistent with the programs, policies and work of the Government in respect of energy

resource development, public land management, environmental management and water management. (2) The Regulator shall, within the time period set out in the order, comply with directions given under this section.

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The AER’s stated mandate since the 2013 reorganization and the passage of REDA has been “to provide for the efficient, safe, orderly and environmentally responsible development of energy resources in Alberta through the Regula-tor’s regulatory activities”.3 This includes “the protection of the environment” and “the con-servation and management of water, including the wise allocation and use of water”.4 Premier Notley’s chief concern appears to be that the AER’s environmental oversight and energy regulatory approval pro-cesses are not consistent, since the regulator’s “overarching mandate is to promote energy development.”5

Given the relatively short timeframe during which REDA has been in force, it remains to be seen how effectively the objectives of environmental responsibility and resource development are co-managed, should they not be split. It is too early to assess the legitimacy of criticisms that a single regulator removes environmental checks and balances and shifts the AER’s role to one of simply permitting. Conversely, there may ultimately be a basis to argue that resource development has been unjustifiably stifled.

Some insight may be found in AER Decision 2013-11 which authorized Shell’s Jackpine Mine Expansion Project. It was one of the first project approval determinations rendered under the REDA framework. By any standard, AER Decision 2013-11 involved a rigorous environmental review, with the ensuing approval being subject to 22 conditions, 88 non-binding recommendations and numerous findings of significant adverse environ-mental and other effects.6

Changes to the structure of the AER will be among the most critical energy policy reforms the new

government considers. The AER’s mandate directly impacts the energy industry’s ability to obtain project approvals, secure financing and assess jurisdictional and regulatory risk. From an industry perspective, key implications – both positive and negative – of a split regulator include the following:

• the potential to facilitate greater nationaland international social acceptance for Canadian energy project development;

• less large bureaucracy, and potentiallygreater regulatory focus and ability to work more directly with applicants;

• overlapping jurisdiction and regulatoryduplication;

• lack of clarity respecting the AER’s newstructure;

• project delays by returning to a multipleapproval system;

• movement from a life-cycle (i.e. fromconception through operations to final decommissioning and reclamation) to a more fragmented system creating greater ongoing regulatory burdens;

• increasedriskofreviews,appealsandlegalchallenge respecting the scope of new statutory changes; and

• uncertain realignment with federalregulators.

Regardless of whatever potential benefits may result from a split regulator, the uncertainty of a restructured provincial energy regulator – for the second time in less than three years – creates significant risk for energy companies, investors, and the province as a whole. It is also unclear whether such dramatic reform is necessary to achieve the new government’s goals. A refreshed policy approach can be implemented through section 67 of REDA — albeit with effects on

3 REDA, section 2(1)(a).4 REDA, section 2(1)(b)(ii) and (iii).5 http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-premier-considers-

splitting-provinces-energy-regulator/article25084947/.6 http://www.aer.ca/documents/news-releases/AERNR2013-21.pdf.

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The NDP pledged to assess existing agencies, boards and commissions. Further, some of the AER’s recent innovative approaches to environ-mental protection, including cumulative impacts management and play-based regulation, may already provide an existing platform for Premier Notley’s government to address concerns regard-ing the level of current regulatory environmental oversight.

Energy Minister Marg McCuaig-Boyd stated that there will be “an announcement in the next few weeks” about a review of the AER and a wider look at Alberta’s energy regulations.7 In a short period of time the new government is poised to address several critical pillars of Alberta’s energy economy, including royalties, refining and greenhouse gas.8 The AER is now among them.

From 2012 to 2015, BLG wrote extensively on the significant changes that were brought about

through the passing and implementation of REDA, as well as the government process which preceded the provincial regulatory reforms, the scope of which is unprecedented in Alberta’s oil and gas history.9 BLG’s views on the possibility of a divided energy regulator were published in the July 3, 2015 edition of the Financial Post.10 To the extent that the new government further reforms the Alberta oil and gas regulatory framework, BLG will be providing regular analysis.

AUTHORS:

Alan L. RossPartner

Michael G. Massicotte Partner

Michael A. MarionPartner

7 http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-premier-considers-

splitting-provinces-energy-regulator/article25084947/.8 See our June 26, 2015 blog posting discussing the recent provincial regulatory developments re: greenhouse gas emissions

at: http://blog.blg.com/energy/Lists/Posts/Post.aspx?ID=358.9 http://www.blg.com/en/newsandpublications/publication_3402; http://www.blg.com/en/NewsAndPublications/Documents/

publication_3089.pdf; http://www.blg.com/en/NewsAndPublications/Documents/Publication_4042_1033.pdf; http://www.

blg.com/en/NewsAndPublications/Documents/Publication_3971.pdf.10 http://www.financialpost.com/m/wp/blog.html?b=business.financialpost.com//fp-comment/a-divided-alberta-energy-

regulator.

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UPDATE: CANADA DAY BRINGS WITH IT NEW AER APPLICATION REQUIREMENTS REGARDING FIRST NATIONS CONSULTATIONTHURSDAY, JULY 2, 2015

BACKGROUND

In our February 27, 2015 blog posting (found here), we alerted industry participants to new application requirements set out in the Joint Operating Procedures for First Nations Consultation on Energy Resource Activities (found here) (Joint Operating Procedures). These new requirements were scheduled to come into force March 2, 2015. They included the completion and submission of a First Nations Consultation Declaration Form (Declaration) to the AER as part of any application under the “specified enactments” (defined in the Responsible Energy Development Act as the Mines and Minerals Act [Part 8], Public Lands Act, Water Act, and Environmental Protection and Enhance-ment Act) for which First Nations consultation was required (as determined by the Aboriginal Con-sultation Office, or ACO). The Declaration included an impacts and mitigation table summarizing the consultation.

In our March 23, 2015 blog posting (found here), we reported that in accordance with Bulletin 2015-10 (found here), the AER advised that it was delaying implementation of the Declaration and application requirements set out in the Joint Operating Procedures “until further notice”. The Bulletin went on to confirm that other application requirements would continue to apply, including the requirements for aboriginal consultation, as outlined in The Government of Alberta’s Guidelines on Consultation with First Nations on Land and Natural Resource Management (Consultation Guidelines), and the report by the Aboriginal Consultation Office (ACO) containing the ACO’s findings on consultation adequacy. There was no indication in Bulletin 2015-10 as to the reason for, or anticipated length of, the delay in the Joint Operating Procedures taking effect.

We had commented in our March 23 blog posting that this indefinite delay marked a departure from what had been a swift and significant ongoing evolution of the regulatory framework governing First Nations consultation for energy development in Alberta (a summary of that evolution may be found in our prior blog posting).

UPDATE

In Bulletin 2015-20, released June 10, 2015, the AER Advised that section 4 of the Joint Operating Procedures had been revised. Effective July 1, 2015, for all AER applications under the specified enactments (except applications for those activities set out in Appendix C of the Consultation Guidelines), an “application supplement” (Supplement) on First Nations consultation is required. The Supplement replaces the Declaration. In the Supplement, the applicant must identify, among other things, whether First Nations consultation was required. If so, a First Nations impacts and mitigation table must be completed and included (which was previously the case with the Declaration), summarizing the First Nations that were consulted, any potential adverse impacts identified during consultation, and any mitigation proposed. The Supplement is found on the AER’s website (found here) and further instruction as to its completion is included within the Supplement itself, as well as within Bulletin 2015-20.

AUTHOR:

Michael G. MassicottePartner

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ENTENTE CORDIALE?FRIDAY, JULY 24, 2015

INTRODUCTION

On March 24, 2011, the Government of Canada and the Government of Québec reached an agreement to regulate the development of petroleum in the Gulf of St. Lawrence (the “Accord”).1 The Accord affirms “Québec will benefit from all revenues derived from the development of petroleum resources… as if these resources were on land.”2 The Accord establishes objectives to ensure shared management of regulatory responsibilities and will adopt, “as much as possible, an approach which is consistent with the petroleum management regimes outside the Accord area.”3

The concepts behind the Accord are now being advanced with the introduction of Bill C-74 (the “Act”).4 The purpose of the Act is stated:

The purpose of this Act is to regulate the deve-lopment of petroleum in the joint management area by promoting, among other things, trans-parency, the sustainable management of resources and best practices to ensure personal safety and environmental protection while maximizing social and economic benefits.5

BRIEF HISTORY

The necessity of the Accord has its roots in Canada’s Constitutional division of powers. The matter ofReference re Offshore Mineral Rights determined the federal government has jurisdiction over the continental shelf and territorial sea.6 As a result, as one company noted, in order to “to drill on its Québec exploration licence, an agreement between the Québec and Federal governments is required and this agreement requires federal government recognition of such licence.”7 The Accord is an important development for the region and follows already existing accords established between Canada and Nova Scotia and Newfoundland.

BILL C-74

As of Friday, July 24, 2015, the Act has only received first reading.8 The application of the Act is confined to the joint management area – the respective area within the Gulf of St. Lawrence, as defined by Schedule 1 of the Act and any pipeline beginning from the joint management area carrying on elsewhere, so long as the pipeline is within the borders of Québec. The Act forms part of the transitional phase contemplated by the Accord:

1 Accord between the Government of Canada and the Government of Québec for the shared management of petroleum resources in the Gulf of St. Lawrence, March 24, 2011.2 Ibid at para 8.1.3 Ibid at para 2(j).4 Canada Bill C-74, An Act to Implement the Accord between the Government of Canada and the Goernment of Quebec for the Joint

Management of Petroleum Resources in the Gulf of St. Lawrence and to Make Consequential Amendments to other Acts, 2nd Sess, 41st

Parl, 2015 [the “Act”].5 Ibid, s 5.6 Reference re Offshore Mineral Rights (British Columbia), [1967] SCR 792, 65 DLR (2d) 353.7 Corridor Resources, “Exploration” online: Corridor Resources Inc. <www.corridor.ca/oil-gas-exploration/>.8 Government of Canada, “House Government Bill C-74” online: Parliament of Canada <www.parl.gc.ca/LegisInfo/BillDetails.aspx?

Mode=1&billId=8049961&View=8&Language=E>.

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During the first pre-discovery “transitional phase,” both Governments will establish a joint regulatory function using both Governments’ existing regulatory capacity. Once there is a commercial discovery of petroleum resources, a second “permanent phase” would be trig-gered; in this phase both Governments will jointly establish a new, independent offshore board, through additional legislation.9

In this transitional phase, a framework is created to ensure joint management: regulations may not be made by the Federal Energy Minister without the Provincial Energy Minister’s approval,10 the Accord may only be jointly amended,11 decisions made by Ministers under the Act must be made jointly,12 and the National Energy Board and Québec Energy Board must exercise their powers and perform their duties as prescribed by the Act jointly.13

The intended cooperation and overlap is further indicated by approval for the respective Ministers to establish an Oil and Gas Committee that will serve an advisory function.14 Additionally, both Ministers will give approval for the issuance of interests in the joint management area.15

Of interest to the energy industry is that the Act adopts Québec’s standard for exploration licences: an exploration licence confers the exclusive right to develop the portions of the joint management area that are licenced for exploration, should petroleum be found.16 Where no exploration licence is in effect, an interest may be granted based on the Federal call for bids system.17

From Old Harry to new restrictions on fracking, oil and gas development in Québec has been both promising and controversial. It remains to be seen whether the Accord facilitates that province’s energy industry – or even survives this fall’s federal election. BLG will be monitoring the Accord’s process and providing updates as they occur.

AUTHOR:

Alan L. RossPartner

9 Office of the Prime Minister, “Canada-Quebec Accord 2011” online: <www.pm.gc.ca/eng/news/2014/10/14/canada-quebec-accord>. See also, the Act, supra note 4, Preamble.

10 The Act, supra note 4, s 7.11 Ibid, s 13.12 Ibid, s 17.13 Ibid, s 18.14 Ibid, s 26.15 Ibid, s 40. 16 Ibid, s 48. See Quebec’s equivalent legislation, Mining Act, CQLR c M-13.1, s 194.17 Ibid, s 40. See the equivalent legislation, Canada Petroleum Resources Act, RSC 1985, c 36 (2nd Supp), s 14.

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015 THE CABC ANNOUNCES NEW BOARD LEADERSHIP

TUESDAY, JULY 14, 2015

On July 14, 2015 BLG lawyer Alan Ross was elected to the board of the Canadian American Business Council (CABC). The CABC provides the private sector’s perspective on the Canada-U.S. relationship and is focused on cross-border business issues including trade, investment and finance.

Alan is a partner in our Commercial Litigation Group in our Calgary office. He specializes in all forms of administrative law, government relations and regulatory matters of provincial and national importance in the energy and oil and gas industries, particularly in the areas of pipeline transmission, natural gas and electricity markets.

The CABC Board roster is represented by Air Canada, Associated Equipment Distributors, Baxter, BlackBerry, Bombardier, Borden Ladner Gervais, Campbell Soup Company, Canadian Federation of Independent Grocers, Canadian National Railway, Capitol Hill Consulting Group, Dickstein Shapiro, Ford Motor Company, General Electric, Lockheed Martin, Motion Picture Association-Canada, MTS Allstream, NGRAIN,

Ontario Media Development Corp, Revolution Organics, Shell, Spectra Energy, Sutherland, Target, TD Bank Group, TransCanada, United Technologies and UPS.

The CABC Advisory Board is chaired by the current Canadian Ambassador to the U.S. and is com-posed of all former Ambassadors to Canada and the U.S., as well as former Congressman John LaFalce, former Senator Jack Austin, P.C., Q.C., and former Minister Barbara McDougall, P.C., O.C.

Congratulations to Alan on this achievement!

AUTHOR:

Michael A. MarionPartner

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BLOG EDITORS

Michael A. Marion403.232.9464 | mmarion@blg.comMichael practises corporate and commercial litigation, arbitration and administrative law, with a focus on commercial litigation matters, oil & gas and energy litigation and regulatory proceedings, expropriation and municipal law, shareholder remedies and corporate litigation, and bankruptcy and insolvency.

Michael G. Massicotte403.232.9602 | mmassicotte@blg.comMichael is a partner in our Commercial Litigation Group, and is the Regional Leader of our Environmental Law Focus Group. Michael’s practice is focused on the energy industry, where he has acted in a variety of regulatory and litigation matters for oil & gas and electricity clients.

Alan L. Ross403.232.9656 | aross@blg.comAlan Ross is a partner in our Commercial Litigation Group in our Calgary office. Alan focuses his practice on administrative law and regulatory matters. He has extensive experience in all aspects of energy and utility regulation as well as major project develop-ment, and represents clients in energy regulatory proceedings. He has acted as counsel in numerous significant proceedings arising

from the restructuring of the Alberta electricity industry. Alan also has expertise in electricity and oil & gas infrastructure development, power transmission and generation, pipelines, oil sands, renewables, coal and coalbed methane. As well, he has extensive experience in corporate governance and telecommunications issues.

Karen Salmon403.232.9476 | ksalmon@blg.comKaren practices commercial litigation with an emphasis on the energy industry. She also acts for oil & gas and electricity clients in regulatory matters in both Alberta and the NWT.

Rick Williams604.640.4074 | rwilliams@blg.comRick Williams is a partner in our Vancouver office and is the Regional Leader of our Environmental, Municipal, Expropriation and Regulatory Group. Rick represents and advises clients on all forms of dispute resolution including regulatory proceedings, corporate/commercial litigation and arbitration, with a particular focus on the areas of oil and gas, expropriation, environmental

law and transportation.