the negotiator · Editorial Board. By providing submissions to the Canadian Association of...

30
the negotiator October 2019 The Constitutionality (or not) of the Federal Greenhouse Gas Pollution Act Royalties are Not all Created Equally Message from the CAPL Board: Never Stop Learning THE LATEST DIANOR DECISION

Transcript of the negotiator · Editorial Board. By providing submissions to the Canadian Association of...

the negotiatorOctober 2019

The Constitutionality (or not) of the Federal Greenhouse Gas Pollution ActRoyalties are Not all Created Equally

Message from the CAPL Board: Never Stop Learning

THE LATEST DIANOR DECISION

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Vesting off Interests in Land: The Latest Dianor Decision 2 Ashley Weldon & Tasha Wood

The Constitutionality (or not) of the Federal Greenhouse Gas Pollution Act 7 Michael A. Thackray, Q.C.

Royalties Are Not All Created Equally 11 Michael P. Theroux, Laura Gill & Leanne Desbarats

14 Get Smart21 Message From the CAPL Board23 Roster Updates

24 2019 CAPL Golf Tournament26 CAPL Calendar of Events27 The Social Calendar

the negotiatorOctober 2019The Magazine of the Canadian Association of Petroleum Landmen

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2The Negotiator • October 2019

The Ontario Court of Appeal has released its much anticipated second deci-sion in Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc.1 The issue squarely before the Court in this case was whether a vesting order granted in a receivership proceeding could extinguish a third party’s interest in land in the nature of a

written byASHLEY WELDON & TASHA WOOD

BD&P

Vesting off Interests in Land: The Latest Dianor Decision

3The Negotiator • October 2019

gross overriding royalty (GOR). The Court concluded that it had the jurisdiction to do so. This appears to be the first case in Canada to reach this conclusion in the context of a GOR.

BACKGROUND AND PRIOR DECISIONSBefore reviewing the Court’s analysis and findings, it is prudent to review the facts of this case as well as the prior Dianor decisions. In 2015, a receiver was appointed over the assets of Dianor, an insolvent exploration company focused on the acquisition and exploitation of mining proper-ties in Canada. Dianor’s main asset was a group of mining claims located in Ontario and Quebec. In acquiring certain mining claims in relation to its flagship project, Dianor agreed to the reservation and payment of certain GORs for diamonds and other metals and minerals in favour of 2350614 Ontario Inc. (235 Co.). After conduct-ing a sales process, the receiver brought an application to the Court for approval of the sale of Dianor’s Ontario assets to Third Eye Capital Corporation (Third Eye) and a vesting order extinguishing the GORs. The sale agreement with Third Eye contained a condition that the GORs in favour of 235 Co. be either terminated or reduced, with a cash payment of $250,000 to be paid as “fair

and reasonable compensation” for the GORs. 235 Co. did not oppose the sale to Third Eye, but argued that the property was to be vested in Third Eye subject to its GORs. The motion judge found that the GORs did not amount to interests in land and held that he had jurisdiction under the Bankruptcy and Insolvency Act (BIA) and Courts of Justice Act (CJA) to order the property sold and on what terms.2 Notwithstanding his finding that the GORs did not amount to an interest in land, the motion judge went on to state: “I see no reason in logic

however why the jurisdiction would not be the same whether the royalty rights were or were not an interest in land”.3

On appeal by 235 Co., the Ontario Court of Appeal disagreed with the motion judge’s determination that the GORs did not amount to interest in land, relying on the two-part test established by the Supreme Court of Canada in the seminal Dynex decision.4 Among other legal errors, that Court concluded that the motion judge failed to examine the intentions of the parties as revealed in the royalty agreements as a whole, along with the surrounding

circumstances.5 After concluding that the GORs were, in fact, an interest in land, the Court of Appeal then requested further submissions and argument from the parties on whether and under what circumstances and

Notwithstanding his finding that the GORs did not amount to an interest in land, the motion judge went on to

state: “I see no reason in logic however why the jurisdiction would not be the same whether the royalty rights were

or were not an interest in land”.

4The Negotiator • October 2019

limitations a Superior Court judge has jurisdiction to extinguish a third party’s interest in land, using a vesting order under s. 100 of the CJA and s. 243 of the BIA.

THE “VESTING ISSUE” – THE ONTARIO COURT OF APPEAL’S SECOND DECISIONAfter a lengthy and comprehensive review of the insolvency process generally, as well as the relevant provisions of the BIA and CJA, the Court consid-ered the scope of the approval and vesting order (which we note had been registered on title following the motion judge’s decision) and whether 235 Co.’s GORs should have been extinguished from title. After reviewing case law touch-ing on the scope of vesting orders vis-à-vis third party interests, the Court remarked that there did not appear to be “a consistently applied frame-work of analysis to determine whether a vesting order extin-guishing interests ought to be granted”.6 The Court also noted that outcomes in these cases have been determined by the particular circumstances of each case, accounting for certain factors such as the nature of the property inter-ests, the dealings between the parties and the relative priority of the competing interests. The Court then went on to set out a framework for analysis to determine if a third party interest should in fact be extinguished, adopting a “rigorous cascade analysis”.7 The Court set out a two-factor framework for considering whether an interest in land should be extinguished: 1. consideration of the nature of the particular interest in

land; and 2. whether the interest holder has consented to the vesting

out of their interest either in the insolvency process itself or in agreements reached prior to the insolvency.8

On the first part of the inquiry, the Court concluded that the key consideration was “whether the interest in land is more akin to a fixed monetary interest that is attached to real or personal property subject to the sale (such as a mortgage or a lien for municipal taxes), or whether the interest is more akin to a fee simple that is in substance an ownership interest in some ascertainable feature of the property itself”.9 For the latter, the reasonable expec-

tation of the owner of such an interest would be that its interest was of a continuing nature, and, absent consent, could not be involuntarily extinguished in the ordinary course through a payment in lieu thereof.10

The second part of the inquiry considers whether the parties have consented to the vesting off of the inter-est either at the time of sale or through a prior agree-ment. The Court noted that the more complex question arises when consent is given through a prior agreement, such as where a third party has subordinated its inter-est contractually.11 On this point the Court reviewed an earlier Ontario deci-sion, R. Meridian, Ronspen, and Firm Capital Mortgage Funds Inc. v. 2012241 Ontario Ltd. where the court considered whether it was appropriate to grant a

vesting order where a third party had subordinated its interest to the interest of the secured creditor.12 The Court noted that the priority of interests reflected in freely negotiated agreements is an important factor to consider in the analysis of whether an interest in land is capable of being vested out. Specifically “[s]uch an approach ensures that the express intention of the parties is given sufficient weight and allows parties to contractu-ally negotiate and prioritize their interests in the event of an insolvency”.13

The Court noted that the priority of interests reflected in freely negotiated agreements is an important factor to consider in the analysis of whether an

interest in land is capable of being vested out. Specifically “[s]uch an approach

ensures that the express intention of the parties is given sufficient weight and allows parties to contractually

negotiate and prioritize their interests in the event of an insolvency”.

5The Negotiator • October 2019

The Court went on to state that if the above factors from the two-part framework proved to be “ambiguous or inconclusive”, a court may then engage in a consid-eration of the equities to determine if a vesting order is appropriate in the particular circumstances of the case.14 This equitable consideration would include the prejudice, if any, to the third party interest holder; whether the third party may be adequately compensated for its interest from the proceeds of the disposition or sale; whether based on evidence of value, there is any equity in the property; and whether the parties are acting in good faith. The Court expressed that this is not an exhaustive list and that there could be other factors to consider.

In the end, the Court of Appeal held that while the GORs in this case could not be said to be a fee simple interest, they were certainly more than a fixed monetary interest that attached to the property and did not exist simply to secure a fixed finite monetary obligation. 235 Co.’s GORs were in substance an interest in a continu-ing and an inherent feature of the property itself.15 Specifically, the Court stated that:

[…] While the GOR, like a fee simple interest, may be capable of being valued at some point in time, this does not transform the substance of the interest in to one that is concerned with a fixed monetary sum rather than an element of the property itself. The interest represented by the GOR is an ownership in the product of the mining claim, either payable by a share of the physical product or a share of revenues. It other words, the GOR carves out an overriding entitlement to an amount of the property interest held by the owner of the mining claims.16

The Court found that given the nature of 235 Co.’s interest, and the absence of any agreement that allowed for any competing priority, there was no need to resort to a consideration of the equities, and the matter was disposed of under the aforementioned two-part framework. Despite the receiver’s submission that the

realities of commerce and business efficacy in this case were that the mining claims would be unsaleable without impairment of the GORs, the Court acknowl-edged “[t]hat may be, but the imperatives of the mining claim owner should not necessarily trump the interest of the owners of the GORs”.17

However, the practi-cal outcome of the case was governed by the procedural issue before the Court, namely, whether or not the appeal period in the BIA or the CJA governed the appeal from the orders of the motion judge in this case. On that matter, the Court

held that the appeal period was 10 days as prescribed by r. 31 of the BIA rules, and ran from the date of the motion judge’s decision. Accordingly, 235 Co.’s appeal was out of time and the appeal was dismissed. The Court decided it would not exercise its discretion to grant any remedy to 235 Co. under any other statutory provision and that 235 Co. was entitled to the $250,000 payment it had already received and its counsel was holding in escrow.

IMPLICATIONS OF THE DECISIONWhile at first blush, the Court of Appeal appears to have widened the door for a court’s authority to extinguish a third party interest using a vesting order in insol-vency proceedings, from a practical point of view, it seems unlikely that many ‘typical’ GORs in the oil and gas context can be extinguished based on the framework and considerations developed by the Court. The Court acknowledged that where it is an element of the property

While at first blush, the Court of Appeal appears to have widened the door for a

court’s authority to extinguish a third party interest using a vesting order in insolvency

proceedings, from a practical point of view, it seems unlikely that many ‘typical’

GORs in the oil and gas context can be extinguished based on the framework and

considerations developed by the Court.

6The Negotiator • October 2019

itself, a GOR cannot be reduced to an interest concerned with a fixed monetary sum merely because it may be capable of being valued at a point in time. Similar to the GORs at issue in this case, standard oil and gas GORs (including those granted under the 2015 CAPL Overriding Royalty Procedure) would also likely be characterized in substance as an interest in a continuing and inherent feature of the property, and therefore fall closer to the fee simple end of the ‘interest in land spectrum’, safe from a court’s exercise of its ‘vesting off’ jurisdiction.

The second part of the framework considers whether the owner of the interest in land might have consented to the vesting off of the interest or subordination of the interest. This again, would be unusual in the typical grant of a GOR in the oil and gas context. That being said, this is an important consideration for drafters of customized royalty agreements to be aware of as subordination of the GOR interest to the interest of existing secured lenders is frequently a negotiated point on significant royalty transactions. Put differently, it is clear from this decision that the priority of interests is paramount and GOR holders should be sure to ensure such priority is reflected in the royalty agreement, and that there is no subordination to other interests, such as that of a secured lender.

While it seems likely that many standard oil and gas GORs would be protected from extinguishment under a vesting order on the basis of this framework, if it is still “ambiguous or inconclusive” at the end of the analysis, the court is then to consider the equities, including the preju-dice to the royalty holder, whether the royalty holder could be adequately compensated for their interest, whether there is any evidence of value in the property itself, etc. in decid-ing whether to grant the vesting order extinguishing the third party interest.

While the Court of Appeal expressly sought to provide a framework for courts to approach the analysis as to whether or not a vesting order extinguishing a third party’s interest is appropriate, it is not entirely clear, aside from consenting to one’s interest being vested off, what specif-ically a court should consider in determining whether it is appropriate to vest off a third party’s interest in land. The parameters of the inquiry remain somewhat vague, but given the potentially sweeping implications for holders of interests in land, it will be interesting to see if: (i) Third Eye takes steps to advance the Supreme Court of Canada leave to appeal application initiated after the first Ontario

Court of Appeal decision, or (ii) 235 Co. pursues leave to appeal from this most recent judgment. While the practical outcome here may lessen the motivation to seek leave to appeal, the door may still be open for the Supreme Court of Canada to weigh in on the interest in land and vesting issues at play in the Dianor decisions.

This article is intended as general information only and is not to be taken as legal advice. If you have any questions,

please contact any member of Burnet, Duckworth & Palmer LLP’s Energy Group. This article originally appeared

on ABlawg (5 July, 2019), online available here.

NOTES1. Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor

Resources Inc, 2019 ONCA 508 [Dianor 2019].2. Third Eye Capital Corp. v Dianor Resources Inc., 2016 ONSC

7112 [Dianor SCJ], citing: Bankruptcy and Insolvency Act RSC 1985, c. B-3 [BIA]; Courts of Justice Act RSO 1990, c. C. 43 [CJA]

3. Dianor SCJ, supra note 2 at para 40.4. Third Eye Capital Corporation v Ressources Dianor Inc., 2018

ONCA 253 [Dianor 2018], citing: Bank of Montreal v Dynex Petroleum Ltd., 2002 SCC 7.

5. Dianor 2018, supra note 4 at para 66.6. Dianor 2019, supra note 1 at para 101.7. Ibid at para 102.8. Ibid at para 109.9. Ibid at para 105.10. Ibid.11. Ibid at para 107.12. Dianor 2019, supra note 1 citing: R. Meridian, Ronspen, and

Firm Capital Mortgage Funds Inc. v. 2012241 Ontario Ltd., 2012 ONSC 4816.

13. Dianor 2019, supra note 1 at para 108.14. Ibid at para 110.15. Ibid at para 111.16. Ibid at para 113.17. Ibid at para 114.

7The Negotiator • October 2019

For context, I write this during the final days of the G7 Conference in Biarritz, France where trade wars, ripped up nuclear deals, unexpected blandly polite tweets and civil behaviour from the “Chosen One” and the question of whether Mr. Putin gets a preferred

The Constitutionality (or not) of the

Federal Greenhouse Gas Pollution Act

written byMICHAEL A. THACKRAY, Q.C.

Partner at Dentons Canada LLP

8The Negotiator • October 2019

12831 – 163 Street, Edmonton, Alberta T5V 1M5

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tee-time next year at the Doral invitational, pushed climate change to the back-pages (but for the Amazon fires). Unfortunate, so…let's instead look closer to home for the “state of our nation” on our much talked about “carbon tax” (for lack of a better word) initiatives. My purpose here today is not to provide an in-depth analysis and treatise on the complex inner-workings and/or trends (some real, some perceived) in respect of the application of our constitutional laws in Canada, but instead to provide you with enough background and current informa-tion so as to enable you to seamlessly transi-tion at a high-level on trending topics such as cyber currencies, nega-tive mortgage rates and carbon taxes at conver-sations during fall cocktail parties (I leave the first two topics alone for now by necessity not really having the faintest idea). As such, please consider this brief article as a public service primer on carbon tax in Canada, no more. Also consider this primer to be a moving target as some provincial Courts of Appeal and most importantly, the Supreme Court of Canada, have not yet spoken.

As to the basics, we all appreciate that Canada is a feder-ation with legislative powers divided between the federal parliament and the provincial legislatures. We also know that environmental legislation has become more complex

as society has become more aware and concerned about envi-ronmental problems, issues and challenges. The end result is that there has been some conflict (understate-ment?) between the federal and provincial governments in terms of regulating activities which affect the envi-ronment. The federal imposition of the carbon tax has obviously created enormous political and social policy battle-fields both within many provinces themselves and as between some of the provinces and the federal government.

The provinces have very broad powers to legislate within their jurisdiction, most of which arise under Sec. 92 of the Constitution Act, 1867. The heads of power under this section include: (a) property and civil rights in the province; (b) generally all matters of a merely local or private nature in the province; and (c) local works and undertakings. With respect to constitutional

As to the basics, we all appreciate that Canada is a federation with legislative powers divided

between the federal parliament and the provincial legislatures. We also know that environmental legislation has become more complex as society has become more aware and concerned about

environmental problems, issues and challenges. The end result is that there has been some conflict

(understatement?) between the federal and provincial governments in terms of regulating

activities which affect the environment.

9The Negotiator • October 2019

jurisdiction over legislation dealing with the protection of the environment, each province has a known constitu-tional right to regulate environmental impacts within its provincial boundaries. Also, there is the long-standing recognition that jurisdiction in Canada with respect to the environment is shared between the federal and provincial governments. As the Supreme Court of Canada held in its 1992 decision in Friends of the Oldman River Society v. Canada (Minister of Transport):

It must be recognized that the environment is not an independent matter of legislation under the

Constitution Act, 1867, and that it is a constitution-ally abstruse matter which does not comfortably, fit within the existing division of powers without consid-erable overlap and uncertainty...

Although admittedly a complete and utter over-sim-plification, to determine the constitutional validity of environmental legislation, the Supreme Court of Canada has held that the first level of analysis is a determina-tion of the pith and substance or true subject matter or dominant purpose of the provision (the “Characterization”). As observed in 2016 decision of the BC Supreme

10The Negotiator • October 2019

Court in Coastal First Nations v. British Columbia (Minister of Environment):

As the Court held in Canadian Western Bank… the doctrine of pith and substance “is founded on the recognition that it is in practice impossible for a legislature to exercise its jurisdiction over a matter effectively without incidentally affecting matters within the jurisdiction of another level of govern-ment.” It is not enough for [Northern Gateway Pipelines Inc.] to argue that s. 17 of the [British Columbia Environmental Assessment Act] affects matters beyond the Province’s jurisdiction. As long as the “dominant purpose” of the legislation is intra vires, any secondary effects are not relevant to the ques-tion of constitutional validity: Canadian Western Bank at para. 28. The Province has a constitutional right to regulate territorial environmental impacts. Since it is established law that regulation of the environment is shared jurisdiction among all levels of govern-ment, it flows logically that the EAA, whose purpose is to regulate environmental concerns in British Columbia while advancing economic investment in the Province, is valid legislation, even where it applies to an interprovincial undertaking.

Once the pith and substance of the law is established and by way of the second level of analysis, its validity will depend on whether it falls within the powers of the enacting govern-ment (the “Classification”).

Now, mercifully, back to the carbon tax…The federal Greenhouse Gas Pollution Act (the “Act”, which

came into force on June 21, 2018 under the long title “An Act to mitigate climate change through the pan-Cana-dian application of pricing mechanisms to a broad set of greenhouse gas emission sources and to make consequential amendments to other Acts”) in part puts a price on carbon pollution in order to reduce greenhouse gas emissions. The Act does not apply in all provinces, just in those that have not adopted sufficiently “stringent” (i.e., GHG emis-sions are not priced at an appropriate level according to the federal cabinet) carbon pricing mechanisms (to digress with no editorial comment, in Alberta, fuel charges under the Act start on January 1, 2020).

As would be expected, any number of provincial govern-ments (Alberta filed its own reference with the Alberta Court of Appeal in June, 2019), First Nations, political

organizations and other groups and parties have taken positions with respect to the constitutionality/unconsti-tutionality of the Act (while, I should add, all seemingly agreeing that climate change is real and must be addressed…they just have different views and opinions on the “by who” part of all this). One line of argument is that the Act is unconstitutional because it is concerned with property and civil rights and other matters of a purely local nature fall-ing within the exclusive authority of provincial legislatures. There are many other lines of argument. However, any attempt to summarize all those positions, views and argu-ments would quickly exhaust my available space. So for ease and efficiencies, I will simply describe the position of the victor (the federal government) in the first two provincial reference cases (Saskatchewan and Ontario).

Bottom line is that the Act is constitutional (although there have been minority concurring and dissenting judgements and thus the matter has been appealed to the Supreme Court of Canada). Step one, the “main thrust” or “pith and substance” of the Act has been determined to be “establishing minimum national stan-dards to reduce greenhouse gas emissions” (Ontario) and “is best seen as being the establishment of mini-mum national standards of price stringency for GHG emissions (Saskatchewan), both being of similar effect. Step two, given this Characterization, its Classification “comes within” the constitutional sphere of federal compe-tence under the national concern branch of the “peace, order and good government” power (the “POGG Power”) contained in Sec. 91 of the Constitutional Act, 1867 which provides that Parliament may “make Laws for the Peace, Order and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces”. And once the carbon tax is determined to fall under the POGG Power, the federal parliament acquires exclusive jurisdiction to legislate in relation thereto, including its intra-provincial aspects.

Many strenuous arguments and positions have been advanced which are either contrary to the above or vari-ations on the themes, but for the current purposes, the above is where Canada sits on carbon tax legislation as of August 27, 2019. Rest assured, much more to come… and cheers.

11The Negotiator • October 2019

INTRODUCTION The Court of Queen’s Bench in Alberta recently issued a decision relating to the interpretation of a gross overriding royalty. The key question the Court consid-ered was what interest is the royalty attached to – with the plaintiff arguing it attached to the

written byMICHAEL P. THEROUX, LAURA GILL & LEANNE DESBARATS

Bennett Jones

Royalties Are Not All Created Equally

Recent Decision Confirms that Royalty Disputes are Highly Factually Specific

12The Negotiator • October 2019

entirety of production from the lands in question and the defendant arguing it only applied to its working interest in those lands. While gross overriding royalties typically attach to the working interest of the grantor, the Court held that the specific language of the agreement supported the interpretation that production applied to all produc-tion. The case is a reminder that the words of a particular agreement are the pre-eminent consideration when it comes to the interpretation of royalties and that a “typical” royalty structure is not relevant to a Court’s analysis in a particular dispute.

FACTS Obsidian Energ y Partnership v Grizzly Resources Ltd, 2019 ABQB 406 involved a dispute over an overriding royalty governed by the 1997 CAPL Overriding Royalty Procedure. Grizzly Resources Ltd. (“Grizzly”) purchased certain oil and gas interests from Obsidian Energy Partnership (“Obsidian”). The deal included a grant to Obsidian by Grizzly of a 2.75% overriding royalty interest in certain lands. A dispute arose over whether the royalty applied only to the 56.25% working interest of Obsidian purchased by Grizzly or to 100% of all production from those lands.

13The Negotiator • October 2019

Grizzly initially paid Obsidian the royalty on the basis of it apply-ing to 100% of production from the lands. However, 7 years after the transaction closed, Grizzly advised Obsidian that it had come to realize the payment had been made in error and should have reflected a royalty on production from only its 56.25% working interest and withheld payments to Obsidian on that basis. Obsidian brought a summary judgment application which was heard by Master Prowse in April of 2019, claiming an entitlement to the amount of the short-fall.

DECISION Master Prowse determined that the royalty was payable on 100% of production and awarded summary judgment in favour of Obsidian. He reached this conclusion by analyzing the express words of the agreement. The royalty interest was described in the agreement as a “royalty calculated on 100%”. He held the language was unambiguous and provided for over 100% of production, not 100% of Grizzly’s working interest. Master Prowse rejected the argu-ment by Grizzly that it had not intended to grant a royalty interest in production, stating the defendant was “bound by the wording of the agreements, not by its ‘intention’”.

IMPLICATIONS There is a great deal of case law on the interpretation of royalties in Canada. In particular, there are countless

disputes as to whether a royalty “runs with the land” or is prop-erly subject to deductions (for example for processing costs). This case involves a different type of dispute – what interest the royalty actually attaches to. However, there is a common theme in decisions involving royalties generally: Courts will look at the specific language used in a royalty to resolve disputes. For example, whether a royalty is an interest in land depends on “the language used in describing the interest” (see for example Bank of Montreal v Dynex Petroleum Ltd, 2002 SCC at para. 22). Similarly, whether a royalty is subject to deductions depends on the language of the underlying agreement and Courts

should not “superimpose the arrangement reflected by a “typical” royalty” when considering disputes (574095 Alberta Ltd. v Hamilton Brothers Exploration Company, 2008 ABQB 413 at para. 29).

In this decision, while the parties tendered evidence about their understanding of the royalty, including correspon-dence exchanged between the parties during negotiations, the Court held that such evidence was inadmissible and focused its analysis on the plain language of the agreement. The key take away is that the interpretation of a particular royalty is highly factually specific exercise and so careful attention should be paid to the language used in describing a royalty.

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In this decision, while the parties tendered evidence about their understanding of the royalty,

including correspondence exchanged between the parties during negotiations, the Court

held that such evidence was inadmissible and focused its analysis on the plain

language of the agreement.

14The Negotiator • October 2019

OCTOBER COURSESLand and Environment: You Can’t Have One Without the Other October 01, 2019 8:30 a.m. to 4:30 p.m.

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Natural Gas Tenure Regulation, related policies and asso-ciated geological/technical requirements. The seminar is an introduction to this subject matter and is most suited to people who are new to petroleum and natural gas tenure or who would like to refresh their base knowledge.

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2. The process of estimating reserves and resources – income method, calculations of recoverable volumes, price forecasts, operating and capital costs, royalties

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Alberta Oil Sands Tenure Regulations and ContinuationOctober 3, 2019, 9:30 a.m. to 12:00 p.m.

Where: McDougall Center, 455 6 St SW, CalgaryNote: This course is being offered by Alberta Energy.

The seminar will provide an overview of the Oil Sands Tenure Regulation, 2010 and geological/technical requirements for oil sands mineral rights leased through Alberta Energy.

Topics will include:• Oil sands rights sales;• Minimum level of evaluation;• Minimum level of production; and• Escalating rent

This seminar is open to land and technical personnel who require a better understanding of the Oil Sands Tenure Regulation, 2010 and associated technical guidelines. This seminar is an introduction to this subject matter and is most suited to people who are new to oil sands tenure or who would like to refresh their base knowledge.

Registration is required. Walk-ins cannot be accommo-dated at the McDougall Centre. Information on registration will be available shortly.

Royalty AgreementsOctober 08, 2019 8:30 a.m. to 12:00 p.m.

This seminar is intended for landmen, administrators and other senior oil and gas personnel who work closely with royalty agreements.

16The Negotiator • October 2019

This half-day seminar is designed to assist in interpret-ing and reviewing royalty clauses and agreements. It will examine the critical components of a royalty agreement, and will discuss such topics as: qualifying an overriding royalty (i.e. an interest in land vs. an interest in the proceeds from the sale of production); proper deductions in calculating an ORR; rights and obligations of the royalty owner and payor; and securing payment of an ORR.

British Columbia Surface Rights (PSL®)October 10, 2019 9:00 a.m. to 1:30 p.m.

The British Columbia Oil and Gas Commission is the single-window regulatory agency with responsibilities for regulating oil and gas activities in British Columbia, including exploration, development, pipeline transpor-tation and reclamation. The Commission’s core roles include reviewing and assessing applications for industry activity, consulting with First Nations, ensuring industry compliance with provincial legislation and cooperating with partner agencies.

Saskatchewan P&NG Regulations October 15, 2019 8:30 a.m. to 4:30 p.m.

This seminar is intended for land personnel who require an understanding and working knowledge of the Saskatchewan Petroleum and Natural Gas Regulations.

This seminar will provide an overview of the Saskatchewan Petroleum and Natural Gas Regulations. Emphasis will be placed on the Crown PNG Dispositions & Landsales (Permits, EL’s/Leases, Public Offerings Process), Lease Administration (Petroleum Registry, Service Desks), IRIS Overview, Information Services Corporation (ISC), Offsets and Compensatory Royalty, Lease Continuations, Non-Producing Well review, and Permit Expenditures. A question and answer period will follow the presentation.

2015 CAPL Operating ProcedureOctober 17, 2019 8:30 a.m. to 4:30 p.m.

This seminar is intended for anyone who is seeking to learn about the 2015 Operating Procedure. All experience

• Project Management & Planning• Surface Freehold & Crown Acquisitions• Public Consultation & Notification• First Nations Engagement• Field Level ERP Consultation• Stakeholder Engagement During & After Construction• Registration of Documents & Caveats• Liability Assessments & Management/Acquisitions & Divestitures• Water Use Planning, Assessments, Applications & Reporting• Environmental Planning & Assessments• Environmental & Wildlife Monitoring• Pipeline Construction & Reclamation Supervision• Spill Response, Remediation & Reclamation• Stream/Wetland Assessments, Mitigation Planning & Restoration

ALBERTA#202 , 809 Manning Rd NE Calgary, ABT2E 7M9Ph: 403.288.2100

BRITISH COLUMBIA 10514 87th AvenueFort St. John, BC V1J 5K7Ph: 250.787.2163

www.prospectland.ca

17The Negotiator • October 2019

levels are welcome, but it should be noted that the course is premised on the assumption that attendees will have a good level of understanding about the 1990 CAPL Operating Procedure, as the focus of the seminar is on differences relative to the 1990, rather than the basics of the Operating Procedure.

This one day course is an overview of the 2015 CAPL Operating Procedure focused specifically on the changes between the 1990 document and the 2007/2015 document. It is meant to enable personnel to appre-ciate substantive differences between the 1990 and the 2007/2015 documents.

Negotiation Skills for Surface Land Agents (PSL®)October 22, 2019 8:30 a.m. to 4:30 p.m.

This seminar is for the surface landman looking to improve negotiation skills to meet negotiation objec-tives. NOTE: There is a 15 - 20% overlap in material between Negotiation Skills for Surface Land Agents and Constructive Conflict Management.

This seminar will examine the common struggle we often experience between meeting our substantive needs in the negotiation while maintaining or improving the working relationship. A review of the impact our “mindset” and “assumptions” have on the way in which we interact with the other party during a negotiation.

A review of traditional “Positional Bargaining” and a comparison with the more effective “Interest Based Negotiation”. Introduction and explanation of a template format which can be applied to prepare for the negotiation, provide structure during the actual negotiation and provide an evaluation tool for the session debriefing.

An examination of the elements contained within the nego-tiation, which include: Alternatives, Interests and Concerns, Options, Benchmarks, Standards and Commitment.

Strategies for dealing with aggressive and more diffi-cult negotiators and tools for addressing that behaviour. This workshop also provides a number of interactive indus-try related negotiation scenarios during the day that allow the participants an opportunity to apply the skills learned during the early stages of the workshop.

18The Negotiator • October 2019

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Current Trends in Oil and Gas LawOctober 23, 2019 8:30 a.m. to 4:30 p.m.

This seminar is designed for industry personnel who require an understanding of the fundamental concepts and current trends of oil and gas law.

This seminar will cover a range of current legal issues in the oil and gas industry, including common issues in purchase and sale transactions, AER transfer procedures and the ramifications of recent case law.

Title Review & Due Diligence: A How ToOctober 24, 2019 8:30 a.m. to 4:30 p.m.

This seminar is intended for landmen and other industry personnel who are responsible for coordinating the conduct of title review with outside counsel or those conducting due diligence reviews and rectifying title deficiencies when acquiring assets.

This seminar will focus on the practical aspects of title and due diligence reviews when acquiring assets in

Western Canada. Attendees will benefit from the suggestions presented to make the title review process involving outside counsel more cost-effective and efficient, enabling you to interpret the title opinion and use it as a working document in your land administration system. In addition, guidelines and procedures will be presented to enable internal land personnel to conduct due diligence reviews in circum-stances where the involvement of outside counsel may not be merited. Finally, the process of deficiency rectification will be discussed as well as alternatives for dealing with unre-solved deficiencies within the context of the business deal and the sale agreement.

Professional Ethics: Theory and ApplicationOctober 29, 2019 8:30 a.m. to 4:30 p.m.

This seminar is suitable for all interested land personnel and is required for prospective CAPL members as well as CAPL’s professional certification program.

This seminar is intended to increase the understand-ing of ethics and the dimensions to ethical behaviour by

19The Negotiator • October 2019

stimulating the ethical thought process, giving a basic introduction to the nuances of ethics, introducing a number of methods used in ethical decision making, and providing a forum for discussions with respect to land related ethical issues. Case studies will encourage class discussion and give each participant insight into the morality vs legality question.

Freehold Mineral LeaseOctober 31, 2019 9:00 a.m. to 4:30 p.m.

This seminar is intended for industry personnel who require a detailed knowledge of freehold mineral rights. Anyone who is taking this seminar should previously have taken CAPL’s Oil and Gas Law or an equivalent course and/or have several years of experience in land.

The instructor will discuss the Torrens System in Alberta (with some reference to Saskatchewan), the concept of indefeasibility and its qualification, historical searches, registration and caveating issues. The instructor will then review the nature and ownership of oil and gas in place, covering such issues as: the rule of capture and legal and regulatory entitlement to various substances such as coal bed methane. The topics to be covered under the Freehold Oil and Gas Lease will be: the principle features of the lease, its standard clauses, the formalities of completion and execution of the lease, the termination of the lease, and top leasing. A review of current court and regulatory decisions regarding freehold leases will complete the day. Throughout the seminar the instructor will reference the leading Canadian court cases and legislation affecting the issues discussed.

NOVEMBERContract Administration *REVAMPED COURSENovember 05, 2019 8:30 a.m. to 4:30 p.m.

Intended for those requiring an in-depth understand-ing of the practical interpretation and administration of common and complicated contract provisions. This course is designed for negotiating landmen, land administrators and all industry personnel charged with directing, draft-ing, and/or administering land contracts. The course will provide insights into the mechanics and practical

interpretation of contract provisions relative to matters that arise throughout the life of an active contract. Standard and emerging industry agreements, as well as the current CAPL procedures, will be addressed in the context of this course.

A Refresher and Practical Guide to ROFR Issues LuncheonNovember 06, 2019 11:30 a.m. to 1:30 p.m.

This seminar is intended for junior and senior land profes-sionals, including anyone who has previously taken the full-day course: An Interpretative Approach to Dealing with ROFR Issues.

This seminar will be a refresher on legal principles applying to rights of first refusal (ROFRs) and a discussion of “tools” and suggested interpretive methods for analyz-ing and responding to novel or unusual ROFR scenarios. As well, this seminar will focus in on seminal and recent ROFR case law that is relevant to the energy industry, including a review of topics such as:

• ROFR compliance and challenges for uncertainty• Unmatchable consideration• Major transactions and package deals• Corporate re-organizations• ROFRs involving both land and facilities • Earning Agreements and royalties• Receiverships and insolvencies

Drilling and Production Operations November 14, 2019 8:30 a.m. to 4:30 p.m.

This seminar is designed for persons with little or no expe-rience in drilling and production technology.

This NEW revamped one-day seminar will give a non-technical overview of oilfield operations in Western Canada. The major topics of drilling, well completion, and production operations will be covered. In the drill-ing section, the instructor will discuss drilling and other operations such as logging, drill stem testing, coring and cementing. The completion section will include a discus-sion of service rigs, perforating, fracture stimulation and downhole equipment. Production operations will cover production facilities and equipment, methods of artificial lift, and enhanced recovery techniques.

20The Negotiator • October 2019

Principles of Contract Drafting and Interpretation November 20, 2019 1:00 p.m. to 4:30 p.m.

This seminar is intended for senior land personnel with a minimum of 10 years experience drafting and interpreting contracts as a part of their daily job requirements.

The principles of drafting and interpreting contracts that have evolved in case law over the years will be presented. In addition to reviewing case studies, the instructor will discuss the essential concepts in drafting and suggestions for improving essential parts of agreements.

Overcoming the Five Dysfunctions of a Team November 26, 2019 8:30 a.m. to 4:30 p.m.

This seminar is suitable for team leads or those looking to enhance their team leadership skills.

This seminar is built on the assumption that great teams attract great team players, and that great team play-ers on great teams achieve more collectively than they could on their own. Using Patrick Lencioni’s book The Five Dysfunctions of a Team as a template, this daylong seminar teaches participants how to strengthen their teams, improve their self-awareness and sharpen their leadership skills. The course also includes a number of practical exercises that can be used to overcome hurdles that stand in the way of building an effective team.

Directive 071: Emergency Preparedness and Response Requirements (PSL®)November 27, 2019 8:30 a.m. to 4:30 p.m.

This seminar is intended for surface land agents and other industry personnel. The instructor(s) will focus on Emergency Response Preparedness, Key Regulatory Requirements and Stakeholder Consultation Expectations for the Petroleum Industry in Alberta as outlined in the Alberta Energy Regulator (AER) Directive 71.

The course material will inform participants of Emergency Response Plan (ERP) requirements associated with sour gas and oil development in Alberta. The one day training session will thoroughly review Directive 71 and provide clarity regarding the interaction between Directive 56 and Directive 71 during the lifecycle of a drilling, pipe-line, or facility project.

The course material will focus on emergency response terminology, public consultation/notification require-ments, hazard assessments and will cite several industry emergency examples.

The training will also give the participants a good understanding of the emergency preparedness expectations outlined in the Directive 71. The guidelines state that a licensee must undertake training sessions on a regular basis for fulfilling functions defined in its ERP in accordance with CAN/CSA Z-731 and the provincial energy authority (AER) to ensure that responsible personnel retain compe-tency in emergency response procedures.

The instructor will also facilitate a mock scenario so that participants have a better understanding of response proto-cols, safety considerations, communication requirements and government agency support.

The seminar will cover the following topics:

1. The ERP Regulatory Framework

2. Why is there a need for Emergency Response Plans?

3. How does Directive 56 fit in with Directive 71?

4. Hazard Assessments (or H2S release Rate Determination)

5. Planning Zones

6. When do you need a site specific Emergency Response Plan?

7. Public Involvement and Stakeholder Information Collection

8. Project Life Cycles

9. What is in an Emergency Response Plan?

10. Mock Scenario

21The Negotiator • October 2019

EDUCATION/NEW EDUCATIONI am back as a rookie Director, but not really. As some of you probably know, I was a Director from 2015 to 2017. I have also handled the education portfolio previously.

Education consists of education within the CAPL as directed by an Education Committee, a Mentorship Committee, Scholarship Committee , and various advisory committees for the University of Calgary and Mount Royal University, as well as liaising with SAIT, CAPLA, PJVA and AAPL.

What has changed for Education since the time that I left the Board in 2017?

LOTS.First and foremost, our cost cutting efforts since 2015

have resulted in breakeven numbers in 2017 and even a surplus in 2018 for the CAPL as a whole. Within Education, as per usual if a course does not make money or breakeven, we do not run it.

TAKE A BOW CAPL, FANTASTIC WORK.We also have a new government provincially that we need

to scope out and get to know. We are currently making efforts to communicate with the new government and inform them where we can.

Also new are the number of courses in our CAPL calendar. My previous job as Director of Education saw 70 courses listed in the course calendar. At present we have 48 courses listed on the calendar. We have removed the courses that do not fit our membership's needs. We have reduced the length of some courses in many cases to acknowledge the value of our members’ time and money.

A&D has become more of a focus, along with liability, indigenous awareness, the environment and the Redwater

case, all in an attempt to remain current with industry needs. Old courses have also been revamped to make them current.

We have new committee chairs and members.Further BIG news relates to the University of Calgary,

which created an “Energy & Professional Land Management “program (EPLM) that will include the old Petroleum Land Management (PLM) program.

The Haskayne School of Business now offers a Bachelor of Commerce degree with a concentration in Energy & Professional Land Management.

There are three available streams in this concentration, the Professional Land Management (PLM) stream, the Energy Management (EM) stream, and a combination of the two streams, EPLM.

Courses unique to the EPLM stream are: 1. Introduction to Professional Land Management2. Energy and Environmental Engineering3. Management of Energy Regulation

Courses unique to the PLM stream are:

1. Energy Business Agreements2. Professional Land Management Policy3. Cases in Professional Land Management

Courses unique to the EM stream are:

1. Energy Regulation2. Overview of the Alberta Oil & Gas Industry3. International Energy Development

Message From the CAPL Board

22The Negotiator • October 2019

Possible additional electives (max 6) include required courses for alternate stream as well as:

1. Oil & Gas Marketing2. Energy Risk Management3. Petroleum Economics4. Electricity Markets5. Indigenous People & Sustainable Development

Also, we are introducing another new Portfolio - “New Education” with Director, Alexis Watson. The objective of this portfolio is to develop new courses that will enhance the existing Education Portfolio. New Education and the exist-ing Education will work collaboratively to bring you courses that are timely and relevant to an ever-changing industry and the evolving role of the land negotiator.

I intend that my focus over the next year will be to do three things:

1. To support and increase the relevance of the Education portfolio to industry and thereby support the CAPL membership.

2. Leverage whatever synergies we have with related organi-zations such as PJVA and CAPLA.

3. Support and coordinate our efforts with post secondary institutions such as SAIT, Mount Royal University and the University of Calgary.

I look forward to learning my portfolio again and adding some new energy and ideas. I also look forward to re-ac-quainting myself with committees and committee members. I would like to thank Alexis for her input, energy and ideas that she has already injected into the Education portfolio and I look forward to working with Alexis in the future.

I would also like to thank the CAPL membership for giving me the opportunity to serve as a Director yet again.

Thanks for your future ideas and input.

Bill SchlegelDirector, Education, CAPL

Alexis WatsonDirector, New Education, CAPL

23The Negotiator • October 2019

Roster Updates

[email protected] 1.866.528.2558 actionland.caMedicine Hat • Calgary • Edmonton • Kindersley • Regina • Saskatoon

New project starting? Time to get cracking.We can help.

ON THE MOVE

Jennifer Bordyniuk Koch Oil Sands Operating ULC

To Independent

Troy Cameron Independent

To Synergy Land Services Ltd.

Bobby Clark Independent

To NuVista Energy Ltd.

Mandy Cookson Devon Canada Corporation

To Canadian Natural Resources Limited

Michael Ftichar Independent

To Saturn Oil & Gas Inc.

Sherry Koftinoff Niven Fischer, a Sproule Company

To Sproule Associates Limited

Jeff Rideout, P.Land Millennium Land Ltd. Calgary Crown

and Mineral Office

To TORC Oil & Gas Ltd.

Brandy Rimmey Repsol Oil & Gas Canada Inc.

To Scott Land & Lease Ltd.

24The Negotiator • October 2019

A big THANK YOU from the CAPL Golf Committee to all the golfers who came out to Heritage Pointe Golf Club and enjoyed a beautiful day of golf and networking with fellow CAPL members! A special THANKS to all our committed spon-sors who created a fun filled day for everyone to experience. Without all your support, this Tournament would not be possible, so thank you!

We were treated to amazing weather, a busy golf course full of generous sponsors, food, giveaways and prizes. As per usual, Heritage Pointe Golf Course was in amazing condition, allowing for some low scores to be had and some great networking to take place following the round.

We were able to raise $3,240 for the Centre of Suicide Prevention, a branch of the Canadian Mental Health

Association, with the Mulligan Raffle. Additional thanks go out to the

efforts of our CAPL Golf Committee: Craig Stayura, Craig Thomas, Jeremy Galeski, Kim King, Lindy Borggard, Maddison Gee, Ryan Swanson and Taylor Searle. The team worked hard and we want to congratulate them on a successful tournament!

Thank you to our 2019 CAPL Golf Tournament Sponsors.

2019 CAPL Golf Tournament

25The Negotiator • October 2019

SPECIALTY SPONSORS: Tee Gift SponsorDentons Canada LLP

Breakfast SponsorLexterra Land Ltd.

Beer Garden SponsorGlobal Raymac Surveys

Golf Cart SponsorCan-Am Geomatics Corp.

Coffee SponsorDLA Piper

Wine SponsorBirchcliff Energy Ltd.

Dinner SponsorsProgress Land Services Ltd. BMO Capital Markets

Halfway SponsorMcCarthy Tretault

Putting Green SponsorXI Technologies Inc.

Hole SponsorsLandSolutions Compass Geomatics Ltd. Sayer Energy AdvisorsP2 Energy SolutionsLawson Lundell LLPAll-Can Engineering & Surveys (1976) Ltd.Crescent Point Energy Corp.McElhanney Land Survey Ltd.

Midwest Surveys Inc.Integrated GeomaticsQuorum Software Heritage Royalty Scott Land & Lease Ltd. BRITT Land & EngagementSynergy Land ServicesVertex Resource Group Ltd.Pandell Action Land & Environmental ServicesPrairie Sky Royalty Ltd.Caltech Surveys Ltd.Phoenix Land ServicesLongshore ResourcesBorden Ladner Gervais LLPIG Wealth Management Gowling WLG

Contributor SponsorsNuVista Energy Ltd.Prospect Land ServicesCWL Energy Management Ltd.Jupiter Resources Inc.Shell Canada EnergyKC Resources Ltd. Amar SurveysPetrus ResourcesPrecision Geomatics Inc. VertexSeven Generations EnergyTervita CorporationProterra Landworks (II) Inc.

We hope to see everyone at next year’s 2020 CAPL Golf Tournament!

Garrett Zokol2019 CAPL Golf Committee Chair

26The Negotiator • October 2019

CAPL Calendar of Events

October 2019October 1 Board Meeting

October 1 Saskatchewan Crown Land Sale

October 1 Land and Environment: You Can’t Have

One Without the Other

October 2 Alberta Petroleum and Natural Gas Tenure

Policy and Regulations

October 2&3 Evaluation of Canadian Oil and Gas

Properties for Landmen (2 Day)

October 3 Alberta Oil Sands Tenure Regulations and

Continuation

October 8 Royalty Agreements (morning)

October 9 Alberta Crown Land Sale

October 9 British Columbia Land Sale

October 10 British Columbia Surface Rights (PSL®)

(afternoon)

October 14 Thanksgiving

October 15 Saskatchewan P&NG Regulations

October 17 2015 CAPL Operating Procedure

October 22 Negotiation Skills for Surface Land Agents

(PSL®)

October 23 Alberta Crown Land Sale

October 23 Current Trends in Oil and Gas Law

October 24 Title Review & Due Diligence: A How To

October 29 Professional Ethics: Theory and Application

October 31 Freehold Mineral Lease

November 2019November 5 Board Meeting

November 5 Contract Administration *Revamped

Course

November 6 A Refresher and Practical Guide to ROFR

Issues Luncheon

November 6 Alberta Crown Land Sale

November 11 Remembrance Day

November 13 British Columbia Crown Land Sale

November 13 Manitoba Crown Land Sale

November 14 Drilling and Production Operations

November 14 General Meeting

November 20 Principles of Contract Drafting and

Interpretation (afternoon)

November 20 Alberta Crown Land Sale

November 26 Overcoming the Five Dysfunctions of a

Team

November 27 Directive 071: Emergency Preparedness and

Response Requirements (PSL®)

NOVEMBER GENERAL MEETINGNovember 14, 2019

Time: 8:30 a.m.

Where: The Westin Hotel Calgary

320 4 Avenue S.W.

Cost: TBD

Register by: November 7, 2019

DECEMBER NETWORKING EVENTDecember 12, 2019

Time: 5:00 p.m.

Where: Ceili’s on 4th Avenue

Cost: $26.25

Register by: December 12, 2019

27The Negotiator • October 2019

Event Date Time Location Cost Contact Name Phone Email Registration

November General Meeting

14-Nov-19 8:30 AMThe Westin Hotel Calgary

TBDKarin SteersKaitlin Polowski

(403) [email protected]@landman.ca

7-Nov-19

December Networking Event

12-Dec-19 5:00 PMCeili’s on 4th Avenue

$26.25 Jeff Rideout 403-554-7433 [email protected] 12-Dec-19

The Social Calendar

INFORMATION AND ONLINE REGISTRATIONGeneral Meetings: http://landman.ca/events/general-meetings/ Social: http://landman.ca/events/social-events/

Call the experienced professionals at Scott Land to talk about your next project. 403-261-1000.

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who has a nose for news.

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