Holders of natural gas rights in PNG leases in Alberta are
applauding the July 7, 2011 decision of Madam Justice Kent of the
Alberta Court of Queen's Bench in the well-known series of
cases involving coal rights owners and natural gas rights holders
(the "CBM Actions").
In late May and early June, 2011, Justice Kent heard
applications brought by natural gas rights holders seeking summary
judgment for a declaration that, for leases which specifically
grant natural gas to the lessee, the lessees of natural gas are
entitled to produce coalbed methane ("CBM") from the
subject lands. At issue was the meaning of the newly amended
Alberta Mines and Minerals Act ("MMA"), and
specifically, Section 10.1 which provides, among other things, that
CBM is and has always been "natural gas."
The genesis of the dispute arose in the regulatory context in
2004, when natural gas rights holders applied for orders from the
Alberta Energy and Utilities Board ("EUB") permitting
them to produce CBM on lands where they were granted natural gas
rights. Objections from coal rights owners led to a hearing before
the EUB in late 2006 and a decision in early 2007, where the EUB
held that for regulatory purposes, the natural gas rights holders
were entitled to produce CBM.
However, commensurate with the EUB hearing, the coal rights
owners brought the CBM Actions which claimed, among other things,
trespass by the natural gas rights holders, and sought damages and
a declaration that the CBM is part of the coal.
In November, 2010, the Alberta legislature waded into the fray,
passing amendments to the MMA to add Section 10.1 as described
above. Although the CBM Actions were set for trial in March, 2011,
Justice Kent granted the natural gas rights holders leave to bring
their summary judgment motions, which subsequently resulted in the
adjournment of the trials sine die while the summary
judgment motions were heard and disposed of by the Court.
It is unknown whether the coal rights owners will appeal this
recent decision, although it seems probable. It will likely be many
more months before all appeals are exhausted.
The decision is a landmark one in the sense that it is the first
from a Canadian superior court to consider the competing claims to
CBM. British Columbia passed legislation in 2003 to declare that
CBM was natural gas, but those provisions have not been judicially
considered. The matter has been largely settled in the United
States by the decision of the U.S. Supreme Court in Amoco v.
Southern Ute which affirmed natural gas rights owners'
entitlement to CBM.
The decision will undoubtedly be closely studied by the oil and
gas industry in Canada, and although not likely the very last word
on the issue, represents a major victory for natural gas rights
owners over coal owners in the long standing dispute over what has
become an unconventional natural gas resource of considerable
Stikeman Elliott Calgary lawyers, Michael Mestinsek, Lou Cusano
and Evan Dickinson, represented natural gas rights holder Devon
Canada Corp. in the CBM Actions.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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