This case speaks to the responsibilities and
liabilities of operators in pooling arrangements.
A series of companies referred to as "Mutiny" (Mutiny)
beneficially owned a mine and minerals lease interest in the north
half of a section in Alberta. Trident Exploration Corp. (Trident),
Bearspaw Petroleum Ltd. (Bearspaw) and F.M. Kaplan Technical
Services Ltd. (Kaplan) were lessees of the south half. The four
executed a pooling agreement, appointing Trident as the operator.
Pursuant to the agreement, Trident was required to do all things
necessary to maintain title documents in good standing and in full
force and effect. Trident's liability to its partners was
limited to gross negligence.
After the pooling agreement was entered, Alberta Energy issued a
Gas Offset Notice to each of the owners stating that their
respective leases were subject to an offset obligation as a result
of gas production on land adjacent to the pooled lands. The notice
described potential courses of action available to the parties,
including notifying Alberta Energy that there was a well on
production from the offset zone or electing to pay offset
compensation. If a lessee failed to respond within six months, the
lease would essentially be lost.
Trident wrote to Mutiny, Bearspaw and Kaplan a month before the
expiry of the six month period advising that the well would not be
in production for another two to six months and recommending that
the offset compensation be paid. Trident advised that it would make
the payment, and invoice the partners at their pooled interest
share. Mutiny received the letter, but did not respond to it. A
witness for Mutiny testified that she had been advised of
Trident's recommended course of action during a phone call with
Trident the week before and had agreed. She did not think further
agreement was necessary.
Bearspaw responded to Trident's letter and advised that it
did not want Trident to respond on its behalf and that each partner
should look after its own lease. Accordingly, Trident did not
respond to the offset notice on behalf of the other partners.
However, Trident failed to advise Mutiny of the change in plans and
Mutiny's lease was terminated. The land was reposted for sale
and Mutiny bid on the land, but was outbid by Bearspaw.
In the circumstances, the Court of the Queen's Bench of
Alberta found that Trident's failure to advise Mutiny that
Mutiny was responsible for responding to the offset notice amounted
to gross negligence.
Trident had written a letter that could reasonably be
interpreted as meaning that it would respond to the offset notice
on behalf of all partners. Trident could have easily advised Mutiny
of the change in plans after receiving word from Bearspaw and
failed to do so. In the result, Trident was held 100% liable for
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).