The Court of Appeal of Alberta recently released its decision in
the case of P. Burns Resources Limited v Locke, Stock
& Barrel Company Ltd., (2014 ABCA 40). The decision
dealt with an oilfield lease held by Locke, Stock & Barrel
Company Ltd. ("LSB") that the lessor, P. Burns Resources
Limited ("PBR"), was successful in terminating by summary
judgment in the Court of Queen's Bench.
The decision centred on the habendum clause for a secondary term
of the lease, where time would not run against the lessor if there
was no production from a well. The lease provided that time would
not run if:
1. LSB was conducting "working operations without
interruptions of more than 90 consecutive days";
2. "drilling or working operations were interrupted or
suspended as the result of any cause whatsoever beyond [LSB]'s
reasonable control"; or
3. any portion of the lands were "shut-in, suspended or
otherwise not produced for any cause whatsoever which is in
accordance with good oil field practice[.]"
LSB provided affidavit evidence before the chambers judge that
the pumper was on-site every day during the two 90-day periods in
question. The pumper testified that he turned the pump on and off,
used hot oil to clear wax accumulations in the pump, circulated
diesel oil, etc., all in an effort to get some production from the
well. The pumper's evidence was consistent with the expert
evidence that LSB produced in a further affidavit, stating that the
actions were consistent with industry practice in getting
production from a low-producing well.
The Court of Appeal concluded that the chambers judge had
ignored the evidence of the pumper and of the expert, and had made
findings of fact as to whether or not LSB's actions constituted
good oilfield practice. The Court held that these findings of fact
were beyond the scope of a summary judgment, which should have been
directed at assessing whether the evidence raised a triable issue.
The Court of Appeal therefore overturned the summary judgment
declaring the lease terminated.
This decision confirms the difficulty of obtaining summary judgment in a complex oil and gas
If given a full trial at the Queen's Bench level, this case
could be an important decision for oil and gas companies , as it
could set a legal precedent in terms of what constitutes "good
oilfield practice" for future cases and contracts.
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