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THE ELECTRICITY INDUSTRY IN CANADA In co-operation with Carswell, a Thomson Reuters company, Gowlings is pleased to announce that our book entitled The Electricity Industry In Canada is now available for purchase. The two-volume work, consisting of about 1,400 pages, is a comprehensive look at the electricity sector from coast-to-coast-to-coast. Topics covered include:
The provinces and territories are also comprehensively covered. These chapters are structured in a way to make cross referencing an easy task with each chapter containing discussions on:
For more information, or to purchase this book, please visit the following Thomson Reuters web site: WHAT ARE SENIOR ENERGY EXECUTIVES THINKING? Have you wanted to know what other senior energy executives are thinking about today's hot issues in the energy sector in Canada and around the world? We have. That's why Energy @ Gowlings has introduced a new feature, "What Are Senior Energy Executives Thinking?". From opinions on the development of renewable generation to views on alternative energy technologies to the place of Alberta's oil sands in the continental supply mix, Gowlings will ask the questions you've always wanted to. This issue's web poll: There has been a great deal of rhetoric recently about the Alberta oilsands being 'dirty energy'. How do you see Alberta's oilsands?
DISCLAIMER: This poll is informal, not scientific. It only reflects the opinions of site visitors who have voluntarily participated. The results may not represent the opinions of the public as a whole. Gowlings is not responsible for the statistical accuracy of opinions here expressed. If you have have a question you'd like to pose, let us know. Your question could be featured in an upcoming edition of the newsletter. Send all your energy-related questions to energy@gowlingsnewsletters.com
RELEASE OF THE DRAFT REGULATIONS AND FIT CONTRACT TO BE ESTABLISHED PURSUANT TO THE GREEN ENERGY ACT
The Green Energy and Green Economy Act, 2009 (the GEA) received royal assent on May 14, 2009. The GEA has yet to be proclaimed in force, but if passed, will establish an office, to be known as the Renewable Energy Facilitation Office (the Office), to be led by a renewable energy facilitator (the Facilitator). The objects of the Office will be to facilitate the development of renewable energy projects and to assist proponents of such projects with approval and procedural requirements at both federal and provincial levels of government. The Facilitator will assist in streamlining the approval process related to renewable energy projects, including assisting in obtaining the "renewable energy approval" that will be created by the GEA. Draft Regulations On June 9, 2009, the Ministries of Natural Resources and the Environment released the draft Approval and Permitting Requirements Document for Renewable Energy Projects, EBR Registry Number 010-6708 and the Proposed Content for the Renewable Energy Approval Regulation Under the Environmental Protection Act, EBR Registry Number 010-6516 (the Draft Requirements). Through the Draft Requirements, the Ministries will aim to administer their processes in a co-ordinated fashion with a view to integrating all provincial Ministry requirements for the review and approval of renewable energy projects, as will be required by the GEA. The focus of the Draft Requirements is to provide as much up-front clarity as possible on requirements, while ensuring environmental protection and public health and safety. The Draft Requirements identify the complete submission requirements to receive a renewable energy approval, including plans, studies, consultations and technology specific requirements such as setbacks, where applicable. In addition to proposing new regulations under the GEA, the Draft Requirements propose the following amendments to certain existing regulations under the Environmental Assessment Act:
In certain cases, the Draft Requirements provide that where a renewable energy generation facility has already been authorized under the Environmental Assessment Act, the facility must comply with the construction, operation and retirement of their project as originally authorized and to comply with any documented commitments made to the public or government agencies. The Draft Requirements also propose the following amendments:
FIT Contract Pursuant to the GEA, the Minister of Energy and Infrastructure (the Minister) may direct the Ontario Power Authority (the OPA) to develop a feed-in tariff program that is designed to procure energy from renewable energy sources. The OPA may also be directed to consult aboriginal peoples as well as members of local communities in the development and establishment of renewable energy projects. The GEA emphasizes the need to consult all interested and affected parties, as well as the potential for further development of renewable energy projects in a more transparent, cohesive and standard approach through the feed-in tariff program. This is further evidenced by the Minister being required to issue directions that set out the goals relating to domestic content to be achieved through the feed-in tariff program. The OPA released draft feed-in tariff (FIT) program rules dated March 13, 2009 to facilitate consultation with affected parties in order to develop a feed-in tariff program upon the enactment of the GEA. Amendments to the draft rules are expected in light of the industry consultations that have take place to date. On June 8, 2009, the OPA released a draft of the FIT contract, which outline the development of the facility, financial, operating and other obligations of renewable energy suppliers looking to provide electricity under the OPA's FIT program. The draft contract and related documents have been informed by a broad spectrum of stakeholders involved in a series of technical consultations conducted by the OPA. Comments and feedback on the FIT contract and associated documents are being welcomed until Friday, June 26, 2009 and must be provided through the OPA's FIT website. The OPA has indicated that the FIT program may launch during the summer of 2009. A further analysis of the Draft Requirements and the FIT contract will be provided once the final form of the documents have been released. See also our Executive Briefing on the Green Energy and Green Economy Act, 2009 available at the following link: http://www.gowlings.com/resources/enewsletters/energy/Htmfiles/ V7N06_20090604.en.html
AN OVERVIEW OF ALBERT'A BILL35, THE LAND STEWARDSHIP ACT
On June 4th, 2009, royal assent was given to Bill 36, the Alberta Land Stewardship Act, which was introduced to create the legislative framework for Alberta's Land-use Framework. The Bill will come into force on proclamation. Bill 36 – Land Stewardship Act Highlights of the Act include:
Regional Plans More specifically, the Act:
The regional plans will be binding on provincial and local governments as well as other decision-makers. The Act creates the positions of Stewardship Commissioner and Planning Secretariat. When a regional plan is made, all local government bodies and other decision-making bodies affected by the plan must review the regional plan and decide what, if any, new regulatory instruments or changes to regulatory instruments are required for compliance with the regional plan. In addition, all local government bodies or decision-making bodies affected by the regional plan must, within the time set in or in accordance with the regional plan, make the necessary changes or implement new initiatives so as to bring themselves into compliance with the regional plan. Conservation Easements The Act will enable the registered owner of land to grant to a qualified organization a conservation easement over the land for the protection, conservation and enhancement of the environment. In addition, a conservation easement may be granted for recreational use, open space use, environmental use and use for research and scientific studies of natural ecosystems. A conservation easement will constitute a caveatable interest in land in favour of the grantee.5 Conservation Directives A regional plan may permanently protect, conserve, manage and enhance environmental, natural scenic, esthetic or agricultural values by means of a conservation directive expressly declared in the regional plan. A title holder whose estate or interest in land is the subject of a conservation directive is given the right to apply for compensation from the Crown. 6 Amendments to Existing Legislation The Bill amends various pieces of legislation including, the Public Lands Act, theMunicipal Government Act, and Forests Act to name a few. Altogether, 26 pieces of legislation are amended by the Alberta Land Stewartship Act. Bill 36 can be viewed at: http://www.assembly.ab.ca/net/index.aspx?p=bills_status&selectbill=036
1.
Trish Audette, "Land stewardship bill sets framework to harmonize growth, environment" The Edmonton Journal (29 April 2009), online:
The Edmonton Journal,
CROWN'S DUTY TO CONSULT CAN BE DISCHARGED THROUGH THE NATIONAL ENERGY BOARD PROCESS: BROKENHEAD OJIBWAY NATION ET AL V. ATTORNEY GENERAL OF CANADA (NATIONAL ENERGY BOARD)
The Federal Court has again waded into the murky waters surrounding the Crown's duty to consult Aboriginal peoples and, in particular, the extent to which the Crown can rely upon administrative tribunals and regulatory processes to discharge that duty. In Brokenhead , the court denied an application by Manitoba's Treaty One First Nations to quash decisions of the Governor in Council (GIC) approving the issuance by the National Energy Board (NEB) of Certificates of Public Convenience and Necessity (CPCN) for the construction of several pipeline projects in southern Manitoba. The Treaty One First Nations had challenged the decisions on the ground that the Crown had failed to meet its constitutional duty to consult and accommodate A boriginal peoples when the Crown proposes action that might negatively impact upon an asserted Aboriginal claim or interest. While that duty finds its origins in earlier caselaw, its scope and content were set out in the leading cases of Haida Nation, Taku River and Mikisew Cree. One of the thornier issues that has arisen in the caselaw since Haida Nation is the role of administrative tribunals and regulatory bodies in grappling with the duty to consult. A threshold issue in this regard appears to have been laid to rest: the courts have found that, generally, regulatory bodies have both the authority and indeed the obligation to address Aboriginal rights matters even in the absence of specific language in their enabling legislation to this effect. See: Paul v. British Columbia (Forest Appeals Commission) [2003] 2 S.C.R, Carrier Sekani Tribal Council v. British Columbia Utilities Commission, (2009) BCCA 67. Where the courts have struggled is whether the role of an administrative tribunal is to discharge the Crown's duty of consultation through its regulatory process, or to use that process to assess whether the Crown has discharged this duty. The approach taken in this regard helps to answer the questions as to when consultation must occur, how it must occur, and by whom. In Brokenhead, the Federal Court adopted the former approach. The court expressly found that the First Nations' diligent attempts to directly engage the federal Crown in consultation and accommodation concerning the pipeline projects had been "ignored." Letters to the Prime Minister and other ministers "were never answered even to the extent of a simple acknowledgement." Despite this, the court found that the duty to consult was met, through the subsequent NEB process. In the absence of any distinct consultation by the Crown, both the NEB and the court assessed the adequacy of consultation largely by examining the extent to which the NEB's own process had provided opportunities for consultation and accommodation. In this sense, the NEB's approach appears to have been, as the court alluded to, as acting as a "surrogate of the Crown" in regard to consultation. The court was explicit in rejecting the idea that there existed a requirement for a distinct and discrete consultation outside the NEB process, finding that this would be a "repetitive and essentially pointless exercise." The court ruled that "the appropriate place to deal with project-related matters is before the NEB and not in a collateral discussion with either the GIC or some arguably relevant Ministry." The idea that the NEB may effectively discharge the Crown's duty of consultation is arguably difficult to reconcile with the pronouncement by the Supreme Court that quasi-judicial administrative bodies (and specifically the National Energy Board) do not themselves owe a duty to consult Aboriginal groups. In Quebec (A.G.) v. Canada (National Energy Board), the Supreme Court found that the NEB did not carry the Crown's fiduciary obligations toward Aboriginal people and that, indeed, to impose such a duty would compromise its independence. This latter approach was followed in the Carrier Sekani and Kwikwetlem decisions of the B.C. Court of Appeal, which found that the B.C. Utilities Commission, like a court of law, could and indeed must determine whether the Crown's duty of consultation had been met, but did not itself owe such a duty. The court in Brokenhead followed a distinctly different path. In so doing, the court relied upon the proposition that "the Crown may fairly consider the opportunities for Aboriginal consultation that are available within the existing processes for regulatory or environmental review… Those processes may be sufficient to address Aboriginal concerns, subject always to the Crown's overriding duty to consider their adequacy in any particular situation." This, the court stated, "is not a delegation of the Crown's duty to consult but only one means by which the Crown may be satisfied that Aboriginal concerns have been heard and, where appropriate, accommodated." This rationale is consistent with a judicial trend by which the Crown is entitled to take into consideration and rely upon statutory processes to satisfy the Crown's duty to consult. In Taku River, the Supreme Court of Canada had found the statutory consultation process pursuant to the B.C. Environmental Assessment Act, which required the participation of the affected First Nation, was adequate to meet the Crown's duty in that case. The court's approach in Brokenhead is arguably to assess the performance the Crown's duty at the level of the decision that is being challenged – in this case, the approval by the Governor in Council (GIC) of the issuance by the NEB of Certificates of Public Convenience and Necessity (CPCN). Viewed this way, the issue becomes whether prior to the GIC giving its approval, there has been adequate consultation and accommodation. The court found that there had been, through the NEB process, and that as a result the decision to approve the CPCNs was justified. In light of the Quebec v. Canada case, such an approach may be more defensible than one which regards the NEB as a "surrogate" for the Crown in matters of consultation. Nevertheless, this approach differs from that in several other cases in which the argument that consultation could be managed at the regulatory stage has been rejected. In matters of Aboriginal consultation, the courts have generally declined to follow the administrative law approach by which a breach of procedural fairness at one stage of a decision-making process can be "cured" by extending procedural rights at a subsequent stage of that process. Thus, in Dene Tha' First Nation v. Canada, the Federal Court ruled that the Crown had failed in its duty to consult by excluding the First Nation from the process of designing the regulatory and environmental review process relating to the Mackenzie Gas Project. The Court dismissed the argument that the regulatory process itself would permit the Crown to discharge its duty of consultation, on the ground that the design of that process could in itself impact upon the rights of the Dene Tha'. Likewise, in Kwikwetlem First Nation v. B.C. (Utilities Commission), the B.C. Court of Appeal ruled that the sufficiency of the Crown's consultation must be assessed at the initial stage of decision-making, even where a subsequent hearing specifically provides for a process of Aboriginal consultation and accommodation. The approach in Brokenhead appears to buck this trend. The court does not focus so much on the Crown's conduct and whether it had directly discharged its duty of consultation at any stage, but rather on whether adequate consultation and accommodation had in fact occurred, by the NEB and, arguably, by the project proponents themselves. If confirmed and followed, this decision will provide comfort to both the Crown and project proponents that regulatory approvals may survive despite a lack of initial consultation, where the regulatory process provides for an opportunity for consultation and accommodation. Meaningful advance engagement with Aboriginal groups by the project proponents themselves also appears to have been quite influential, despite the clear pronouncement by the Supreme Court that the Crown's substantive duty is not owed by, and cannot be delegated to, third-parties. For Aboriginal groups, the court's clear message in this case is that they must engage in and fully avail themselves of consultation opportunities at the regulatory stage. However, it is not clear that Brokenhead will constitute a new benchmark in the law of consultation. As noted, the approach arguably differs from other judicial trends. Furthermore, the court underscored that although the duty to consult was engaged, the evidence of potential harm to Aboriginal claims and interests was lacking. Accordingly, the level of consultation and accommodation required was at the low end of the spectrum. It may be that Crown reliance on the NEB process will not suffice in relation to projects involving greater potential impacts on Aboriginal claims and interests. Other noteworthy guidance that can be drawn from the decision (bearing in mind the possibility of an appeal), includes the following :
GOVERNMENT OF ALBERTA TO CONSIDER NUCLEAR POWER
Background In the May 2008 edition of Energy@Gowlings, Scott Whitby and Chiara Woods outlined in detail the prospects for developing nuclear power generation to serve the energy market in Alberta. As noted by Scott and Chiara, the Government of Alberta appointed an expert panel in April 2008 to "prepare a balanced and objective report for the Government of Alberta on the factual issues pertinent to the use of nuclear power to supply electricity in Alberta". Since the May 2008 edition of Energy@Gowlings, we have seen the retraction of the world economy and considerable volatility in commodity prices, which together have caused the pace of developing Alberta's energy resources to slow considerably. Notwithstanding these difficulties, there have been a number of developments to indicate that the conditions in Alberta are ripe for a discussion on the use of nuclear power:
Arguably the two most important developments to date are the Nuclear Power Expert Panel: Report on Nuclear Power and Alberta released in February 2009 ("Report") and the release at the end of April 2009 of the Alberta Nuclear Consultation Workbook ("Workbook"), constituting the basis for Alberta's nascent public consultation process. The Expert Panel's Report The expert panel which issued the Report was composed of Dr. Harvie Andre, Dr. Joseph Doucet, Dr. John Luxat and Dr. Harrie Vredenburg ("Expert Panel"). The Expert Panel was asked to refrain from taking a position on whether or not nuclear power should be incorporated into Alberta's energy grid, but rather to discuss the various scientific attributes of nuclear power generation technology. The key conclusions of the Expert Panel include:
Fundamentally, the purpose of the Report is to provide a clear understanding of the nature of nuclear power generation and its relative risks and benefits as compared to other generation alternatives. The Report states that the technology of nuclear power has evolved significantly over the past decades, with nuclear plants in Canada having a triple redundancy with respect to safety 8, and that nuclear power has a smaller physical footprint on the landscape than the alternative technologies that use coal or natural gas as feedstock. According to the Expert Panel, the social issues relating to the construction of a nuclear power generation plant are not unique. Rather, associated social issues will have to be addressed, ameliorated or supported as with the construction of any large generation facility, regardless of the type of fuel used to generate electricity. Public Consultations The first round of public consultation was concluded on June 1, 2009 with the Government of Alberta allowing citizens to complete an online interactive survey based on information contained in the Workbook. The Workbook information included:
For those not able to participate in the first round of consultation, the Government of Alberta plans to expand the public consultation process by holding discussions with stakeholder groups representing environmental, business, energy, and other interests, forming discussion groups in communities across Alberta, and conducting a public opinion survey of Albertans. Conclusion There is still much discussion to be had on the future of nuclear power in Alberta, the extent to which the Government of Alberta will support the nuclear power industry (both financially and politically), and the impact, if any, of Saskatchewan's nuclear aspirations (the Government of Saskatchewan has made it clear that it will support the nuclear industry). At the very least, it can be said that the conversation about nuclear power has begun in Alberta.
7.
Existing nuclear power generators use fission technology, which relies on harnessing energy from the splitting of heavy elements, whereas
fusion technology currently uses lasers to heat a "fuel pellet" and create a self-sustaining reaction and, effectively, creates a miniature
star within the laboratory.
CORRIDPR & LOCATION V. ROUTE: A CASE COMMENT ON SINCENNES V. ALBERTA (EUB), 2009 ABCA 167
In a recent9 decision, the Alberta Court of Appeal addressed the overlapping jurisdiction of the National Energy Board (NEB) and the Alberta Energy and Utilities Board (EUB 10) in respect of international power lines (IPL), and the EUB's "public interest" mandate. The majority upheld the EUB's decision that its jurisdiction does not extend to considering the relative merits of corridors where corridor selection had been assessed and approved by the NEB, and also upheld the EUB's interpretation of its "public interest" mandate; Madam Justice Conrad dissented in favour of the appellant landowners on the jurisdictional matter and did not consider the second point on appeal. The dispute in Sincennes arose from an original application by Montana-Alberta Tie Line (MATL) to the NEB for a permit to build and operate an IPL between Lethbridge, Alberta and Great Falls, Montana. The NEB permit included a number of terms and conditions, the most relevant of which – paragraph 4 – provided that:
In essence, the NEB permit defined the parameters of the corridor through which the IPL was to be constructed. The NEB's permit process does not requires a public hearing, but does require the NEB to provide an Environmental Screening Report, which in this instance involved various federal and provincial government departments and extensive public participation. In accordance with that process in the MATL case, the provisions of the NEB Act required the application of provincial laws to, among other matters, the determination (by the EUB) of the "location or detailed route" of the IPL (subsection 58.19(a)). On the basis of the NEB permit condition noted above, the EUB concluded11 that the EUB did:
Leave to appeal was granted on two questions: (1) Whether the EUB erred in its interpretation and application of the interplay of jurisdiction between the NEB and the EUB under the NEB Act, particularly in relation to the selection of the location of an international power line; and (2) Whether the EUB erred in its interpretation and application of the public interest test, particularly in light of the "merchant nature" of the project. Majority: Overlapping Jurisdiction and Questions of Paramountcy A good part of the majority decision focused on the interpretation of "location or detailed route" found in subsection 58.19(a) of the NEB Act . The Court noted the ambiguity of the legislative language and the difficulty of interpretation given the complexity of the statutory scheme and some of the language found in the NEB's decision granting the permit to MATL. In analysing the difference between location and detailed route, the Court noted that location was generally understood to refer to the macro or general location of the line, or the corridor. Even though the NEB Act does not require the NEB to select the corridor, the majority questioned the practicalities of the NEB leaving open the matter of location of the corridor to the EUB. Given that the NEB is required to assess the environmental impacts of a project, presumably it must first identify the corridor. Regardless of the interpretive difficulties, the majority found that section 58.22 of the NEB Act clearly grants paramountcy to "the terms and conditions of permits". The intent of the permit condition was clear, and required the IPL to be constructed and operated within the general corridor applied for by MATL. Accordingly, the majority concluded that:
The Court found that the possibility of alternative locations outside the permit corridor was beyond the authority of the EUB. According to the majority, this was supported by the fact that a "contrary interpretation would promote operational conflict. If the EUB determined that a different corridor were appropriate, the NEB findings would be revisited and the permit process subverted because the provincial designate could undo the permit through refusing its approval on the basis that another location was superior..." If the EUB were to reconsider the matter of location of the corridor, this would offend the principle of estoppels, including abuse of process, as such a reconsideration would constitute re-litigation of the same issue and be a collateral attack upon the NEB's earlier determination. With respect to the argument of the appellant landowners that as a matter of fundamental justice they were entitled to a full oral hearing on all issues, whether at the federal or provincial level, the Court concluded that "[p]rocedural fairness does not require that interested parties be given the right to an oral hearing in every situation. Meaningful participation can be achieved through various ways." Majority: Public Interest Test Justice O'Brien, for the majority, was reluctant to agree with the appellants that "need to Albertans" – a hall mark of the Alberta regulatory scheme – constituted a requisite element of the public interest test. Having regard to the flexibility accorded that criterion, the Court found that the EUB clearly demonstrated it had ample evidence regarding the social, economic and environmental effects of the proposed IPL, and that it undertook a comprehensive balancing of those effects with the benefits of the MATL project. According to the majority, "[t]he assessment was made after a comprehensive review of the specific social, economic and environmental effects of the proposed line, including those that are unique to a merchant line." As such, there was no reason to disturb the conclusion reached by the EUB with respect to public interest. Minority: Concept of "Permit" and Right to a Public Hearing Justice Conrad would have allowed the appeal on the basis that the EUB erred in finding it did not have jurisdiction to consider alternate corridors when dealing with MATL's application. She concluded that even though the corridor provision is found under the "terms and conditions" portion of the NEB's permit, it was not really a condition of the permit. Rather, paragraph 4 is the permit itself, which is subject to review by the EUB in accordance with sections 58.19 and 58.21 of the NEB Act. Thus, she found that on the basis of the language in section 58.21, 12 the EUB was entitled to consider alternate corridors in arriving at its decision of whether or not to refuse MATL's application for detailed route approval. Justice Conrad was evidently concerned by the fact that the appellant landowners were not given an oral hearing under the NEB's permit process. Given that an NEB permit will always issue for a location, and if that fact deprives the public from a hearing on location, she concluded that section 58.19 of the NEB Act, as it relates to location, is meaningless. Accordingly, "[i]f paragraph 4 was intended to limit the EUB's right to consider "location", I fail to see how such a limitation could be "necessary or desirable in the public interest". Similarly, she was satisfied that:
Conclusion According to subsequent press reports, counsel for the appellant landowners has stated that leave to appeal this decision to the Supreme Court of Canada will be sought, principally on the basis of Justice Conrad's dissent. Should leave be granted, the complexities of the overlapping federal-provincial jurisdiction in respect of international power lines, as evidenced in this Alberta decision, will be further clarified.
9.
Released May 5, 2009
CASE COMMENT ON RECENT ALBERTA ROFR DECISION: BEARSPAW PETROLEUM LTD. V CONOCOPHILLIPS WESTERN CANADA PARTNERSHIP, 2009 ABQB 202
A recent decision by a Master in Alberta confirms the principle that in selling an interest which is subject to a right of first refusal (ROFR), a vendor must act in good faith and avoid taking actions which cause the rights of the ROFR-holder to become meaningless. Facts ConocoPhillips Western Canada Partnership (CP) decided to sell various petroleum and natural gas assets including some lands which were subject to a ROFR in favour of Bearspaw Petroleum Ltd. (Bearspaw). Pengrowth Corporation was the successful bidder at a price of approximately $1 billion. The transaction was structured such that CP conveyed the assets to four subsidiaries of CP, whose shares were then purchased by Pengrowth. On the agreed closing date CP issued Notices of Disposition of Interests to Bearspaw in respect of the ROFR lands. The notices did not include values for the interests transferred and did not refer to Bearspaw's ROFR rights. Bearspaw requested ROFR notices from CP but none were issued. CP took the position that the transaction fell within an exception to the ROFR clause because the sale of the ROFR lands was between affiliated companies. Bearspaw commenced an action seeking to set aside the transfers or an order directing that ROFR notices be provided to it in accordance with the agreements. Pengrowth then sent Bearspaw a "business settlement proposal" that was described as a ROFR notice but which contained a statement that, in Pengrowth's view, the ROFR had not been triggered by the transaction. The proposal included a purchase price for each of the particular interests that made up the ROFR lands based on values determined by Pengrowth after the closing. Subsequently, Bearspaw requested the basis of the allocation of value set forth in the notices and filed a notice of motion requesting disclosure by Pengrowth of specific valuation information. 13 Pengrowth cross-applied for summary dismissal arguing that a ROFR notice had already been issued. Decision Master Hanebury reviewed the case law on summary dismissal applications and stated that if Pengrowth could demonstrate that the "business settlement proposal" included notices which complied with the ROFR clause of the agreements between Bearspaw and CP, the relief sought by Bearspaw would have been already provided, leaving its claim with no prospect of success. The agreements between Bearspaw and CP provided that the price in the ROFR notice would be the price offered by the third party purchaser. They did not however expressly contemplate a situation where the ROFR lands made up only a portion of a package sale, sold by a transfer of shares, with a sale price that did not break out the value of the ROFR lands. Master Hanebury reviewed prior case law, including the Ontario decision in GATX Corp. v. Hawker Siddeley Canada Inc.14 and the Alberta Court of Appeal's decision inChase Manhattan Bank of Canada v. Sunoma Energy Corp. 15("Chase"), the latter of which concerned the enforceability and pricing of a ROFR in the context of a package sale. As summarized by Master Hanebury, the principles which emerged from Chase are as follows: 1. A package sale will trigger ROFR rights even when the ROFR agreement does not contemplate such a sale. 2. With a package sale, the vendor owes a duty of good faith to the ROFR holder in setting a bona fide estimate of the value of the portion of the package subject to the ROFR. 3. It is not obvious that a duty of good faith is owed by the purchaser in a package sale to the holder of a ROFR over a portion of the package subject to the ROFR. 4. Regardless, the ROFR-holder challenging the issuance of proper ROFR notices must establish that the purchase price allocated to the part of the parcel subject to the ROFR is not a bona fide estimate of their value. 16 Based on these principles and the factual situation before her, Master Hanebury held that Pengrowth had to satisfy the court that it had offered the ROFR lands at the price at which they would have been offered originally under the ROFRs. However, evidence was presented that Pengrowth had bumped up the purchase price contained in the notices to Bearspaw in order to keep Pengrowth "whole" in respect of a potential tax loss faced by Pengrowth. Therefore, as the evidence was insufficient to show that Pengrowth's settlement offer was in accordance with what would have been offered had the ROFR notice been provided at the time of the sale by CP, there was a genuine issue to go to trial. Comment This decision confirms that a vendor must act in good faith and proceed in a manner which ensures that the rights of the ROFR-holder are not left meaningless. It will often be appropriate for the vendor of a land package to use the price which the purchaser has allocated to the ROFR lands as the price included in the ROFR notice. However, any adjustment to the valuation which is made post-closing may be suspect. As Bearspaw v. Conoco-Phillips is only a master's decision dismissing a summary judgment application, it remains to be decided whether a vendor may in good faith depend upon a valuation done by a purchaser after a transaction has closed, particularly where the values are adjusted in order to hold the purchaser "whole".
13.
Bearspaw Petroleum Ltd. v. Conoco Phillips Western Canada Partnership
, 2009 ABQB (Unreported, Feb.26, 2009).
CLIMATE CHANGE NEWSFLASH
On May 15th, the American Clean Energy and Security Act (the Bill) was introduced in the House and following its first reading it was referred to the Energy and Commerce Committee (the ECC) of the US House of Representatives (the House) for markup. On May 21, 2009 the Bill was approved by the ECC. It is now under consideration by other committees of the House including the Transportation and Infrastructure Committee, which have until June 19, 2009 to make amendments to provisions that fall within their jurisdiction. More information about this important American legislation can be found in the Gowlings Climate Change Newsflash at the following site: http://www.gowlings.com/resources/enewsletters/climateChange/Htmfiles/ newsflash_20090617.en.html
Up Close With ... Craig Burley In this instalment of Up Close With… we feature Craig Burley from Gowlings Hamilton office. Craig Burley is an associate in Gowlings' Hamilton office where he is a member of the National Tax Group and active member of Gowlings' Energy Group and Family-Owned Business Initiative. Craig's practice focuses on Canadian and cross-border corporate, partnership and trust tax.
Craig's tax experience includes:
Craig is bilingual in English and French. Contact Information |
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Clark Schow
Dianna Kyles
He specializes in providing tax advice to active businesses and investment funds in the context of acquisitions, reorganizations, restructurings and cross-border financing. He also practises in the area of executive compensation and provides advice on specialized tax issues in the electricity sector as well as to individuals and businesses regarding tax dispute resolution.