The AER has issued Bulletin 2016-21 to respond to the industry's outcry to Bulletin 2016-16 which imposed a 2.0 LMR minimum threshold for eligibility to take transfers of AER-licensed assets. Bulletin 2016-16 was in response to the Alberta Court of Queen's Bench decision in Redwater Energy Corporation (Re), 2016 ABQB 278, which we previously commented on.
This Bulletin confirms the changes that it implemented in Bulletin 2016-16 which include that, in the interim, an LMR of 2.0 post-transfer is still the minimum threshold in order to be approved to take transfers. However, the AER has now provided itself some discretion to approve transfers where the transferee may not have an LMR of 2.0. In particular, the Bulletin provides in part that:
3) As a condition of transferring existing AER licences, approvals, and permits, the AER will require transferees to demonstrate that they have a LMR of 2.0 or higher immediately following the transfer or provide other evidence that the transferee will be able to meet their obligations throughout the life cycle of energy development with an LMR of less than 2.0.
The AER has not specified by what means they will be satisfied that the transferee will be able to meet its "obligations throughout the life cycle of energy development."
We further note that in the last paragraph of page 2 of the Bulletin it states: "For this reason, the AER will permit licensees to acquire additional AER-licensed assets if (i) the licensee already has an LMR of 2.0 or higher …". We have sought clarification from the AER as to whether this means that a transferee's LMR may be below 2.0 post-transfer if pre-transfer they were above 2.0.
What does this mean to potential transferees? There appears to be some reason for optimism. However, given that this Bulletin encourages licensees with transactions in progress to "contact the AER to arrange a review of their specific circumstances" it would appear that guidance will only be provided on a case by case basis and only after the specifics of a transaction are already in place. Although this does open the door to allow transfers where a transferee will have an LMR of less than 2.0 post-transfer, it does not provide certainty prior to negotiating transactions. In particular, it does not provide any guidance as to what particular factors will be considered and whether there is a minimum post-transfer LMR required in order for a company to avail itself of this discretion.
Randy's energy law practice is focused primarily in the area of oil and gas law. Randy's services include:
- Title review/opinions in conjunction with the acquisition and divestiture ("A&D") of oil and gas assets, including title ...
Bernadita’s practice is focused in the area of oil and gas law. In particular, Bernadita assists domestic and international clients in the oil and gas sector with respect to acquisitions and divestitures and the requisite due ...
Lawson Lundell's Project Law Blog focuses on updating proponents on issues emerging in the law and policy that applies to the development of major projects in Canada. The focus of the blog is on matters relating to environmental assessment and compliance, regulatory matters and Indigenous consultation.
Legal Disclaimer: The information made available on this webpage is for information purposes only. It does not constitute legal advice, and should not be relied on as such. Please contact our firm if you need legal advice or have questions about the content of this webpage.