Cansearch: Lessons For Operators In Limiting Counterparty Risk

Introduction

The Court of Queen's Bench of Alberta ("Court") recently decided in Cansearch Resources Ltd v Regent Resources Ltd, 2017 ABQB 535 that an unregistered operator's lien is subordinate to the registered interest of a secured lender under applicable provisions of the Personal Property Security Act (Alberta) ("PPSA"), notwithstanding an agreement's language to the contrary. The decision provides caution to operators in the oil and gas industry to take the required steps under the PPSA to protect contractual liens. The decision has further implications for operators who have failed to register an operator's lien in the Personal Property Registry and attempt to assert priority based on possession of equipment at a facility or rig.