Court Considers Unreasonably Withholding Consent Under CAPL Operating Procedure In Precedent-Setting Decision

In IFP Technologies (Canada) v Encana Midstream and Marketing, 2014 ABQB 470, the Court clarified for the first time the circumstances in which a party that waives its right of first refusal under Article 24 of the 1990 CAPL Operating Procedure may withhold its consent to a disposition of the operator's interest.

The background facts leading to the case were that IFP purchased an unusual working interest in a heavy-oil field from Encana's corporate predecessor. The field was being developed with conventional production, but may have been a candidate for enhanced production by Steam Assisted Gravity Drainage (SAGD) or other enhanced recovery methods. The agreements between the parties limited IFP's working interest to thermal and enhanced production, with no benefit accruing to IFP for primary production. The agreements did not require Encana to undertake enhanced recovery operations.