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ARTICLE · 06 SEPTEMBER 2017

Set-Off – A Powerful Remedy Made Even More Powerful By Alberta Court

Borden Ladner Gervais LLP
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Set-off is one of the most effective and powerful remedies available to a creditor, and operators under oil and gas operating agreements find it especially useful, in that the operator can set off revenues...

CanadaEnergy and Natural Resources
Miles Pittman
Miles Pittman
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Set-off is one of the most effective and powerful remedies available to a creditor, and operators under oil and gas operating agreements find it especially useful, in that the operator can set off revenues or other funds or credits it receives as operator against amounts owed. Further, the operator's set-off rights are usually honoured in an insolvency.

In Spyglass Resources Corp v. Bonavista Energy Corporation, 2017 ABQB 504, the Alberta Court of Queen's Bench opened the door to expanding the scope of set-off, as it approved the operator's setting-off of joint royalty credits it received against the non-operator's1 share of abandonment and decommissioning costs. Even though the credits arose under one contract and the costs under another – the Court did so in the name of business efficacy. Further, the Court found that set-off was effective against the non-operator's receiver and also awarded costs against the receiver for the application challenging the set-off.

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