Call On Production Agreement Held Not To Be An "Eligible Financial Contract" Under The CCAA

Re Calpine Canada Energy Limited, 2006 ABQB 153 (Alberta Court of Queen’s Bench), February 24, 2006

An Alberta judge has ruled that an oil and gas "call on production" (COP) agreement is not an "eligible financial contract" (EFC) under the Companies’ Creditors Arrangement Act (CCAA). Madam Justice Romaine of the Court of Queen’s Bench continued a trend established in the Blue Range and Androscoggin decisions by declining to provide a "bright line" test for determining whether physical commodity contracts are EFCs. As she put it:

There may well be criticism of a broad spectrum approach to the determination of whether a contract that is otherwise on a strict interpretation of section 11.1(1) an eligible financial contract is in reality such a contract in character and in the context of the CCAA itself. Such an approach [i.e. the one adopted here] may lead to uncertainty and a greater risk of litigation, at least until a body of case law is established. With respect to such concerns, a