Joint Operations And Insolvent Operators: Change Of Operatorship During A Receivership

On February 21, 2018, the Alberta Court of Queen's Bench released its decision in Firenze Energy Ltd. v. Scollard Energy Ltd., 2018 ABQB 126 (Scollard)¹.  This case considered the effect of an operator's formal insolvency proceedings (and the stay that typically arises in such proceedings) on the non-operating working interest owners' rights under the relevant joint operating agreement to assume operatorship, or appoint a new operator.

The Court's decision in Scollard follows in a long, though somewhat sparse, line of cases considering the contractual rights granted to non-operators under the CAPL Operating Agreement to replace the operator upon its insolvency – the most recent such case being the 2016 decision of Justice Macleod in Bank of Montreal v. Bumper Development Corp., 2016 ABQB 363 (Bumper). Importantly, Scollard differs from Bumper and the other cases which preceded it because, for the first time, the Court was asked to consider the lifting of the stay