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ARTICLE · 30 AUGUST 2007

Oil Royalties At The Wellhead – Legal Principles And Practical Considerations

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On February 22, 2007, the Manitoba Court of Appeal released its decision in "Missilinda of Canada Ltd. v. Husky Oil Operations Ltd." (Missilinda).

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Article by Kristen Lewicki, © 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Energy - Oil & Gas, July 2007

On February 22, 2007, the Manitoba Court of Appeal released its decision in Missilinda of Canada Ltd. v. Husky Oil Operations Ltd. (Missilinda). In Missilinda, the Court of Appeal examined how royalties should be calculated under a lease providing for a royalty payable on the current market value at the wellhead.

Missilinda of Canada Ltd. (Missilinda), the lessor, had an undivided 50% interest in Saskatchewan land known as the "Red Jacket" field. Husky Oil Operations Limited (Husky) was one of the lessees and operator of the oil wells to which the lease applied. The lease, dated October 9, 1984, contained the following royalty provisions:

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