Alberta Court of Appeal clarifies the definition of "Producible"

22 février 2011

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In Bearspaw Petroleum Ltd. v. EnCana Corporation, the Alberta Court of Appeal upheld a trial court's interpretation of "producible" to mean, in the context of an oil and gas lease's habendum clause, hydrocarbons which are capable of being produced "with no more to be done than turning on a valve."

For a lease where the term endures "so long thereafter as the leased substances or any of them are producible from the leased area," it is sufficient if the lessee has drilled a well that is capable of producing hydrocarbons. The ordinary and natural meaning of the word "producible" does not require immediate commercial production or a pipeline tie-in to market as a condition for the lease's continuation.

The Court of Appeal distinguished this case from Freyburg v. Fletcher Challenge Oil and Gas Inc., where the term of the lease depended upon the leased substances being "produced" rather than "producible." The Freyburg case outlined policy considerations in favour of the strict construction of habendum clauses, including the desire of lessors to have wells produce as soon as possible to generate royalty income.

Nevertheless, the Court of Appeal held that the policy concerns in Freyburg do not preclude parties to a lease from choosing its duration on a basis other than that of immediate production, which is what occurred through the use of the word "producible" rather than "produced."

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