Vandergrift et al. v. Coseka Resources Ltd. et al., (1989) 95 A.R. 372 (QB)

• Judge: Virtue, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: March 30, 1989
• Citations: (1989), 95 A.R. 372 (QB)

Vandergrift v. Coseka Resources Ltd. (1989), 95 A.R. 372 (QB)

MLB headnote and full text

Millard R. Vandergrift, Howard J. Fogarty, Oilmen's Wellsite Services Ltd., The Carbon Brick & Coal Company Limited, 240689 Alberta Ltd. (plaintiffs) v. Coseka Resources Limited, Plains Petroleum Ltd., Telstar Resources Ltd., Hidrogas Limited, Scurry-Rainbow Oil Limited, Mutual Exploration Inc., Michigan Wisconsin Pipe Line Company, Turbo Resources Limited, Pembina Pipe Line Ltd., Placer Cego Petroleum Limited, Brent Petroleum Industries Ltd. (defendants) and Dome Petroleum Limited (third party) and Norman Theodore Wudel, Chevron Standard Limited

(fourth parties)

Indexed As: Vandergrift et al. v. Coseka Resources Ltd. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Virtue, J.

March 30, 1989.

Summary:

Vandergrift was entitled to a royalty on production from a gas well. The well and five other wells were the subject of a block order made by the Energy Resources Conservation Board. Vandergrift claimed a royalty based on the pooled production from all six wells.

The Alberta Court of Queen's Bench dismissed Vandergrift's claim.

Mines and Minerals - Topic 8153

Oil and gas - Compulsory unitization, elements of - The Alberta Court of Queen's Bench referred to the "two most critical elements required for the unitization of a petroleum and natural gas area" (see paragraph 48).

Mines and Minerals - Topic 8166

Oil and gas - Royalty agreements - Whether royalty rights constitute an interest in land - The Alberta Court of Queen's Bench referred to circumstances when a royalty interest creates an interest in land (see paragraphs 29 to 31 and 38).

Mines and Minerals - Topic 8166

Oil and gas - Royalty agreements - Whether royalty rights constitute an interest in land - The Alberta Court of Queen's Bench examined the langauge of a grant of royalty and held that the royalty agreement conveyed a contractual right and not an interest in land (see paragraphs 34 to 39).

Mines and Minerals - Topic 8174

Oil and gas - Royalty agreements - Royalty, calculation of - Vandergrift was entitled to a royalty on production from a well - The well and five other wells were the subject of a block order made by the Energy Resources Conservation Board - Vandergrift claimed a royalty based on the pooled production from all the wells in the block - The Alberta Court of Queen's Bench rejected the claim and held that the royalty was payable solely on the production from the original well (see paragraphs 47 to 56).

Mines and Minerals - Topic 8205

Oil and gas - Drilling agreements - Right to drill, effect of - The Alberta Court of Queen's Bench stated that a bare right to drill a well does not create an interest in land (see paragraphs 43 and 44) - The court stated that the owner of such a right to drill cannot convey an interest in land (see paragraph 45).

Mines and Minerals - Topic 8410

Oil and gas - Wells - Regulation - Block orders - A company entitled to a royalty on production from a well claimed that a block order (made by the Energy Resources Conservation Board) constituted a compulsory unitization of the wells in the block - The Alberta Court of Queen's Bench rejected the claim (see paragraphs 47 to 53).

Cases Noticed:

Vanguard Petroleum Ltd. v. Vermont Oil and Gas Ltd. et al., [1977] 2 W.W.R. 66; 4 A.R. 251, refd to. [para. 30].

Guaranty Trust Co. of Canada v. Hetherington (1987), 77 A.R. 104; 50 Alta. L.R.(2d) 193, refd to. [para. 31].

Saskatchewan Minerals v. Keyes, [1972] 2 W.W.R. 108 (S.C.C.), refd to. [para. 32].

Bensette and Campbell v. Reece, [1973] 2 W.W.R. 497, refd to. [para. 33].

Emerald Resources Ltd. v. Sterling Oil Properties Management Ltd. (1969), 3 D.L.R.(3d) 630 (Alta. C.A.), affd. 15 D.L.R.(3d) 256 (S.C.C.), refd to. [para. 37].

Telstar Resources Ltd. v. Coseka Resources Ltd. (1980), 24 A.R. 562; 12 Alta. L.R.(2d) 187, refd to. [para. 40].

Alminix Limited et al. v. Berkley Oil and Gas Ltd., [1972] 6 W.W.R. 412, refd to. [para. 55].

Bell v. Lever Bros. Ltd., [1932] A.C. 161, refd to. [para. 57].

Statutes Noticed:

Natural Gas Licence Regulations, 1962, A.R. 297/62 [para. 43].

Oil and Gas Conservation Act, R.S.A. 1980, c. O-5, sect. 1(1)(b.1) [para. 50].

Authors and Works Noticed:

Kuntz, Eugene, Classifying nonoperating interests in Oil and Gas (1988), [para. 28].

Counsel:

W.H. Kennedy, for the plaintiffs;

E.L. Bunnell, Q.C., for the defendants except Telstar Resources Ltd.;

B.K. O'Ferrall, for the third party, Dome Petroleum Limited;

T.M. Hughes, for the fourth party, Norman Theodore Wudel;

L.C. Fontaine, for the fourth party, Chevron Standard Limited.

This case was heard by Virtue, J., of the Alberta Court of Queen's Bench. The decision of Virtue, J., was delivered at Calgary, Alberta, on March 30, 1989.