Canadian Natural Resources Limited v Harvest Operations Corp, 2023 ABKB 62

Court of King’s Bench of Alberta Citation: Canadian Natural Resources Limited v Harvest Operations Corp, 2023 ABKB 62 Date: 20230131 Docket: 2201 01841 Registry: Calgary Between: Canadian Natural Resources Limited, Canadian Natural Resources, a General Partnership by Its Managing Partner Canadian Natural Resources Limited, Canadian Natural Resources Northern Alberta Partnership by Its Managing Partner, Canadian Natural Resources Limited, CNR Royalty Partnership, a General Partnership by Its Managing Partner Canadian Natural Resources Limited Applicants/Respondents by Crossclaim Plaintiffs/Defendants by Counterclaim - and - Harvest Operations Corp & Spoke Resources Ltd.

Respondents/Applicants by Crossclaim Defendants/Plaintiffs by Counterclaim _______________________________________________________ Reasons for Decision of the Honourable Justice B.B. Johnston _______________________________________________________ [ 1 ] The Applicants, Canadian Natural Resources Limited et al (“CNRL”), apply to set aside six notices of default served on it by Spoke Resources Ltd (“Spoke”). [ 2 ] Harvest Operations Corp (“Harvest”) and Spoke cross-apply for partial

summary judgment relating to the assignment of 114 oil and gas agreements between CNRL and Harvest. Harvest and Spoke argue that the agreements either do not require consent for the assignment or fall under an exception to consent.

Background [ 3 ] CNRL and Harvest are parties to 170 agreements that relate to oil and gas operations in Alberta, including 133 land agreements, 30 facility agreements and 7 service agreements (collectively, the “Agreements”). [ 4 ] On November 30, 2020, an Asset Purchase and Sale Agreement (“PSA”) was entered into between Harvest and Spoke whereby approximately 1,158 well licenses, 233 pipeline licenses and 159 facility licenses were transferred to Spoke. The PSA covered 117,047 net hectares of land.

CNRL holds a joint interest in 40,135 of the net hectares. [ 5 ] On April 1, 2021, Harvest sent correspondence to over 300 parties, including CNRL, asking for consent to the assignment of agreements related to the PSA. CNRL was asked for consent on all of the Agreements, including those Harvest claims are consent exempt.

[ 6 ] CNRL did not consent to the assignments of the Agreements to Spoke. CNRL advised Harvest on April 21 and 26, 2021, that it had concerns relating to Spoke’s ability to meet future financial obligations. [ 7 ] CNRL, however, was prepared to agree to the assignments if it received satisfactory evidence of Spoke’s ability to meet its prospective financial obligations related to the jointly held assets.

Alternatively, Spoke could provide CNRL with an irrevocable letter of credit in an amount equal to the expected abandonment and reclamation obligations. [ 8 ] Spoke was only licensed by the Alberta Energy Regulator to hold licenses on November 6, 2020.

The licenses assigned to Spoke by Harvest were Spoke’s first and only well licenses and Spoke had no financial or operational history. [ 9 ] On July 9, 2021, Spoke and Harvest advised CNRL that most of the Agreements were consent exempt. [ 10 ] On February 11, 2022, CNRL filed a statement of claim against Harvest and Spoke seeking, amongst other things, a declaration that Harvest’s assignment of the Agreements was of no force and effect and damages in the amount of $367,210.60. [ 11 ] On May 9, 2022, CNRL filed an application seeking a declaration that it is the operator under the Operatorship Agreements.

CNRL subsequently became the operator by consent and this part of the application was withdrawn. [ 12 ] On June 2, 2022, Spoke, as Harvest’s agent, issued six notices of default (“Notices of Default”) under five land agreements, plus the North Cecil CO & O agreement, which is a facility agreement (“Cecil”) (collectively, the “Operatorship Agreements”).

The Default Notices alleged that CNRL was in default under the Operatorship Agreements for withholding consent to the assignment of interests to Spoke. [ 13 ] A counterclaim was filed by Spoke on June 3, 2022, seeking, amongst other things, a declaration that the assignments are valid and that Spoke is a valid assignee. [ 14 ] On June 10, 2022, CNRL amended its application to request the Notices of Default be set aside. [ 15 ] A cross-application was filed by Harvest and Spoke on June 10, 2022, relating to 114 of the 170 Agreements (“Consent Exempt Agreements”).

Of the 114 Consent Exempt Agreements, 18 are facility agreements and the remainder are land agreements. Issues [ 16 ] The issues are (1) whether the Default Notices should be set aside and (2) whether partial

summary judgment should be granted for the Consent Exempt Agreements? Analysis Default Notices [ 17 ] Harvest issued the Default Notices for the Operatorship Agreements on June 2, 2022. CNRL, Harvest and Spoke agree that CNRL was not the operator under the Operatorship Agreements when the Default Notices were issued. CNRL became the operator approximately 15 months after the issuance of the Default Notices. [ 18 ] Harvest asserts that the Default Notices were valid at the time or are valid now.

It argues that CNRL has breached the Operatorship Agreements by refusing to recognize Spoke as a valid assignee. [ 19 ] CNRL argues the Default Notices should be set aside as it was not the operator at the time the notices were issued. I agree. [ 20 ] Five of the Operatorship Agreements incorporate the 1981 or 1990 Canadian Association of Petroleum Landmen (“CAPL”) Operating Procedure. One of the Operator Agreements incorporates the 1999 Petroleum Joint Venture Agreement (“PJVA”). The Operating Procedures and PJVA draw a distinction between an operator and an owner or party to the Agreements.

Such distinction has been recognized previously by this Court and the Court of Appeal: Dow Chemical Canada ULC v NOVA Chemicals Corporation , 2020 ABCA 320 at paras 89-90 ; SemCanada Crude Co (Re) , 2009 ABQB 397 at para 38-68 , leave to appeal refused, 2009 ABCA 275 . [ 21 ] The right to provide or withhold consent is the right of the owner or party to the Agreement rather than the operator. [ 22 ] The functions and duties of an operator are separately addressed in each of the CAPL Operating Procedures and the PJVA. The Default Notices refer to defaults of the duties and obligations of the operator.

I agree with CNRL that there can be no default in the absence of being the operator. [ 23 ] I also note that neither the CAPL Operating Procedures nor the PJVA Agreement permit the issuance of prospective default notices. Further, under the Default Notices, an operator has 30 days to cure a default. If CNRL was not the operator, it would have no ability to attempt to cure any default. [ 24 ] I find that the Default Notices were not valid. I make no determination regarding whether any new notices of default that may be issued are proper or valid. Such notices are not before the Court.

Is this Case Appropriate for Partial

Summary Judgment?

[ 25 ] Horizon and Spoke rely on rule 7.3(1) in their application for partial

summary judgment. [ 26 ]

Summary judgment is an appropriate procedure if there is no genuine issue for trial such that the judge can reach a fair and just determination on the merits. Specifically,

summary judgment may be appropriate when the process allows the judge to make the necessary findings of fact and to apply the law to the facts, and it is a proportionate, more expeditious and less expensive means to achieve a just result: Hryniak v Mauldin , 2014 SCC 7 at para 49 ; Weir-Jones Technical Services Incorporated v Purolator Courier Ltd , 2019 ABCA 49 at para 21 ; Pure Environmental Waste Management Ltd v Lonquist FieldService (Canada), ULC, 2022 ABQB 30 at para 39 . [ 27 ] Disputes about material facts will not necessarily disqualify a matter from the

summary judgment process: Weir-Jones at para 21; Hannam v Medicine Hat School District No 76 , 2020 ABCA 343 at para 147 . [ 28 ] In Weir-Jones at para 47, the Court of Appeal outlined the considerations relevant to

summary judgment: (

a) Having regard to the state of the record and the issues, is it possible to fairly resolve the dispute on a

summary basis, or do uncertainties in the facts, the record or the law reveal a genuine issue requiring a trial? (

b) Has the moving party met the burden on it to show that there is either "no merit" and that there is no genuine issue requiring a trial? At a threshold level the facts of the case must be proven on a balance of probabilities or the application will fail. (

c) If the moving party has met its burden, the resisting party must put its best foot forward and demonstrate from the record that there is a genuine issue requiring a trial. (

d) In any event, the presiding judge must be left with sufficient confidence in the state of the record such that he or she is prepared to exercise the judicial discretion to summarily resolve the dispute. [ 29 ] CNRL argues that the Court must apply a separate three-part test for partial

summary judgment before considering the Weir- Jones criteria. I disagree. The analysis for partial

summary judgment is part of the Weir-Jones analysis. [ 30 ] In the context of an application for partial

summary judgment, the Court of Appeal recently noted in JBRO Holdings Inc v Dynasty Power Inc , 2022 ABCA 140 at para 49-51 : Under r 7.3(1), a party may apply for

summary judgment in respect of all or part of a claim. Partial

summary judgment is expressly contemplated by the words of the rule. Provided the issue can be decided discretely and fairly, partial

summary judgment may be granted: [ Baim v North Country Catering Ltd , 2017 ABCA 206 ], paras 10-11. While partial

summary judgment (for example, granting

summary judgment against a single defendant) may run the risk of duplicative proceedings or inconsistent findings of fact, resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost-effective approach: Hryniak , para 60 . It must be demonstrated that partial

summary judgment would achieve a just result: see Stankovic v 1536679 Alberta Ltd , 2019 ABCA 187 , para 54 , 88 Alta LR (6th) 1. If the record allows the judge to make the necessary findings of fact and apply the law, then the

summary procedure should be used unless there is a substantive reason to conclude that

summary disposition would not achieve a just result: Weir-Jones , para 25. [ 31 ] Harvest and Spoke seek partial

summary judgment on the Consent Exempt Agreements. They argue that the Consent Exempt Agreements contain standard industry language and are unambiguous, and either require no consent or have contractual consent exemptions. [ 32 ] CNRL argues that partial

summary judgment is not appropriate. The issues are neither simple nor straightforward. The Consent Exempt Agreements require the

interpretation of provisions in three industry agreements that have not previously been considered by this Court. Given the significant precedential effect on the oil and gas industry, such issues must be carefully considered at trial based on a full evidentiary record. [ 33 ] CNRL also asserts that the application only addresses 114 of the 170 agreements that were purportedly assigned to Spoke. The application leaves out 56 agreements and ignores the transaction as a whole and the reasons why CNRL refused to consent to the assignments.

All issues of damages, set-off and judgments claimed in both the Claim and Counterclaim under all 170 agreements are reserved for trial. Further, CNRL argues that Harvest and Spoke ignore the issues of waiver, partial

summary judgment is a “rare procedure”, and the application is the “antithesis” of the limited, easily bifurcated issues appropriate for partial

summary judgment. [ 34 ] I find this case well-suited for partial

summary judgment for several reasons. [ 35 ] First, this is, at its heart, a contractual dispute. These types of cases are well-suited for

summary judgment. The issue is mainly one of

interpretation of contract and there are few facts in dispute. Although there are some uncertainties in the facts, I find that having regard to the record and the issues, it is possible to fairly resolve part of the dispute on a

summary basis. I disagree with CNRL that partial

summary judgment is not appropriate in cases where agreements have not previously been interpreted by this Court. Indeed, this would have the effect of thwarting most partial

summary judgment applications involving contractual matters. This is contrary to Hryniak , Weir-Jones and rules 1.2 and 7.3(1). [ 36 ] Second, although this application only deals with 114 of the Agreements, the Consent Exempt Agreements have different terms than the remaining 56 agreements, thus minimizing concerns over inconsistent

interpretations. The risk of inconsistent results is further minimized because the issues of damages and set-off claimed in both the Claim and Counterclaim under all the Agreements have been reserved for trial. As such, CNRL will still be able to make arguments at trial relating to the transaction as a whole. It will simply be unable to argue the assignability of the Consent Exempt Agreements. The Court acknowledges concerns of CNRL regarding abandonment and reclamation obligations that it may face in the event of a company becoming financially insolvent or defunct.

However, these concerns can still be raised in the trial as part of the context of the overall transaction. Indeed, the issue of the reasonableness of CNRL’s conduct in declining to exercise consent can be considered as a whole. However, I do not see how this impacts the

interpretation of agreements that were freely negotiated, that contemplate the absence of consent or exceptions to consent and that rely on industry agreements widely used by parties in the oil and gas industry in Alberta. Indeed, parties would be prudent to consider their abandonment and reclamation obligations but such concerns should be addressed at the time of negotiating and entering such agreements, not after the parties have agreed to the terms. [ 37 ] Third, this application has the potential to significantly streamline and simplify the trial.

The Consent Exempt Agreements will no longer be in issue, effectively removing evidence and argument related to all but 56 of the agreements. This will significantly advance access to justice, and is the most proportionate, timely and cost-effective approach. [ 38 ] Fourth, the issues of the Consent Exempt Agreements can easily be bifurcated from the remainder of the issues. None of the remaining agreements are consent exempt. [ 39 ] Fifth, CNRL has offered little explanation in terms of additional evidence that could be adduced at trial.

Although it raised concerns about the efficacy of some evidence adduced by Harvest and Spoke, even if this Court disregards that evidence, I am still able to interpret the Agreements in the absence of such evidence. [ 40 ] Sixth, given this case involves the

interpretation of agreements, there are no credibility concerns or complex expert opinions. I do, however, note there are arguments related to the appropriateness of the deponent’s evidence, which I address below. [ 41 ] Finally, there are no genuine issues for trial relating to the assignability of the Consent Exempt Agreements since there is no dispute as to which Agreements apply and the unambiguous wording of the terms within those Agreements. Partial

summary judgment will provide a fair result, having regard to the state of the record and the issues. [ 42 ] The assignability of the 114 agreements is easily bifurcated from the main action and can be dealt with expeditiously and in a cost-effective manner. Indeed, this case is exactly the type of proceedings where partial

summary judgment is appropriate. [ 43 ] Since Hryniak and Weir-Jones , courts have been somewhat reluctant to grant partial

summary judgment. Indeed, there are important reasons for declining to do so in some cases. However, it is also important for this Court to embrace the “cultural shift” mandated by the Supreme Court and use the partial

summary judgment rules to their full extent in appropriate cases. For the reasons noted above, I find this is one such case. Evidence [ 44 ] CNRL argues there are evidentiary concerns in this case which make partial

summary judgment inappropriate. I disagree. [ 45 ] CNRL asks this Court to disregard the evidence of Mr. Jon Lowe about the applicability of the exemptions under the Consent Exempt Agreements. CNRL raises concerns that Mr. Lowe purports to give opinion evidence on the very issues before this Court. It asserts that Mr. Lowe is not qualified to give such evidence and such opinion evidence is inadmissible. Further, it argues that this application can only be determined with a full evidentiary record including expert evidence. [ 46 ] I note that Mr.

Lowe is a senior land professional with over 40 years experience in the oil and gas industry. He was previously the vice-president of land involved in the PSA in this case and therefore has knowledge of matters deposed to in the affidavit. The parties’

interpretation of their agreements and conduct based upon such would be probative evidence in most contractual disputes, subject, of course, to evidentiary rules like the parol evidence rule. I take Mr. Lowe’s evidence as simply evidence of how Harvest has interpreted the Agreements in issue and acted based on such

interpretations. Indeed, long before any contractual dispute reaches the courts, the parties to the contract are tasked with the role of interpreting the contractual terms to perform their respective obligations. Accordingly, I reject CNRL’s assertion that how Harvest interprets the Agreements is inadmissible opinion evidence. [ 47 ] I agree, however, with CNRL that it is the role of this Court, not Mr. Lowe, to make findings on the ultimate issues before this Court. In such instances, I am not bound by Mr. Lowe’s evidence on how Harvest interprets the agreements. This Court can interpret the Agreements and expert evidence is not required on this issue. Principles of Contractual

Interpretation [ 48 ] This case involves the

interpretation of standard industry agreements including the CAPL Operating Procedures and the 1999 PJVA Agreements. [ 49 ] The Supreme Court of Canada in Sattva Capital Corp v Creston Moly Corp , 2014 SCC 53 , opined that a court must first ascertain the intent of the parties and the scope of their understanding.

This requires a court to “read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva at para 47. [ 50 ] The Supreme Court of Canada described the surrounding circumstances this way: While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement ( Hayes Forest Services , at para. 14; and Hall, at p. 30).

The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The

interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract ( Hall , at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from

the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), (BC CA), 101 B.C.A.C. 62). The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case tocase. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution ofthe contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of bothparties at or before the date of contracting.

Subject to these requirements and the parol evidence rule discussed below, this includes, inthe words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document wouldhave been understood by a reasonable man” (Investors Compensation Scheme, at p. 114).

Whether something was or reasonably ought tohave been within the common knowledge of the parties at the time of execution of the contract is a question of fact: Sattva at para 57 and58. [51] In interpreting the CAPL Operating Procedures and the 1999 PJVA Agreements, both parties agree that they must beinterpreted in a manner that is commercially reasonable and accords with good business sense: Resolute FP Canada Inc v Ontario(Attorney General), 2019 SCC 60 at paras 79, 142-144. The parties, however, differ on what that

interpretation should be. [52] CNRL argues that allowing a party to assign such agreements without their consent would “trample on the fundamental legalprinciple that parties are able to make bargains with parties of their own choice (freedom of contract).

Otherwise, parties could findthemselves unilaterally stuck in a relationship with an unpleasant or difficult partner.” It further asserts that when the financial liabilitiesare potentially significant, “commercial reasonability demands that the contractual and common law right of a party to withhold consentare not disregarded or interpreted in a manner” to gut the purpose of the protection. [53] Although this argument has merit as it relates to the agreements where consent to assignment is required or agreements thatare silent on assignability, that is not the situation before this Court on the partial

summary judgment application. The argument ofCNRL does not have merit where the parties have entered into agreements that allow for assignment without consent. It does not bely aparty to agree to terms under a contract and then resile from the terms when it does not like what it has negotiated. In this case, CNRLentered into 170 different agreements, all with differing assignment terms, and there is no basis to set aside the contractual agreements.Parties must live with the consequences of the bargain they strike. CNRL’s approach would constitute a wholesale rejection of the termsit voluntarily agreed to, not an exercise in

interpretation in a manner that is “commercially reasonable”. Are the Agreements Consent Exempt? [54] Harvest and Spoke assert the 114 Consent Exempt Agreements either require no consent, deem consent where the non-consenting party fails to exercise a right of first refusal (“ROFR”) or there is a contractually enumerated exception to consent. Each ofthese categories will be discussed below. 1981 and 1990 CAPL Operating Procedures [55] Most of the Consent Exempt Agreements incorporate the 1981 or 1990 CAPL Operating Procedures. [56]

Article XXIV of the 1981 and 1990 CAPL Operating Procedures address the procedure for assignments. In both cases, Clause2401 articulates two alternatives that may be elected by the parties including the requirement of consent by the non-assigning parties,that cannot unreasonably be withheld, or a ROFR in favour of the non assigning parties. Clause 2402 then provides certain enumeratedexceptions to the two alternatives.

The 5% Exemption [57] Most of the Consent Exempt Agreements fall under the enumerated 5% exemption. [58] A plain and ordinary reading of the CAPL procedures make it clear that there are exceptions to consent or the ROFRalternative, including where the 5% exemption applies. [59] The 1981 CAPL provides: 2402 Exceptions to Clause 2401-Clause 2401 shall not apply in the following circumstances namely ... (

d) an assignment, sale or disposition by a party in which the net acres being assigned, sold or otherwise disposed of by that party in thejoint lands represents less than five (5%) percent of the total net acres being assigned, sold or otherwise disposed of by that partypursuant to the transaction affecting its interest in the joint lands. [60] The 1990 CAPL states: 2402 Exceptions to Clause 2401-Clause 2401 shall not apply in the following circumstances namely ... (

d) A disposition by a party in which the net hectares being disposed of by that party in the joint lands represent less than five percent(5%) of the total net hectares being disposed of by that party pursuant to that disposition. [61] “Joint lands” in the 1981 CAPL are defined as “those lands or interests therein which by the Agreement have been madesubject hereto”. In the 1990 CAPL, the meaning includes “those lands and interests therein which have been made subject hereto by theAgreement…”. In other words, the clause applies to each specific agreement.

[ 62 ] I find that the language of (

d) in both the 1981 and 1990 CAPL makes it clear that the 5% exemption is to be calculated on an agreement-by-agreement basis with reference to the total land contemplated in a “transaction” or “disposition”. In this case, the total land contemplated in the PSA. [ 63 ] The only evidence before this Court is that none of the individual agreements in which the 5% exemption is relied upon exceed the 5% threshold on an individual basis.

Although CNRL agrees that the 5% exemption applies on an agreement-by-agreement basis, it asserts the total land in each agreement cumulatively cannot exceed 5%. [ 64 ] CNRL argues that the cumulative total in this case is over 26% of the total net hectares. Its position is that it would be “absurd” not to add up the total net hectares of each agreement because the larger the transaction, the larger the risk. [ 65 ] I disagree that the percentages are cumulative.

The language of the agreements is clear that the calculation is on an agreement-by-agreement basis. [ 66 ] I have reached this conclusion for several reasons. [ 67 ] First, the plain and ordinary meaning supports this

interpretation. There is nothing in the CAPL language or in the annotations that suggest a cumulative calculation. [ 68 ] Second, this

interpretation is consistent with the CAPL Operating Procedures as a whole. [ 69 ] Third, although not binding on this Court, I note the CAPL Annotation to Clause 2402(

d) provides an example that is consistent with the agreement-by-agreement

interpretation. The annotation, which is drafted for use by the industry, provides insight into the intentions of industry when these clauses were drafted. This is some of the evidence of “surrounding circumstances”, per Sattva . [ 70 ] Fourth, this

interpretation is reasonable from a commercial sense. Indeed, the annotations to the 1990 CAPL suggest as much by explaining that this exception applies where the interest being disposed of in the joint lands “represent a very small part of the transaction”. [ 71 ] Fifth, there is some evidence of other transactions where the 5% was applied on an agreement-by-agreement basis consistent with Spoke’s

interpretation, and no evidence of any transaction where CNRL’s proposed

interpretation was followed. I also note that CNRL refused to answer questions as to how it had applied the 5% in other cases. While I do not give much weight to the fact that CNRL objected to provide this evidence, I do consider the absence of any evidence showing that CNRL has applied its proposed

interpretation in other cases to be somewhat probative considering a party’s obligations to put its best foot forward in

summary judgment applications. [ 72 ] CNRL raises concerns with 17 of the 96 agreements that did not involve the conveyance of any “joint lands”. CNRL argues the 5% exemption could not apply because no “hectares or acres” were conveyed. I note there is nothing in the CAPL or the annotation that suggests that the percentage must be more than 0% but less than 5%. In any event, the definition of joint lands includes both the “lands” and “interests”. [ 73 ] For the reasons noted above, I find the Consent Exempt Agreements that rely on the 5% exemption were properly assigned.

Facility Agreements 1999 Petroleum Joint Venture Association Operating Procedure [ 74 ] Harvest and Spoke claim further exemptions for 18 facility agreements. Of these, 15 incorporate the PJVA. [ 75 ]

Article IX of PJVA governs assignments. The PJVA operates much like the CAPL language that in Clause 901, “Disposal of an Interest in the Facility”, allows for parties to elect Alternative A, B or C, when they enter into the agreement. The alternatives contemplated for assignment to a third party include the possibility of no consent, written consent that cannot unreasonably be withheld, or a ROFR in favour of the non-assigning party. [ 76 ] A plain and ordinary reading of the PJVA makes it clear that there are exceptions to the above alternatives. [ 77 ] Clause 902 states: 902. Unrestricted Disposals Notwithstanding anything contained in this

Article IX, an Owner may transfer all or a portion of its interest in the Facility without providing prior notice or the option to acquire such interest to the other Owners in the following instances, namely: ... (

d) a disposition made by an Owner of all, or substantially all, or of an undivided interest in all or substantially all, of its petroleum and natural gas rights in wells producing to the Facility and for the purposes of this Subclause, "substantially all" means a percentage of ninety percent (90%) or more of the working interest held by such Owner in such wells; and, (

e) a disposition made by an Owner of a portion of its petroleum and natural gas rights in wells producing to the Facility, where such disposition is accompanied by the disposition of a proportionate part or share of the Facility.

However, an Owner making such a disposition pursuant to Subclause (a), (b), (c), (

d) or (

e) of this Clause shall advise the Operator ofsuch disposition in a timely manner, and shall comply with the provisions of Clause 905. [78] Therefore, if one of the enumerated exceptions apply, including (

d) and (e), no consent is required from the non-assigningparty. [79] CNRL asserts that there is insufficient evidence related to 10 of the 16 facilities to confirm the agreements that govern. Itargues there is no evidence to establish that the wells that flow to such facilities are governed by the agreements included in theapplication. [80] In a

summary judgment application, a party must put their best foot forward. [81] I note that Harvest and Spoke provided CNRL the schedules to the PSA which show the location of the lands, facilities, andpipelines in question and the whitemap areas. Given this was a whitemap disposition, any wells within the mapped areas that Harvesthad an interest in were included in the disposition to Spoke. Additionally, in his affidavit, Mr. Lowe deposed that for each of theagreements that related to a facility, “Harvests entire interest in the facility along with its entire interest in wells producing to the facilitywas disposed.” This is confirmed by

article 2.7 of the PSA. [82] Conversely, CNRL has not provided evidence that it was incapable of determining what interests it held and that theapplicable agreements in the whitemap areas are being transferred. Presumably, CNRL would know or be able to determine whatinterests it holds in any particular area.

If that presumption is incorrect and CNRL did not know or was incapable of determining its owninterests within the whitemap areas, then it could have elicited information through cross-examination of Spoke or through undertakingrequests, which it did not do. [83] Finally, CNRL raises concerns that Harvest did not provide timely notice of the disposition, as is required with both CAPLand PJVA, as Harvest did not initially take the position that the agreements were consent exempt. I disagree. CNRL was notified of thetransaction on April 1, 2021. This satisfies the requirements.

In any event, the PJVA refers to the “operator” and in this case, CNRL wasnot the operator. Facility Agreements That Do Not Require Any Consent [84] Two of the agreements do not require any consent. In one case, the agreement states that the parties “may at any time disposeof all or any part of its interest”. In another case, the agreement imposes no consent obligation related to the assignment of theagreement. In these cases, it is clear that the consent of CNRL is not required to assign these agreements. I find these agreements wereproperly assigned to Spoke.

Facility Agreement That Contemplates a ROFR [85] One agreement stipulates that consent will be deemed where the non-consenting party declines to exercise a ROFR. In thiscase, there is no evidence that CNRL exercised such right. Therefore, these agreements were properly assignable to Spoke. Waiver [86] On April 1, 2021, Harvest sent boilerplate letters to over 300 parties, including CNRL, asking for consent to the assignment ofagreements related to the PSA.

In cross-examination, Harvest acknowledged that it did not review the agreements to confirm if consentwas required prior to sending the letters. [87] CNRL argues that by issuing a blanket request for the assignment of the Agreements, Harvest waived their right to rely on theexemption because of their conduct. After receiving the blanket request, CNRL refused to provide consent. Subsequently, incorrespondence on April 30, 2021, Harvest claimed at least one of the five agreements mentioned in the correspondence was consentexempt but failed to mention the remaining 109 agreements it now claims were consent exempt.

In May 2021, Harvest then asserted thatit retained an interest in the Agreements by appointing Spoke as its agent, and in November 2021, confirmed Spoke had not been novatedinto the Agreements because of the withheld consent. [88] Harvest and Spoke disagree. They argue there was no waiver as Harvest had no intention of waiving its contractual right. Inany event, CNRL has not pled waiver or estoppel as is required under rules 13.6(3)(

c) and (m). [89] Waiver requires there be full knowledge of the rights and an unequivocal and conscious intention to abandon them. Waivercan be retracted if reasonable notice is given to the party in whose favour it operates: Saskatchewan River Bungalows Ltd v MaritimeLife Assurance Co, [1994] 2 SCR 490, at paras 20 and 27. [90] In this case, I find that there was never an unequivocal and conscious intention by Harvest to abandon their contractual rights.Harvest’s explanation was that it issued the blanket request for deal expediency as opposed to it being an intentional waiver.

While theevidence is undoubtedly self-serving, I do find it is a reasonable explanation that is neither contradicted by any evidence nor impeachedthrough cross-examination.

Although one can question the wisdom of Harvest for failing to properly review the Agreements for anyconsent exemptions, it cannot be said that it had an unequivocal and conscious intention to abandon them. [91] I note as well that Harvest’s joint venture group had reviewed some of the facility agreements and advised CNRL on April 30,2021, of the applicable exemptions. [92] Although Harvest did not immediately advise CNRL of their position that none of the Consent Exempt Agreements required

the consent of CNRL, at a minimum, this became partially clear in May and then totally clear by July 2021.

In correspondence dated July 9, 2021, Harvest advised CNRL of their position that “no consent is required in connection with such assignment as the Subject Contracts either do not require consent from third parties or the transaction is exempt from the consent requirements...”. [ 93 ] Even if there was an intention by Harvest to waive its contractual rights, which I do not find, by July any such waiver was retracted. [ 94 ] As I have found there was no waiver, I need not address Harvest’s concerns relating to what it asserts are deficient pleadings by CNRL on this issue.

Conclusion [ 95 ] I set aside the Notices of Default. [ 96 ] I grant the cross-application for partial

summary judgment with respect to the Consent Exempt Agreements. [ 97 ] The parties may speak to costs within 30 days of this decision. Heard on the 18 th day of October 2022. Dated at the City of Calgary, Alberta this 31 st day of January 2023. B.B. Johnston J.C.K.B.A. Appearances: Geoffrey S. Poelman & Sunny Mann for Harvest Operations Corp. & Spoke Resources Emily Paplawski & Amanda G. Manasterski for Canadian Natural Resources Limited, et al