Alberta Court of Appeal Bars Crown Royalty Arrears Claims

Alberta Energy and Minerals has been dealt a significant blow by the Alberta Court of Appeal in a case involving CCAA vesting orders. The court ruled that Crown royalty arrears claims against Spartan Delta Corp. and Canadian Natural Resources Limited were barred due to the joint liability created under the Mines and Minerals Act.

The case stems from the CCAA proceedings surrounding Bellatrix Exploration Ltd., which held interests in various Crown petroleum and natural gas leases. During the proceedings, Bellatrix sold its interests to Spartan, with the sale approved under an Approval and Vesting Order granted by the court.

However, more than four years after the sale, Alberta Energy issued notices demanding payment of both pre-filing and post-filing royalty arrears from Spartan and several co-lessees. The court held that liability under an MMA lease is joint, not joint and several, and that the extinguishment of Bellatrix's liability for pre-filing arrears would extinguish the liability of any co-lessee.

The court also found that the CCAA process provided a mechanism for the recovery of post-filing royalty arrears, which Alberta Energy did not use. As such, the court held that Alberta Energy's post-CCAA collection efforts undermined the integrity and finality of the CCAA process.