On Wednesday, November 6, 2013, Bill 34: Building New Petroleum Markets Act (“Bill 34”) passed first reading at the Alberta Legislature.1

Bill 34 proposes important amendments to the Petroleum Marketing Act 2 that have the potential to significantly expand the scope of operations of the Alberta Petroleum Marketing Commission (the “Commission”). These amendments include giving the Commission the power to seek out new opportunities for the province’s royalty hydrocarbons as well as to offer financial support and other assistance to energy industry players through a number of different tools.3

The Commission’s Current Mandate

The Commission is presently tasked with selling hydrocarbons that the Alberta government receives in lieu of cash royalties. As a result of the implementation of the province’s Bitumen Royalty-In-Kind policy (“BRIK”),4 the Commission, currently responsible for nearly 70,000 barrels per day of conventional oil the province receives as its royalty share, will also be responsible for Alberta royalty bitumen, which could reach 400,000 barrels per day by 2015.5

Under the existing Petroleum Marketing Act, the Commission is a corporation which, subject to that Act, has the rights, powers, and privileges of a natural person.6 However, the Commission’s role is presently limited to accepting delivery of and dealing with the province’s royalty share of hydrocarbons in a manner that is, in the Commission’s opinion, in the public interest of Alberta.7

The Proposed Amendments

The proposed amendments to the Petroleum Marketing Act under Bill 34 have the potential to broadly expand the scope of the management and operation of the Commission, and include the following:

  1. Creating a board consisting of up to seven directors (an increase of four from the current maximum of three Commission members) which may, in addition to managing or supervising the management of the business and affairs of the Commission, delegate the board’s powers8 to any director or committee of the board;9
  2. Allowing the Commission “to engage in other hydrocarbon-related activities, in a manner that is, in the Commission’s opinion, in the public interest of Alberta”10 (which, on its face, is significantly broader than merely accepting delivery and dealing with the Crown’s royalty share);11
  3. Enabling the Commission12 to guarantee any obligation of the Commission as well as the obligation of any person,13 directly or indirectly purchase shares, make loans or acquire existing loans and, in transactions involving the payment of any money, enter into joint ventures or partnerships for the purposes of fulfilling its responsibilities;14
  4. Allowing the Minister of Energy to issue directives that the Commission, the Commission’s board, or both must follow in carrying out their powers and duties and which must be implemented in a prompt and efficient manner;15 and
  5. Removing the currently existing requirement for the Commission to annually prepare a detailed report summarizing its transactions and affairs during each past fiscal year.16

In discussing the changes to the Petroleum Marketing Act proposed under Bill 34, Ken Hughes, Alberta’s Minister of Energy, is reported to have expressed:

  1. That this will be the vehicle the government uses for strategic initiatives to ensure that access to markets is obtained and that value is added, where there is a direct role for the province;
  2. That with an expanded role for the Commission, its work will become more complex, and will require wider expertise that might be found today only in the Alberta Department of Energy;
  3. That Bill 34 also clarifies the financial tools available to the Commission, which could include providing loans or making equity investments in projects, when authorized by the government; and
  4. That projects could be looked at that require strategic support from the province to enable them to happen.17

The government has also broadly stated that these amendments will support the Commission’s increased strategic mandate to execute the BRIK and related policy goals, including enhancing market access and increasing value-added activity.18

Implications

The Commission, should Bill 34’s amendments be proclaimed, will be expressly entitled to “engage” in undefined “hydrocarbon-related activities” which are, in its opinion, in the public interest of Alberta.19 This will grant the Commission potentially significant power to participate in the private development of oil and gas resources and infrastructure beyond the mere marketing of hydrocarbons it receives in lieu of cash royalties.

In effect, the Commission could potentially be used by the province as a corporate vehicle to implement government policy through direct contractual and financial relationships with energy industry stakeholders, as long as its undefined “hydrocarbon-related activities” are, in the Commission’s opinion, in the public interest of Alberta.

The introduction of the province as a potentially significant shipper with the ability to creatively spur private development of energy infrastructure could be a boon to industry, but it remains to be seen how active the newly constituted Commission will be and whether it will have the experience or resources to manage complex legal relationships and be effective in its proposed new role.

Bill 34 was adjourned at second reading on November 7, 2013.20 If passed, the bill will come into force upon its proclamation.21

Authors

Michael A. Marion
Partner
403.232.9464
mmarion@blg.com

Layne N. Thiessen


1 Legislative Assembly of Alberta, Bills and Amendments, 28th Legislature, Bill 34. Available online at: http://www.assembly.ab.ca/net/index.aspx?p=bills_status&selectbill=034&legl=28&session=1

2Petroleum Marketing Act, RSA 2000 c P-10 (the “Petroleum Marketing Act”).

3 Dave Cooper, Alberta Government Seeking to Expand Role of Petroleum Marketing Commission, Edmonton Journal, November 6, 2013.

4 Alberta Government, New Act Helps Alberta Reach Energy Potential, November 6, 2013. Available online at:  http://alberta.ca/release.cfm?xID=35321D7EBD66B-E040-E81E-A6EA4639B50E3EF5;  Alberta  Energy, Alberta Petroleum  Marketing  Commission  (APMC). Available  online  at: http://www.energy.alberta.ca/includes/3435.asp

5 Dave Cooper, Alberta Government Seeking to Expand Role of Petroleum Marketing Commission, Edmonton Journal, November 6, 2013.

6Petroleum Marketing Act, supra, at s. 13(1). If passed, s. 13 of Bill 34 will repeal s. 13(1) of the Petroleum Marketing Act, and replace it with equivalent s. 2(1.1).

7Ibid., s. 15(b).

8 With the exception of the power to make bylaws under s. 5 of the Petroleum Marketing Act and any other power, duty or function prescribed in the regulations, as set out in s. 3 of Bill 34.

9 Bill 34, s. 3.

10 Bill 34, s. 14. Note that under s. 7 of Bill 34, new s. 6.1 would be added to the Petroleum Marketing Act, which provides that every director and officer, in exercising powers and discharging duties, shall act honestly and in good faith and with a view to the best interests of the Commission, and shall exercise the care, diligence and skill that a reasonable and prudent person would exercise in comparable circumstances. Similarly, new s. 6.2 would add the disclosure obligations pertaining to material contracts and transactions, under s. 120 of the Business Corporations Act, RSA 2000, c B-9.

11 Which is currently permitted under ss. 15(a) and (b) of the Petroleum Marketing Act.

12 With the approval of the Lieutenant Governor in Council (Cabinet).

13 Bill 34, s. 11, which adds to the Commission’s current powers under s. 12(4) of the Petroleum Marketing Act to, guarantee on behalf of the Crown the repayment of any money borrowed by the Commission.

14Ibid., s. 12.1. Under s. 12 of Bill 34, the Commission is also empowered to enter into contractual arrangements with financial institutions and participants for the management and pooled investment of surplus cash, under s. 40 of the Financial Administration Act, RSA 2000, c F-12.

15 Ibid., section 12.2. Bill 34 also proposes minor and incidental amendments to the Natural Gas Marketing Act.

16 Ibid., s. 10; Petroleum Marketing Act, supra, at s. 11.

17 Dave Cooper, Alberta Government Seeking to Expand Role of Petroleum Marketing Commission, Edmonton Journal, November 6, 2013. Available online at: http://www.edmontonjournal.com/Alberta+government+seeking+expand+role+petroleum+marketing+commission/9134628/story.html

18 The 28th Legislature, First Session, Alberta Hansard, Thursday, November 7, 2013, Issue 67a, p. 2846.

19 Bill 34, s. 14.

20 Legislative Assembly of Alberta, Bills and Amendments, 28th Legislature, Bill 34. Available online at: http://www.assembly.ab.ca/net/index.aspx?p=bills_st   atus&selectbill=034&legl=28&session=1

21  Bill 34, s. 17.

Author

Michael A. Marion 
MMarion@blg.com
403.232.9464

Expertise

Corporate Commercial Litigation and Arbitration
Oil and Gas