Current / Archived
2010: Jan / Feb / Mar / May / Sep / Oct / Nov
2009: Jan / Feb / Mar / Apr / May / Sep / Oct / Nov
2008: Feb / Mar / May / Oct / Nov
2007: Jan / Feb / Apr / Jun / Oct
2006: Jan / Feb / Mar / Sep / Oct / Nov
2005: Jan / Feb / Mar / Dec
2004: Mar
2003: Feb / Mar
2002: Jan / Feb / Mar / Apr / May / Oct / Nov
2001: Jan / Feb / Mar / Apr / May / Sep / Nov
2000: Oct / Nov
This EMS is essentially a repeat of the quickly sold-out September 2010 EMS on the same topic. If you attended the last Statute of Limitations session, please delay your registration so others who could not attend that session might be able to attend this session.
Session moderated by Jerry Marchak from Daylight Energy Ltd.
Please login to download an attached file
We want to hear your opinions and experiences related to any additional services and fees that Facility Operators insist on providing.
The PJVA Tie-in Agreement Task Force has recently issued the final draft of the PJVA Model Tie-In Agreement. The Agreement covers the costs, specification, construction, liabilities, insurance and statutory requirements related to the tie-in of Producer's equipment to an existing facility.
The main points of the draft Agreement will be reviewed in the EMS, feedback previously solicited and received through PJVA will be addressed and then we'll have further discussion and feedback. In particular:
Please join us in thanking them on a job well done.
The session will be facilitated by Joan Lee, the task force leader.
Unfortunately conflicts often arise when dealing with Partners. Many JV Agreements have dispute resolution appendices. How are you resolving your conflicts, especially if the other party doesn't want to come to a resolution? Do you have a magic solution, other than giving in?
Our March EMS will be a great opportunity to talk about conflict resolution and what each of us does when in conflict. While this is not the venue to deal with specific joint venture conflicts, this is your opportunity to have a conversation about them. What are the priority challenges? What are the "normal" behaviors and practices? What needs to change?
Session facilitated by David B. Savage and J.B. Isaacs.
If there are several large unutilized facilities in an area, it seems to make sense to consolidate the production into one. In reality, this is easier said than done.
Facility consolidation raises many difficult issues to be resolved among the Owners of both facilities. How do you decide which facility should remain operating and which facility to be shut-down? Who should pay for the modifications to the surviving facility to accept the new production? Who should pay for the reclamation of the shut-down facility? Should the owners of the shut-down facility have preferential processing rights in the operating facility? Should they become Owners in the operating facility?
These topics and more will be discussed at the EMS. What is your experience around facility consolidations? Whose plant was shut-down (anyone but mine)? Do you have any ideas to simplify the process?
Session moderated by Bill Armstrong from GPMI
The JP-05 processing fee methodology was crafted over five years ago when gas price forecasts were somewhat more optimistic than today. Is the JP-05 fee calculation still fair for both the processor and the facility owner in today's environment? Come out and discuss your views on the JP-05 processing fee methodology.
Other items to be discussed at this session will include:
View Presentation
Occasionally an older JV Agreement (such as a CO&O or Unit Agreement) for a specific facility may not be appropriate for the current operations of the facility. This might occur when one or more of the JV partners purchases the assets of the others, or through the addition or removal of facilities equipment.
Items to be discussed at this session will include how industry is handling items such as:
View Presentation
The Statute of Limitations act sets the time limit when the "books are closed", although many JV agreements extend the time limit. How is industry handling "leftover" items such as:
The session moderated by Doug Phillips from Advantage Oil & Gas Ltd.
The PJVA Model Construction Ownership and Operating (CO&O) Agreement was published in 1999. Many companies have a number of CO&O Agreements that have been in draft form for many years. The PJVA has set up a Task Force to review the need to update the current model CO&O Agreement and is seeking industry feedback regarding issues with the current model CO&O Agreement. Come and give your input.
The Energy Resources Conservation Board (ERCB) has changed the process for auditing oil and natural gas volumetric data submitted by operators. The Enhanced Production Audit Program (EPAP) is a new measurement and reporting compliance assurance program being introduced by the ERCB. It replaces the current audit program and introduces a new audit methodology for assuring compliance.
View March presentation
Operating Agreements generally require the Facility or Unit Operator to obtain specific approval for Capital or Operating projects above a certain expenditure limit from the Facility or Unit Working Interest Owners using Mail Ballots or AFEs.
Many Operating Agreements require the Facility or Unit Operator obtain approval for the annual Operating Forecast from the Facility or Unit Working Interest Owners prior to a date specified in the Operating Agreement.
View January presentation
Open discussion about the issues and potential solutions.
Links to articles discussed at the session:
BD&P Law - Articles and Publications Page
Blakes - Oil and Gas Bulletins Page
(*International Financial Reporting Standards)
Background
By 2011, all publicly traded companies in North America are expected to switch to IFRS from the current accounting reporting standard. This will have an impact on Joint Ventures, since some things will have to be reported differently than is current industry practice, especially operating costs vs. capital costs. This may require companies to have work practices (capital vs. expense) and issue AFE's for projects that would normally be expensed. For example:
Turnarounds: IFRS calls for turnarounds to be capitalized, and amortized over the period (forward) to the next turnaround; turnarounds are currently treated as operating costs in our CO&O's and processing agreements
This will be a general open discussion session to be led by Ib Moller. Some topics to be considered:
Plant Operators now have a responsibility to manage Emission Liabilities and Emission Reduction Credits at facilities. Issues can arise regarding how individual Owners handle their liabilities and utilize credits.
The mechanisms and implementation of the CAPP Guidelines.
Well operating charges made to the Joint Account often result in questions and disputes. The matrix posted below is intended to bring some clarity to these charges.
The presenters at the Early Morning Session will welcome your comments and will point out some issues that can often result in a disagreement about what is chargeable versus what the Operator should pay under the Joint Operating Agreement.
View Presentations:
The proposed new Well Administration and Production Accounting Agreement
A task force is to be formed in the fall, and so this is expected to be an interactive session to discuss the following:
View Presentation
CO&O Agreements often exist in draft form for many years after the construction of a facility. Mike Taylor moderated a discussion on the following:
Kimi Rutz - moderator:
View presentation
Issues related to overhead in Joint Venture Operations
Doug Gurel presented and moderated a discussion of the practical issues arising from his years of experience in negotiating Joint Venture Agreements, dealing with audit queries and handling Partner concerns on matters related to Overhead.
Some companies are adding a fixed percentage to their AFEs for internal engineering costs; others are tracking and charging the actual hours spent by staff on engineering; while others are simply not tracking or recovering these costs.
Linda Green, BA MBA - Enerplus Resources Fund
PASC is currently updating their model form Accounting Procedure. There are many changes being contemplated. The current draft and a summary document outlining the changes can be downloaded from the PASC website.
PASC is looking for comments from industry by mid March. This session will provide a forum for discussion of JV issues with the current Accounting Procedure and ways to address those problems.
Presentation and Discussion
View the Powerpoint presentation from the January 11 Morning Discussion.
There will be an overview presentation of the new Gas Handling Agreement. Mike Taylor, Brian Zimmer and Linda Green will lead the presentation and discussion.
Discussion amongst attendees relating to other issues needing consideration.
Kathleen Grey, Course Developer
Kathleen will give an overview of 13th month adjustments and identify common errors. As well, she will address different types of processing fees and their impact on 13th month adjustments.
Discussion amongst attendees to identify other issues and approaches with 13th month adjustments.
Orest Kotelko - CNRL Chairman, CAPP Industry Shadow Group for the Large Facility Liability Management Program
Orest will be updating the membership on the status and path forward for the Large Facility Liability Management Program proposed by the EUB. Stakeholder feedback closed on January 28th, and needless to say, there are differences of opinion across the industry.
Identify the key issues where consensus exists, and where it does not, so industry is prepared as this program unfolds.
Keiren Ferris, Manager of Royalty and JV Policy, Shell Canada
Under current government of Canada plans, GHG emissions targets will be set by individual facilities - easy in some industries but a huge issue for an industry where joint ventures are a standard mode of business. CAPP has developed a proposal for sharing GHG costs and credits among JV partners. How would this proposal affect you as an operator, owner or third-party processor in a facility? What will it cost you?
John Kingsbury and other members of the Task Force
The JP-04 Task Force will soon release its report for industry association comment and input. This is the perfect opportunity for PJVA members to get first-hand details on the content, and hear the Task Force's perspective on how different sectors of our industry (producer operators, non-operators and midstreamers) may have different views on this new report.
View the PowerPoint presentation from the March 16 Morning Discussion.
This subject is becoming a higher and higher priority as the time to comply with this new legislation approaches and as further guidance and interpretation comes available. The Sarbanes-Oxley Act of 2002 establishes new standards for corporate accountability in response to corporate and accounting scandals in the US in an attempt to restore public trust in corporate accounting and reporting. Similar changes to the Ontario Securities Act and Regulations have also been put in place.
Is your company recovering all the fees it is entitled to? Do your actual fee recoveries vs your estimated fee recoveries never match?
As this is a rather large topic to cover in one breakfast session we will be spreading it over three or four sessions to give it the attention it deserves. Our first meeting is intended to go over how the data bases fit together, an overview and then break it down into:
We will explain how to start this process within your company so you can recover all the fees you are entitled to.
The Early Morning Session (March 25, 2003) topic presented by Rod Swenson, was on the topic of databases related to fee recovery. Thanks to Rod for a presentation which raised a lot of interest from the 70+ attendees. Rod's one page chart and notes follow:
(click to see a figure)
The Early Morning Planning Group believes there is interest in dedicating two more sessions so that Rod can continue with the same topic and address special interests. Tentative dates are April 22 and May 27, 2003. To be confirmed closer to these dates.
Resolving disputes through negotiation is something we do every day, at work and at home. The process and communication skills used by mediators in helping others resolve disputes can be learned and applied by each of us to improve our own effectiveness in negotiations.
JIM WILLSON (lawyer, mediator, arbitrator, instructor and coach) will review the four-stage interest based negotiation/mediation model and demonstrate the use of these communication skills in a simulated mediation with representatives (PAT FORREST - PJVA Rep and GEORGE GREEN - CAPLA Rep) from the COMPANY TO COMPANY (C2C) APPROPRIATE DISPUTE RESOLUTION TASK FORCE.
Join us for an entertaining and informative morning session. The C2C TASK FORCE is here to promote some ideas of how disputes may be avoided or resolved at an early stage before they develop into overwhelming problems. We promise to leave you with at least one new skill to try out on your co-workers and partners (and even your family).
Join us for a panel discussion of shared joint venture concerns
On the panel will be:
Fred Lavitt, Interoperability and Implementation Manager for the Registry (formerly known as VIPER) project on behalf of the Government of Alberta, will be joining us to lead a discussion on the implementation of the Registry process in our industry. The industry testing begins in April 2002 wi th full implementation scheduled for October 2002. This Registry project represents a significant amount of change for most companies. Will you be ready?
Fred will discuss:
John Stayura, of Tom Brown Resources Ltd. and co-author/co-instructor of the new PJVA CO&O course will be joining us to lead a discussion on a situation we have all encountered in our joint venture careers - conducting our joint business without an agreement in place, especially a CO&O agreement. John discussed:
The Custom User Audit Committee, a subcommittee of the PASC Joint Venture Audit Committee (JVAC) and the Petroleum Joint Venture Association, has drafted Custom User Audit Guidelines currently being reviewed by PASC.
This project commenced by soliciting concerns surrounding Custom User audits within the industry, the results of which were published in the PASC and PJVA newsletters. Based on industry feedback, Guidelines for administering and conducting Custom User Audits were drafted, which we feel meet the requirements of industry today.
The Guidelines are divided into four sections; Protocol, Procedures, Confidentiality and Resolution. All sections, except for Procedures, are quite unique to Custom User audits and a summary of each will be presented by Kathleen Grey, audit consultant; Bill Harvey, Council - JV Contracts for Chevron Canada Resources and Noel Smyth, Manager of Operations Services for Keyspan Energy Canada, before opening the floor for discussion.
Assistance: Lynda MacNeill, PanCanadian Energy
The last half of the session will be more interactive. Now that you know what is available, tell us what we are doing well and what we can do differently:
Joining us this month is Jim McLean. Jim is the Land Manager at Chevron Canada Resources and the principal draftsman of the 1990 CAPL Operating Procedure, the 1997 CAPL Farmout & Royalty Procedure, the 2000 CAPL Property Transfer Procedure and the pending update to the 1990 CAPL Operating Procedure.
He will be presenting an overview of payout mechanisms under farmout agreements and the CAPL Operating Procedure including:
Joining us this month will be Bill Remmer from the EUB and Dave Savage from BXL Energy to speak on the new EUB dispute resolution initiative. Both of these people were involved from the beginning on the committee which guided the formation of the process now used by the EUB. Informational Letter 2001-1 titled Appropriate Dispute Resolution (ADR) Program and Guidelines for Energy Industry Disputes was issued January 8, 2001. This regulatory document formalizes the use of ADR and explains the Board's expectations and requirements.
The goals of the EUB ADR program include:
There will be a panel of JV professionals who will discuss (and encourage discussion of) various Joint Venture issues of their choosing and your choosing. What we hope to accomplish is to have a quick look at several topics that will not fill a whole session but that do deserve some air time. Some of the issues that have been put forward for discussion:
Facilitated by: Pat Forrest, Northern Cross Resource Management Inc.
Assistance: Blaine Clarke and Noel Smyth, Keyspan Energy Canada
Please note this topic has been changed from the previous notices. A discussion on Payout Accounts has been moved to May.
Previous Morning Discussions
2011: Jan / Mar / Apr / May / October / November2010: Jan / Feb / Mar / May / Sep / Oct / Nov
2009: Jan / Feb / Mar / Apr / May / Sep / Oct / Nov
2008: Feb / Mar / May / Oct / Nov
2007: Jan / Feb / Apr / Jun / Oct
2006: Jan / Feb / Mar / Sep / Oct / Nov
2005: Jan / Feb / Mar / Dec
2004: Mar
2003: Feb / Mar
2002: Jan / Feb / Mar / Apr / May / Oct / Nov
2001: Jan / Feb / Mar / Apr / May / Sep / Nov
2000: Oct / Nov
November 2011
The Statute of Limitations and Leftover Billings
The Statute of Limitations act sets the time limit when the "books are closed", although many JV agreements extend the time limit. How is industry handling "leftover" items such as:- Forgotten Invoices (Operator discovers he had not been invoicing)
- Discovery of a systemic error
- Uncompleted 13th Month Adjustments
- Unresolved audit queries:
- Claims that extend beyond the audit period
- Time to resolve audit queries - In addition, if the property was sold in the interim - who pays?
This EMS is essentially a repeat of the quickly sold-out September 2010 EMS on the same topic. If you attended the last Statute of Limitations session, please delay your registration so others who could not attend that session might be able to attend this session.
Session moderated by Jerry Marchak from Daylight Energy Ltd.
Please login to download an attached file
October 2011
"We Only Want Custom Processing!"
You have found a Facility Operator that will process your gas for a reasonable fee, but now they also insist on providing "additional" services that will cost much more than just the gas processing fee. Is it reasonable that Facility Operators require the following in addition to the processing fees:- Operator must contract operate all Producer's wells and facilities tied-in to their system
- Operator must complete all production accounting and provide all government reporting
- Operator will market all Producer's products - Producer cannot take product in-kind
- Producer is only given gas heating value for their hydrocarbon liquids
- Operator will charge fees for other "services", such as:
- Accounting Fees
- CSO Fees
- Administration Fees
- Tie-in Fees
- Marketing Fees
We want to hear your opinions and experiences related to any additional services and fees that Facility Operators insist on providing.
May 2011
Gathering System Mysteries
Operating a gathering system may seem fairly straight forward. Gas or oil goes in one end and hopefully comes out the other. When you involve partners in a gathering system, it can get more complicated. Gathering System Mysteries will be discussed at this EMS. In particular:- What happens if the new production backs-out the existing production?
- How do you determine a fair back-out fee?
- What is the basis for the back-out fees currently being charged?
- Typically CO&O's use capacity as one of the key components for allocating usage fees, but a gathering pipeline is always full.
- How do you determine whether an owner is overusing their capacity?
- What pipeline capacity should you use for allocating fees?
- If a gathering system is comprised of a bunch of flow-lines, who actually owns it?
- If a third party wants to use the gathering system, who gets the fees?
- Does the Operator have the authority to allow the third party to use the system?
- Who pays for major capital additions or abandonment costs?
- JP05 recommends using distance based fees in gathering systems ($0.20-$0.35/e3m3/km)
- Are these really fair for long lines?
- Does anyone charge the lower limit fee?
- Are you seeing unjustified gathering system fee increases?
- Do you have any other Gatherings System Mysteries you want to discuss?
April 2011
Introduction of the PJVA Model Tie-In AgreementThe PJVA Tie-in Agreement Task Force has recently issued the final draft of the PJVA Model Tie-In Agreement. The Agreement covers the costs, specification, construction, liabilities, insurance and statutory requirements related to the tie-in of Producer's equipment to an existing facility.
The main points of the draft Agreement will be reviewed in the EMS, feedback previously solicited and received through PJVA will be addressed and then we'll have further discussion and feedback. In particular:
- Do you have any suggestions to improve clarity?
- Are there any specific issues which may need to be added to the final tie-in agreement?
- Are there clauses in the agreement that may be a hindrance to getting it executed?
- Have you reviewed the draft Agreement yet?
Please join us in thanking them on a job well done.
The session will be facilitated by Joan Lee, the task force leader.
March 2011
Conflict Resolution - How are you resolving conflicts?Unfortunately conflicts often arise when dealing with Partners. Many JV Agreements have dispute resolution appendices. How are you resolving your conflicts, especially if the other party doesn't want to come to a resolution? Do you have a magic solution, other than giving in?
Our March EMS will be a great opportunity to talk about conflict resolution and what each of us does when in conflict. While this is not the venue to deal with specific joint venture conflicts, this is your opportunity to have a conversation about them. What are the priority challenges? What are the "normal" behaviors and practices? What needs to change?
Session facilitated by David B. Savage and J.B. Isaacs.
January 2011
Facility Consolidation - A great idea?If there are several large unutilized facilities in an area, it seems to make sense to consolidate the production into one. In reality, this is easier said than done.
Facility consolidation raises many difficult issues to be resolved among the Owners of both facilities. How do you decide which facility should remain operating and which facility to be shut-down? Who should pay for the modifications to the surviving facility to accept the new production? Who should pay for the reclamation of the shut-down facility? Should the owners of the shut-down facility have preferential processing rights in the operating facility? Should they become Owners in the operating facility?
These topics and more will be discussed at the EMS. What is your experience around facility consolidations? Whose plant was shut-down (anyone but mine)? Do you have any ideas to simplify the process?
Session moderated by Bill Armstrong from GPMI
November 2010
Are JP-05 Fees Fair in Today's Environment?The JP-05 processing fee methodology was crafted over five years ago when gas price forecasts were somewhat more optimistic than today. Is the JP-05 fee calculation still fair for both the processor and the facility owner in today's environment? Come out and discuss your views on the JP-05 processing fee methodology.
Other items to be discussed at this session will include:
- What actions can a processor undertake should revenue be less than the fees and operating costs?
- Is there any obligation on behalf of the facility owners to lower the fees in an existing contract if the producer claims he is losing money by producing?
- Should there be any considerations given for third party gas which is unavoidably comingled with owner's gas?
October 2010
Outdated Agreements - Issues and PitfallsView Presentation
Occasionally an older JV Agreement (such as a CO&O or Unit Agreement) for a specific facility may not be appropriate for the current operations of the facility. This might occur when one or more of the JV partners purchases the assets of the others, or through the addition or removal of facilities equipment.
Items to be discussed at this session will include how industry is handling items such as:
- Unworkable voting procedures
- Older Agreements missing new provisions
- Agreements not kept up to date
- Unsigned Agreements
September 2010
The Statute of Limitations and Leftover BillingsView Presentation
The Statute of Limitations act sets the time limit when the "books are closed", although many JV agreements extend the time limit. How is industry handling "leftover" items such as:
- Forgotten Invoices (Operator discovers he had not been invoicing)
- Discovery of a systemic error
- Uncompleted 13th Month Adjustments
- Unresolved audit queries:
- Claims that extend beyond the audit period
- Time to resolve audit queries
- In addition, if the property was sold in the interim - who pays?
The session moderated by Doug Phillips from Advantage Oil & Gas Ltd.
May 2010
Re-Visiting the CO&O AgreementThe PJVA Model Construction Ownership and Operating (CO&O) Agreement was published in 1999. Many companies have a number of CO&O Agreements that have been in draft form for many years. The PJVA has set up a Task Force to review the need to update the current model CO&O Agreement and is seeking industry feedback regarding issues with the current model CO&O Agreement. Come and give your input.
- Is the current CO&O model difficult to generate?
- Are there particular clauses in the CO&O model that companies find objectionable or are commonly rewritten?
- Are there new clauses that need to be added to the CO&O model?
- Are there other reasons that companies do not execute CO&O's in a timely fashion?
- Does the current CO&O model require an overall update?
- What possible remedies are there?
March 2010
EPAP – What the heck is that?The Energy Resources Conservation Board (ERCB) has changed the process for auditing oil and natural gas volumetric data submitted by operators. The Enhanced Production Audit Program (EPAP) is a new measurement and reporting compliance assurance program being introduced by the ERCB. It replaces the current audit program and introduces a new audit methodology for assuring compliance.
- What is the new process?
- How are companies meeting their obligations?
- Who pays for the additional work?
- Is Partner approval required?
- What are the JV/Agreement/Measurement implications?
View March presentation
February 2010
Mail Ballots and AFEs – Who needs them?Operating Agreements generally require the Facility or Unit Operator to obtain specific approval for Capital or Operating projects above a certain expenditure limit from the Facility or Unit Working Interest Owners using Mail Ballots or AFEs.
- When are Mail Ballots/AFEs used?
- Is approval required for the project scope, or for the project expenditure?
- What occurs if approval is denied?
- What is a reasonable expenditure limit?
- How should over-expenditures be handled?
January 2010
Annual Operating Forecasts – Who needs them?Many Operating Agreements require the Facility or Unit Operator obtain approval for the annual Operating Forecast from the Facility or Unit Working Interest Owners prior to a date specified in the Operating Agreement.
- Are Operators providing annual Operating Forecasts?
- Do the Non-Operators require this information, and if so why?
- Should similar information be provided under Processing Agreements or in areas without a specific Operating Agreement?
- What could happen/has happened if the Operator fails to provide an annual Operating Forecast?
- What are possible next steps for the Operator if the Owners do not approve the annual Operating Forecast?
- What is the protocol/procedure if the Operator overspends the annual Operating Forecast? Overspends by how much? Is any notice or additional approval required?
View January presentation
November 2009
Auditing in a Low Price Environment- Are auditors looking harder in this low price environment?
- Overhead charges from third party contractors
- Administrative services provided as part of third-party contracts
- Lower materiality threshold – what is reasonable?
- Audit "information requests"
- How can we effectively manage audit claims?
- Is there a disconnect between the auditors and their clients?
- Are audits being reviewed by JV group prior to submission?
- What is the role of the JV auditor, vis a vis the role of the operating committee/JV reps?
- Open Discussion - what audit issues are you seeing?
- Are they reasonable?
Open discussion about the issues and potential solutions.
October 2009
Shutting in Wells and Facilities in a Low Price Environment- Shutting in Gas Wells
- Provisions of the Joint Operating Agreement (CAPL)
- Impact on Royalty Owners and Leases
- Partner notification
- Unit considerations
- Processing agreements
- Suspension of wells
- Shut-in Operating Costs
- Shutting in Gas Processing Facilities
- Provisions of CO&O Agreement
- Partner considerations
- Processing agreements for third parties
- Notification to owners and third parties
- Shut-in Operating Costs
Links to articles discussed at the session:
BD&P Law - Articles and Publications Page
Blakes - Oil and Gas Bulletins Page
September 2009
JV Issues re Conversion to IFRS*(*International Financial Reporting Standards)
Background
By 2011, all publicly traded companies in North America are expected to switch to IFRS from the current accounting reporting standard. This will have an impact on Joint Ventures, since some things will have to be reported differently than is current industry practice, especially operating costs vs. capital costs. This may require companies to have work practices (capital vs. expense) and issue AFE's for projects that would normally be expensed. For example:
Turnarounds: IFRS calls for turnarounds to be capitalized, and amortized over the period (forward) to the next turnaround; turnarounds are currently treated as operating costs in our CO&O's and processing agreements
- Impact on Producers that are Facility Owners
- Impact on Midstream Facility Owners
- Impact on Third Party users of Facilities (processing fees)
- Affect on Overhead – expense vs. capital
May 2009
Processing Fees and Other FeesThis will be a general open discussion session to be led by Ib Moller. Some topics to be considered:
- A trend seems to be developing towards more expensive fees; are producers seeing some “gouging” by processors?
- JP-05 Fees: are producers seeing higher capital fees justified by higher "Replacement Cost" estimates? What happens when the "Original Cost" is not known?
- Do operating fees ever go down? Are third party producer fees suffering from declining throughputs?
- What can be done in the low price environment, when some well owner's production is uneconomic, while other's is un-economic?
- Questionable fee practices: charging Common Stream Operator fees for each well, duplicate well administration fees (e.g. for gathering and for processing); production accounting fees by owner; etc.
April 2009
Those Pesky Accounting Issues- Should a fee be charged to cover the cost of allocation or accounting re-runs, should there be greater accountability to provide accurate and timely production data?
- Retroactive adjustments: how far back can service agreement fees or equalization costs be adjusted, are these limited to the Statute of Limitations
- Take in Kind Issues
- Should producers always be allowed to take their products ion kind at the plant gate?
- Should minority well owners that take in kind have their own processing contract or be included in the well Operator’s contract?
- Affiliates: some CO&Os don’t have an affiliates clause: should affiliates pay third party fees if the agreement doesn’t specify otherwise, should an Owner’s Silent Partners be treated as Affiliates or Third Parties
March 2009
Issues with Annual Budgets- What happens if the partners do not approve the annual budget?
- Will the Operator continue to operate?
- Will some partners stop paying their share of bills
- If there are no consequences should the budget be balloted or simply issued for information?
- Should budgets be issued for each Functional Unit in a plant?
- Other issues regarding allocating costs to Functional Units
February 2009
Issues with Greenhouse Gas CreditsPlant Operators now have a responsibility to manage Emission Liabilities and Emission Reduction Credits at facilities. Issues can arise regarding how individual Owners handle their liabilities and utilize credits.
The mechanisms and implementation of the CAPP Guidelines.
January 2009
Issues with Well Operating ChargesWell operating charges made to the Joint Account often result in questions and disputes. The matrix posted below is intended to bring some clarity to these charges.
The presenters at the Early Morning Session will welcome your comments and will point out some issues that can often result in a disagreement about what is chargeable versus what the Operator should pay under the Joint Operating Agreement.
View Presentations:
- Presenters Introduction
- Issues with Well Operating Charges
- Discussion Notes
- Well Operating Charges Matrix (February 2009)
November 2008
Issues with Two Party CO&O’s and Issues with Facilities without CO&O’s- Two Party CO&O’s:
- Managing the Agreement
- Issues that develop when one party has a small interest.
- Other Issues
- Operating Facilites where there is no CO&O
- Should mail ballots be sent?
- Should 13th month adjustments be done?
- How should third party fee revenues be distributed?
- Other Issues
October 2008
Gas Gathering System Fee Issues- JP-05 Fees: Calculated Fees vs. Distance Based Fees
- Fees by Single GGS, by Lateral used, or by Segment used?
- Calculated Fees: Capacity or Throughput based
- Capacity based - What is capacity?
- When are calculated fees applicable?
- Sour Gas gathering
- Distance Based Fees: $0.20-$0.35/e3m3/km
- Higher Pressure gathering vs. Low Pressure gathering
- Operating Costs:
- Who charges GGS operating costs?
- Costs allocated to GGS, or to Wells?
- Cost of pigging
- Well Flow Lines and Tie-ins
- Fees for non-participating well owners
May 2008
The proposed new Well Administration and Production Accounting Agreement
A task force is to be formed in the fall, and so this is expected to be an interactive session to discuss the following:
- Why is this agreement required?
- What should be included in this agreement?
- Why can this agreement not be incorporated into existing agreements?
- How is it different from a Contract Operating Agreement or a Gas Handling Agreement?
- Other?
View Presentation
March 2008
Drafting and Execution of CO&O AgreementsCO&O Agreements often exist in draft form for many years after the construction of a facility. Mike Taylor moderated a discussion on the following:
- Suggestions to improve drafting of CO&O Agreements (PDF) - Members Only
- Most common basic CO&O drafting errors (PDF) - Members Only
February 2008
Tie In AgreementsKimi Rutz - moderator:
- What is the purpose of the Tie In Agreement?
- What should it cover?
- Should there be a standard?
- Is this a JV Agreement?
- Who should administer this agreement?
- Other questions/issues
View presentation
October 2007
Operator OverheadIssues related to overhead in Joint Venture Operations
Doug Gurel presented and moderated a discussion of the practical issues arising from his years of experience in negotiating Joint Venture Agreements, dealing with audit queries and handling Partner concerns on matters related to Overhead.
June 2007
PASC Accounting Procedure- What does simplification in the Accounting Procedure mean? More clarity? More negotiating room? Specific direction?
- What does "approval" mean? What are acceptable mechanisms?
- How do we deal with billing disputes?
- What is the role of the JV Auditor, vis a vis the role of the Operating Committee/JV Reps? How can we effectively manage audit claims?
- The push to direct charge more costs: what is the root cause?
- Should engineering costs be capped? If so, how? If not, why not?
April 2007
Internal Engineering CostsSome companies are adding a fixed percentage to their AFEs for internal engineering costs; others are tracking and charging the actual hours spent by staff on engineering; while others are simply not tracking or recovering these costs.
- What is the general practice for charging internal engineering costs?
- How are charges from engineering alliances handled?
- What hourly rates should be charged for in-house engineering?
- What is an appropriate % rate for flat in-house engineering charges?
- What is appropriate per the PASC Accounting Procedures?
- Other issues re in-house technical charges
February 2007
- Allocation Issues
- Daily Balancing vs. Monthly Balancing to Align With Marketing (pros and cons)
- How is it currently handled?
- Impact on fees?
- Can Prism and QByte handle?
- Allocation Procedures
- Best practices
- Fuel Gas Allocation
- On compressor stations
- On gathering or sales lines
January 2007
- Abandonment and Reclamation Charges
- Who pays for Abandonment & Reclamation - Operating vs. Capital costs
- Changes of ownership – changes of Operator
- CO&O provisions
- Partial abandonment of facilities – during facility normal operation
- Cleanup of spills – during facility normal operation
- Should we charge Third Parties using the facilities – variable operating costs
- Midstreamer's responsibilities – charges to users
- Abandonment and Reclamation Funds
- Use of abandonment funds in the oil industry
- Fund complications – taxes, ownership changes
- Contributions by Third Parties
- Midstreamer perspective
- Royalty Trust perspective
November 2006
The new Gas Handling Agreement - with Linda GreenOctober 2006
- Well Administration Charges
- What is the basis for the usual $250/month charge? Is this fee sufficient, or excessive?
- Should this fee apply to all wells, shallow, sour, CBM?
- Does each facility operator add their fee (is it cumulative)?
- Is this charge considered a well operating cost (subject to overhead)?
- Real Time Production Information
- What information is the facility Operator obliged to provide?
- Should information be available to all well owners, or just the well operator? Does the Operator have to communicate with well owners? What agreed to terms to receive the data?
- What costs should parties share in setting up the real time data distribution? Set up costs? Continuing costs?
- Do well operators expect to be able to provide direction on how the facility Operator produces the wells or field?
September 2006
CO&O Agreement IssuesLinda Green, BA MBA - Enerplus Resources Fund
- Silent Partners – rights/obligations, Operator indemnity, ROFRs.
- Assignment Issues – notices, retroactive effective dates and retroactive use of Capacity
- Changes to Appendices – voting vs. fact
- Execution of Agreements – managing counterparts
- Handling of Appendices – delete vs. N/A
March 2006
Operating Cost Allocation- Economic vs. Accounting Fixed and Variable Costs
- Should Cost Allocation be Based on Throughput User Pay
- Surplus Capacity What does it really cost?
- Cost Allocation by Operating Fees
- Avoiding 13th month adjustments
February 2006
PASC Accounting Procedure UpdatePASC is currently updating their model form Accounting Procedure. There are many changes being contemplated. The current draft and a summary document outlining the changes can be downloaded from the PASC website.
PASC is looking for comments from industry by mid March. This session will provide a forum for discussion of JV issues with the current Accounting Procedure and ways to address those problems.
January 2006
PJVA Model Form Gas Handling AgreementPresentation and Discussion
View the Powerpoint presentation from the January 11 Morning Discussion.
There will be an overview presentation of the new Gas Handling Agreement. Mike Taylor, Brian Zimmer and Linda Green will lead the presentation and discussion.
Discussion amongst attendees relating to other issues needing consideration.
December 2005
13th Month AdjustmentsKathleen Grey, Course Developer
Kathleen will give an overview of 13th month adjustments and identify common errors. As well, she will address different types of processing fees and their impact on 13th month adjustments.
Discussion amongst attendees to identify other issues and approaches with 13th month adjustments.
March 2005
Large Facilities Liability Management ProgramOrest Kotelko - CNRL Chairman, CAPP Industry Shadow Group for the Large Facility Liability Management Program
Orest will be updating the membership on the status and path forward for the Large Facility Liability Management Program proposed by the EUB. Stakeholder feedback closed on January 28th, and needless to say, there are differences of opinion across the industry.
Identify the key issues where consensus exists, and where it does not, so industry is prepared as this program unfolds.
February 2005
JV Impacts of Greenhouse Gases: Who Pays?Keiren Ferris, Manager of Royalty and JV Policy, Shell Canada
Under current government of Canada plans, GHG emissions targets will be set by individual facilities - easy in some industries but a huge issue for an industry where joint ventures are a standard mode of business. CAPP has developed a proposal for sharing GHG costs and credits among JV partners. How would this proposal affect you as an operator, owner or third-party processor in a facility? What will it cost you?
January 2005
JP-04 Status Update and Various Industry PerspectivesJohn Kingsbury and other members of the Task Force
The JP-04 Task Force will soon release its report for industry association comment and input. This is the perfect opportunity for PJVA members to get first-hand details on the content, and hear the Task Force's perspective on how different sectors of our industry (producer operators, non-operators and midstreamers) may have different views on this new report.
March 2004
Sarbanes-Oxley Act and Bill 198View the PowerPoint presentation from the March 16 Morning Discussion.
This subject is becoming a higher and higher priority as the time to comply with this new legislation approaches and as further guidance and interpretation comes available. The Sarbanes-Oxley Act of 2002 establishes new standards for corporate accountability in response to corporate and accounting scandals in the US in an attempt to restore public trust in corporate accounting and reporting. Similar changes to the Ontario Securities Act and Regulations have also been put in place.
March 2003
Fee RecoveryIs your company recovering all the fees it is entitled to? Do your actual fee recoveries vs your estimated fee recoveries never match?
As this is a rather large topic to cover in one breakfast session we will be spreading it over three or four sessions to give it the attention it deserves. Our first meeting is intended to go over how the data bases fit together, an overview and then break it down into:
- Is your company recovering the fees and charging out the operating expenses and capital dollars you should?
- The first step is information repair in the databases.
- Is your company checking the integrity of your databases?
- Managing your databases.
- Are you generating exception reports on the data within your databases?
- Database exception reporting.
We will explain how to start this process within your company so you can recover all the fees you are entitled to.
The Early Morning Session (March 25, 2003) topic presented by Rod Swenson, was on the topic of databases related to fee recovery. Thanks to Rod for a presentation which raised a lot of interest from the 70+ attendees. Rod's one page chart and notes follow:
(click to see a figure)
The Early Morning Planning Group believes there is interest in dedicating two more sessions so that Rod can continue with the same topic and address special interests. Tentative dates are April 22 and May 27, 2003. To be confirmed closer to these dates.
February 2003
THE C2C TASK FORCE & "NEW SKILLS FOR RESOLVING DISPUTES"Resolving disputes through negotiation is something we do every day, at work and at home. The process and communication skills used by mediators in helping others resolve disputes can be learned and applied by each of us to improve our own effectiveness in negotiations.
JIM WILLSON (lawyer, mediator, arbitrator, instructor and coach) will review the four-stage interest based negotiation/mediation model and demonstrate the use of these communication skills in a simulated mediation with representatives (PAT FORREST - PJVA Rep and GEORGE GREEN - CAPLA Rep) from the COMPANY TO COMPANY (C2C) APPROPRIATE DISPUTE RESOLUTION TASK FORCE.
Join us for an entertaining and informative morning session. The C2C TASK FORCE is here to promote some ideas of how disputes may be avoided or resolved at an early stage before they develop into overwhelming problems. We promise to leave you with at least one new skill to try out on your co-workers and partners (and even your family).
November 2002
ISSUES RE PROCESSING AGREEMENTS- Do we really need separate Gas Processing and Gas Transportation agreements
- Should processing agreements be with the well operator on behalf of the well owners, or with individual owners?
- Has anyone ever tried to make the LIFO (last in first out) priority provision work? What about joint production from the wells?
- Standard Terms and Conditions Task Force - what are they doing?
- OTHER PROCESSING ISSUES from the attendees - Discussion
October 2002
- VIPER - Volumetric and Infrastructure Petroleum Information Registry - update
- Analysis and Measurement - The reality of Operator and Producer compliance at JV facilities
- A&D - Understanding the responsibilities for paying JV billings after closing
- Affiliates - How to correctly deal with them (capacity, priorities, ROFR's, etc.)
- Audit Principles - continuation of November discussion - to discuss standards, scheduling, responses to exceptions and improved methods of conclusion
- One year later - a look at Statute of Limitations or Power Deregulation or both
May 2002
PANEL DISCUSSION OF JOINT VENTURE HOT TOPICSJoin us for a panel discussion of shared joint venture concerns
On the panel will be:
- Doug Phillips - Manager, Joint Ventures - Canadian 88 Energy
- Alan Harvie - Partner - MacLeod Dixon
- Cheryl Pritchard - Manager, Foothills Business Development - Keyspan Energy Canada Inc.
- Doug Sick - Joint Venture Representative - Talisman Energy
- John Kingsbury - Principal - Gas Processing Management Inc.
- JP-95 - Current interpretations in the industry (used well or abused?)
- Emulsion handling and water disposal fees - How should these fees be calculated to be fair to both Producer and Operator?
- Midstreamer and Producers Owners - Will marriage work or will we just be friends?
- Right to take in kind - Who decides; Processor, Well Operator or Working Interest Owner?
- Administration fees - What do you get for $250/w/m?
- CSO fees - When is it appropriate to charge to third party processors?
- Bring your own questions, concerns, or comments on any joint venture topic that you are looking for some input into.
April 2002
THE PETROLEUM REGISTRY OF ALBERTAFred Lavitt, Interoperability and Implementation Manager for the Registry (formerly known as VIPER) project on behalf of the Government of Alberta, will be joining us to lead a discussion on the implementation of the Registry process in our industry. The industry testing begins in April 2002 wi th full implementation scheduled for October 2002. This Registry project represents a significant amount of change for most companies. Will you be ready?
Fred will discuss:
- What is the Registry?
- What are the benefits to Industry?
- What are the "Hot Topics"?
- How could your company be impacted?
- What could the effect be on Joint Venture properties or roles?
March 2002
LIFE WITHOUT AN AGREEMENTJohn Stayura, of Tom Brown Resources Ltd. and co-author/co-instructor of the new PJVA CO&O course will be joining us to lead a discussion on a situation we have all encountered in our joint venture careers - conducting our joint business without an agreement in place, especially a CO&O agreement. John discussed:
- Key terms that are effected by the lack of an agreement
- Common law treatment of a facility with no agreement
- Alternatives to a signed CO&O agreement - pros and cons
- How enforceable is a draft agreement?
- What about service agreements (or lack thereof)?
February 2002
MIDSTREAM PROCESSING IN JOINTLY OWNED PLANTS- Sharing of processing revenue vs streaming of processing revenue
- Wellhead purchases or buy/sell arrangements for non-Owner production
- "Firm Pool" for processing within a joint venture plant
- Priority of processing for non-Owner gas
- Enlargements, or capital expenditures for non-Owner processing
January 2002
The Custom User Audit Committee, a subcommittee of the PASC Joint Venture Audit Committee (JVAC) and the Petroleum Joint Venture Association, has drafted Custom User Audit Guidelines currently being reviewed by PASC.
This project commenced by soliciting concerns surrounding Custom User audits within the industry, the results of which were published in the PASC and PJVA newsletters. Based on industry feedback, Guidelines for administering and conducting Custom User Audits were drafted, which we feel meet the requirements of industry today.
The Guidelines are divided into four sections; Protocol, Procedures, Confidentiality and Resolution. All sections, except for Procedures, are quite unique to Custom User audits and a summary of each will be presented by Kathleen Grey, audit consultant; Bill Harvey, Council - JV Contracts for Chevron Canada Resources and Noel Smyth, Manager of Operations Services for Keyspan Energy Canada, before opening the floor for discussion.
November 2001
SETTLING ACCOUNTING ISSUES- MATERIALITY
- What is material enough to require a settlement?
- What is material enough to require a rework of previous product allocation?
- Audit protocol
- What is material enough to require a rework of previous product allocation?
- PRECISE ACCOUNTING vs SETTLEMENT
- Does every error have to be precisely corrected? - settlement vs rework.
- How far back should we correct? - legal and moral obligations.
- Production accounting reworks - settlement by cash or by volume
- How far back should we correct? - legal and moral obligations.
- BENEFICIARIES OF SETTLEMENTS
- How do all past owners/parties receive benefit (cost)?
- Operator's obligations to allocate settlements? - current or past owners
- Other affected parties - royalty owners, the Crown
- Operator's obligations to allocate settlements? - current or past owners
- RIGHT TO PROTEST BILLS
- Withholding payment
- Right to offset
- Agreement provisions
- Right to offset
Assistance: Lynda MacNeill, PanCanadian Energy
September 2001
INDUSTRY EDUCATION PROGRAMS - ARE WE SERVING YOUR NEEDS?- To start off this year, we will be looking at education programs offered by the various industry associations. There will be representatives from some or all of the following associations:
- Petroleum Accountants Society of Canada (PASC)
- Canadian Association of Petroleum Production Accounting (CAPPA)
- Canadian Association of Petroleum Landmen (CAPL)
- Canadian Association of Petroleum Land Administration (CAPLA)
- and of course, PJVA.
- Canadian Association of Petroleum Production Accounting (CAPPA)
The last half of the session will be more interactive. Now that you know what is available, tell us what we are doing well and what we can do differently:
- What are you looking for in education opportunities that will help you do your job better?
- Subject matter
- Length (how many days?), duration (how many hours/day?)
- Class size
- Type of instructor (volunteer or professional?)
- Type of notes/handouts
- Location
- Cost
- Credit/Non-credit
May 30, 2001
Payout AccountsJoining us this month is Jim McLean. Jim is the Land Manager at Chevron Canada Resources and the principal draftsman of the 1990 CAPL Operating Procedure, the 1997 CAPL Farmout & Royalty Procedure, the 2000 CAPL Property Transfer Procedure and the pending update to the 1990 CAPL Operating Procedure.
He will be presenting an overview of payout mechanisms under farmout agreements and the CAPL Operating Procedure including:
- traditional cost recovery mechanisms and their deficiencies;
- volume based alternative; and
- status of update work on the 1990 CAPL Operating Procedure respecting the production penalty mechanism
April 25, 2001
Energy Utilities Board's Appropriate Dispute Resolution (ADR) InitiativeJoining us this month will be Bill Remmer from the EUB and Dave Savage from BXL Energy to speak on the new EUB dispute resolution initiative. Both of these people were involved from the beginning on the committee which guided the formation of the process now used by the EUB. Informational Letter 2001-1 titled Appropriate Dispute Resolution (ADR) Program and Guidelines for Energy Industry Disputes was issued January 8, 2001. This regulatory document formalizes the use of ADR and explains the Board's expectations and requirements.
The goals of the EUB ADR program include:
- improved landowner-industry relations in the interest of all Albertans
- better use of the EUB's and stakeholders' time and other resources
- more face-to-face discussions between affected landowners and company decision-makers, leading to local solutions to local problems
- enhanced efficiencies in the effort to meet the needs of stakeholders in the electricity and upstream oil and gas sectors
- increased resolution of industry-to-industry disputes without an EUB hearing
- a more effective and efficient hearing, if one is necessary.
March 2001
This month we are trying something new!There will be a panel of JV professionals who will discuss (and encourage discussion of) various Joint Venture issues of their choosing and your choosing. What we hope to accomplish is to have a quick look at several topics that will not fill a whole session but that do deserve some air time. Some of the issues that have been put forward for discussion:
- Common Stream fees, or Alliance fees proposed by some processors
- Differential processing fees for Owners vs. non-Owners (eg. 15% vs 20% ROR)
- What can be done to increase the confidence level of Operators and non-Operators that the facility $ values they are reporting to their insurance company accurately reflect the facility's true replacement cost?
- How to optimize the process so that a non-Operator can take over suspended Unit wells for uphole potential? What obligations (if any) does the Operator have to share technical information with the uphole Owners as to the condition of the wellbore and the lease?
- How are the model PJVA agreements working in the industry?
Facilitated by: Pat Forrest, Northern Cross Resource Management Inc.
- Panel:
- Robert Foster, Anderson Exploration Ltd.
- Storm Purdy, ATCO Midstream Ltd. (and Vice President, PJVA)
- John Stayura, Joint Venture Management Inc.
- Storm Purdy, ATCO Midstream Ltd. (and Vice President, PJVA)
February 28, 2001
13th MONTH ADJUSTMENTS - IS THERE A BETTER WAY?- PROBLEMS WITH THE CURRENT WAY
- Timeliness of adjustments - within three months of the end of the year?
- Missed costs - non-capital AFE's
- Retroactive processing fee adjustments - ownership changes
- Changes of Operator during the year
- Are retroactive adjustments fair and equitable?
- A PROPOSAL FOR A BETTER WAY
- Charge Operating Costs fee to throughput
- Adjust forward, not backwards
- The Rimbey and Strachan experience - a three year rolling average
- Relative size of adjustment
- Throughput adjustments should not apply to minor gathering lines
- REVISION OF CURRENT AGREEMENT PROVISIONS
- Need for an Industry Task Force to develop provisions
- Revise individual agreements, or by Industry Agreement?
Assistance: Blaine Clarke and Noel Smyth, Keyspan Energy Canada
January 31, 2001
Limitations Task Force and the resulting Industry Agreement regarding the Limitation ActPlease note this topic has been changed from the previous notices. A discussion on Payout Accounts has been moved to May.
- On March 1, 2001, the new Limitation Act comes fully into effect in Alberta. Under the new Act, all actions must be commenced within two years of when the claimant knew or ought to have known of its claim.
- Industry standard auditing procedures and industry agreements currently establish a process for the conduct of audits which might result in claims becoming statute-barred before the audit occurs.
- In response to an industry survey, PASC formed a Limitations Act Task Force with a number of individuals presenting a number of key oil and gas companies and certain industry associations including PASC, CAPL, CAPLA and PJVA to find an industry wide solution to the limitation problem.
- Jay Park, a director of PASC and a lawyer with Macleod Dixon, will be on hand to present the results of the Task Force and the resulting Industry Agreement. Additional information on this initiative can also be found on the PASC website (www.petroleumaccountants.com) or PJVA website (www.pjva.ca)
- How is your company going to handle this situation? The agreement must be signed by February 15, 2001 in order to effectively amend the tens of thousands of agreements that require amending.
- Come share your questions, concerns and observations.
November 29, 2000
Possible Impacts of Power Deregulation on the Joint Account- This topic was addressed at the October PJVA luncheon and is still generating a lot of discussion.
- What does the CO&O say about purchasing power for facilities? What approvals are required, if any?
- Do we ride the wave of prices and pass on what we are billed or do we become brokers where we buy and sell as required?
- If we become brokers do we pass on the ups and downs to partners? Or do we take the profits and losses?
- Do we do an equalization at the end of the year for our cost of power? Maybe we need to set a benchmark for the cost of power which companies profit from if they are below and absorb the cost if they are above.
- What standards, if any, needs to be addressed/implemented by the industry to avoid possible problems down the road (at audit time, for example)?
- How is your company going to handle this new situation?
- Come to share your questions, concerns and observations.
- What does the CO&O say about purchasing power for facilities? What approvals are required, if any?
October 25, 2000
Preliminary Results of CAPP Road Use Task Force Report- John Winton of Husky (Renaissance) and Don Snowdon of Northstar are representatives from the task force and both have 20 years experience as surface landmen. They have been responsible for numerous road use negotiations. They will be at the meeting to present some preliminary results and to lead the discussion
- Find out their recommendations and findings
- Share your questions, concerns and observations