CAPL Operating Procedure-Introduction & Context
The 2015 CAPL Operating Procedure is the sixth version of the CAPL Operating Procedure. Previous versions were issued in 1971, 1974, 1981, 1990 and 2007. Facing page explanatory notes were introduced in the document as of the 1990 version as an innovation that has been very well received by users and replicated in other major industry documents.
The CAPL Operating Procedure has been one of the most important standard documents in our industry since the 1974 version became widely accepted. It has fundamentally changed the way in which our industry has documented the business relationship between joint owners of P&NG rights. Its success has also demonstrated the major business benefits of standardizing those aspects of our agreements for which our industry cannot afford to address basically the same business terms in a multitude of different ways.
It was an honour to have been invited by the late Jim O’Byrne to become the principal draftsman of the 1990 CAPL Operating Procedure as the first step of the transition to become Chairman of the Committee for subsequent updates of the document.
The CAPL Operating Procedure is ultimately a document that attempts to balance competing needs. They include those of Operators relative to Non-Operators, those of an individual party relative to the other parties in the collective and those of larger and smaller companies. It also requires a delicate balance of respecting what has worked in the past, addressing the needs of the present and trying to anticipate industry’s needs with respect to emerging issues (some of which might not yet be widely appreciated). This is while also recognizing that there are some topics that are more appropriately left for the parties to negotiate in their particular transaction. The major consequence of not balancing those respective needs appropriately is that a critical mass of industry would ultimately be unlikely to use the document.
The major 2007 update reflected the need to modify the document to address changes that were warranted based on industry’s experiences with the 1990 document, and are analogous to a transition from a “flip phone” to a circa 2007 “Blackberry”. The changes reflected four other major factors.
The need to address issues associated with evolving business needs (e.g., horizontal wells, an increased emphasis on health, safety and the environment, use of a well to evaluate joint and 100% intervals, an increased emphasis on deeper portions of the WCSB and more technically complex operations, changes in the marketing environment and drilling density/holdings).
Legal influences (court cases, increased emphasis on alternative dispute resolution approaches, the Alberta Limitations Act, other changes in the legislative and regulatory environment).
A desire to apply “plainer language” principles to simplify the presentation in the document and make the material more accessible to users without sacrificing required content.
A significant expansion of the annotations to provide greater insights for users of all experience levels on a real-time basis as they worked with the document.
The 2015 update was much more modest, with about 3.5 pages of incremental content. However, the update was still significant - analogous to a transition from an older “Blackberry” to a “Smartphone”. It was designed primarily to offer greater functionality for horizontal wells in the context of industry’s experiences with “long reach wells” and resource plays. These changes offer a more appropriate foundation for complex shale projects without attempting to predict or prescribe outcomes for matters that should be negotiated by the parties in the context of their particular situation. However, parties might choose to use a more international, project-based approach for large, scale sized projects in due course, particularly if international partners are involved.
As is the case with all of the major CAPL documents, it will typically be helpful for a user with a potential problem under an earlier version of the document to look at the text and annotations of subsequent versions of the document. Modern versions of the document will often offer additional insights on an issue that might provide a platform for an early stage resolution (or an internal de-escalation of an emerging issue) because of the possibility that the current handling of the issue will be regarded as reflecting current generally accepted industry standards. This is particularly helpful if the current handling of the issue was first introduced in a pre-2015 document because of the additional opportunity for industry to have identified any concerns on that handling over time.
The content in the other tabs in this section offers more specific insights on the applicable version of the document or topic. Of particular note in this regard, the module on the 2015 document includes matrices that show the evolution of the Operating Procedure through the various versions of the document with respect to: (i) approval processes; (ii) the production penalty/cost recovery processes; (iii) the abandonment and surrender processes; and (iv) the handling of dispositions of interest.