November 30, 2016

Construction Lien Rights Won For The Oil & Gas Industry

If you or your company have not been paid for the services or materials provided to a construction or oil or gas project, the Alberta Builders’ Lien Act (“BLA”) can be utilized to protect your rights to repayment.

Under the BLA, contractors and sub-contractors on a construction project usually have 45 days from the last day worked (or the day the contract was abandoned) or the last date rented equipment was on site to file a lien. However, if the services or materials provided were with respect to improvements to an oil or gas well or an oil or gas well site, a longer 90 day registration period may apply.

The recent Alberta Court of Queen’s Bench decision of Davidson Well Drilling Limited (Re), 2016 ABQB 416, considered a number of builders’ liens filed against a Syncrude oil sands project near Wood Buffalo, Alberta. The general contractor on the project, Davidson Well Drilling (“Davidson”), went into receivership, leaving numerous sub-trades unpaid for the work they had provided. 

The Receiver acting on behalf of Davidson had to determine which liens were valid. The Receiver argued that five liens were invalid due to, among other things, the fact that they were not filed within 45 days. The primary issue for the court to consider was whether the Syncrude Oil Sands project was “an oil or gas well or oil or gas well site,” entitling its sub-trades to the longer 90 day registration period under the BLA.

Walsh LLP represented lien claimants who had provided services as sub-trades on the project and successfully argued that, in fact, the longer 90 day registration period applied in the circumstances.

Although the Alberta Energy Regulator had designated the sites as “mines,” the story did not end there. The court instead adopted a liberal interpretation of the term “oil or gas well or well site,” consistent with the remedial purpose of the legislation, and ruled that this included exploratory wells, evaluation holes, or test wells.

In the case at hand, Davidson was involved in the drilling of exploratory wells in order to locate bitumen from which oil would be processed. Their services, as well as those providing services or materials to them, were therefore entitled to the 90 day lien period.

The oil and gas service companies represented by Walsh LLP were assisting with these drilling endeavours. The court agreed with Walsh LLP that their liens were valid and they were entitled to payment for same.

However, simply doing work on an oil or gas site does not necessarily entitle you to a longer lien registration period. If the work provided is totally unrelated to the drilling of wells, the shorter 45 day lien period may apply. Therefore, it is best to err on the side of caution and file all liens within 45 days.  Each case is determined on its own facts.

For any questions or comments regarding builders’ liens or construction law disputes, contact one of Walsh LLP’s Construction Litigation lawyers.