Executive Summary: Key Legal and Evidentiary Issues

• CNOOC Petroleum North America ULC sued multiple defendants over a pipeline failure on July 15, 2015, triggering complex, multi-year litigation with numerous discovery and procedural disputes.

• Wood Group sought to compel CNOOC Canada's responses to refused undertakings, with the Court ordering responses on several related to mitigation reasonableness and conflicts of interest among non-arm's length CNOOC-affiliated entities.

• Potential conflicts of interest arising from the common corporate control of CNOOC Canada, CNOOC Limited, CNOOC Research Institute, and COOEC Canada were found relevant and material to the damages and mitigation issues.

• The Court permitted Wood Group to question Dean Kovacs — the sole source of information about an unwritten Pipeline Integrity Maintenance System (PIMS) — despite the expiry of the primary questioning deadline.

• Costs from the cross-examination of former general counsel Marianne "Chuck" Davies were denied to Wood Group on the Privilege Application, as the Court determined it was a case of mixed success where each party should bear their own costs.

• Wood Group was awarded costs (Column 5, Schedule C at a four-times multiplier) for its successful adjournment application, which moved the trial from September 2025 to October 13, 2026.

The pipeline failure and the parties involved

On July 15, 2015, a pipeline failure occurred in Alberta. CNOOC Petroleum North America ULC ("CNOOC Canada"), an indirect wholly owned subsidiary of CNOOC Limited, filed a Statement of Claim against several parties, including Sunstone Projects Ltd and Wood Group Canada, Inc (collectively, the "Wood Group") and ITP SA ("ITP"). Third parties to the action include Surerus Pipeline Inc, Stresstech Engineering Inc, and Thurber Engineering Ltd. The matter has been under case management by Associate Chief Justice D.B. Nixon at the Court of King's Bench of Alberta for several years, generating multiple interlocutory decisions as the parties progressed through discovery toward a trial set for October 13, 2026.

Discovery disputes over undertaking responses

A significant portion of the litigation concerned Wood Group's applications to compel CNOOC Canada to respond to numerous undertaking requests arising from the questioning of CNOOC Canada's corporate representative, Sean Noe, on June 23 and 25, 2025. Under Part 5 of the Alberta Rules of Court, parties must disclose all relevant and material records and answer all relevant and material questions. The Court assessed each batch of refused undertakings against the standard of relevance and materiality, guided by the pleadings and the overall context of the claim.

Inquiries of third parties and CNOOC affiliates

CNOOC Canada refused several undertakings requesting inquiries of affiliated entities, including China Petroleum Pipeline Engineering Company, Ltd ("CPPCo"), CNOOC Limited, and CNOOC Research Institute. The Court upheld CNOOC Canada's refusal of Undertaking 884 on the basis that there was no evidence that CPPCo and the CNOOC affiliated entities were under common control, and the Court found that CPPCo is an arm's length third party. For Undertaking 885, CNOOC Canada had already agreed, without admitting relevance and materiality, to make inquiries of CNOOC Limited and CNOOC Research Institute and to inform what use was made of the report. The Court found the remaining request for "any analysis of whether to do a PUR pipeline or a pipe-in-pipe pipeline" to be overly broad, and ruled that the balance of Undertaking 885 was appropriately refused.

Reasonableness of mitigation and competitive bidding

The Court ordered CNOOC Canada to respond to the balance of Undertakings 890–892, which asked whether pipeline replacement contracts were competitively bid or sole sourced, who made the selection, and what criteria were used, including whether other businesses were considered for the work. CNOOC Canada had already advised that these were competitive bids but refused the remaining inquiries, arguing they were not relevant or material to a damages assessment or mitigation efforts. The Court found these inquiries relevant and material to the issue of whether the damages claimed by CNOOC Canada were reasonable. Similarly, Undertaking 893 was ordered responded to in part, requiring CNOOC Canada to make inquiries of CNOOC Limited regarding who made the decision to use a pipe-in-pipe pipeline as well as the roles of those individuals within the organization. The rest of the undertaking was appropriately refused as being overly broad and not relevant for the issue of damages.

Conflicts of interest within the CNOOC corporate group

A central theme across several undertakings was the potential for conflicts of interest within the CNOOC corporate structure. CNOOC Canada is an indirect wholly owned subsidiary of CNOOC Limited, operating as CNOOC Limited's business unit in North America. China Ocean Oil Group Co, Ltd ("COOGC"), formerly named China National Offshore Oil Corporation, in turn controls CNOOC Limited and its subsidiaries. COOGC also wholly owns CNOOC Research Institute. The Court emphasized that the common control of all these entities means the transactions amongst them are, by definition, not at arm's length, and that non-arm's length transactions generally warrant extra due diligence. Undertaking 896, which asked what steps were taken to prevent a conflict of interest when CNOOC Research Institute performed the front-end engineering design ("FEED") work on the replacement pipe-in-pipe pipeline, was ordered to be answered. The Court found that there was no evidence that the potential conflict of interest within this corporate group, all of which is controlled by COOGC, was considered or addressed. COOEC China, also controlled by COOGC, is the parent company of COOEC Canada, which was the general construction contractor for the pipe replacement project and was granted a sole source contract to complete the construction of the replacement pipelines. Undertakings 907 and 908 were ordered responded to, with the scope focused on whether individuals within the non-arm's length group of CNOOC entities have any memory or information as to who made the decision to retain COOEC Canada. If a decision-maker is identified, CNOOC Canada was directed to respond to follow-up undertaking requests, except for Undertaking Requests 914, 915, 918, and 920, which were refused as the knowledge of the decisionmaker and/or COOEC is not relevant or material. Undertaking 899 was also ordered answered, as the inquiry into what factors were considered in awarding the FEED contract to CNOOC Research Institute was found relevant and material. Undertaking 906 was similarly ordered answered, as the Court found it reasonable to ask whether the decisionmaker requested or conducted a review of the decision to select CNOOC Research Institute for the work, and whether a third party reviewed or scrutinized whether this was a reasonable decision. The other undertaking requests in the 899–901 and 904–906 batch were appropriately refused.

The Pipeline Integrity Maintenance System (PIMS) and the questioning of Dean Kovacs

In a separate decision (2026 ABKB 101), the Court addressed Wood Group's application to question Dean Kovacs, the former chief inspector of CNOOC's Canadian gas operation. Mr. Kovacs was the sole source of information that CNOOC relied on in its assertion in the amended Undertaking Response 708 that CNOOC had a form of unwritten PIMS relating to the pipelines at issue. CNOOC made an inquiry of Mr. Kovacs regarding the PIMS at some point in October of 2025, and in an affidavit of Sean Noe sworn November 5, 2025, Mr. Kovacs advised that although he could not recall exactly what was referred to as programs or procedures similar to PIMS, the pipelines at issue had elements typically part of a PIMS, including corrosion system monitoring, pigging procedures, an operations manual, shutdown procedures, and an annual risk assessment process. The error underlying the original Undertaking Response 708 — that there was no written PIMS — was not acknowledged by CNOOC until June of 2025, which was after primary questioning had closed on March 30, 2025. The Court exercised its discretion to permit Wood Group to question Mr. Kovacs, finding that the undertaking response had been amended following the closing of primary questioning, and there was no indication prior to that amendment that Mr. Kovacs had any specific knowledge on the PIMS issue. The fact that Wood Group had knowledge of Mr. Kovacs' name and role was of no consequence before the evidence disclosed the relevant particulars connecting the PIMS issue in the November 5, 2025 affidavit and the questioning of Mr. Noe on November 7, 2025. The scope of questioning was limited strictly to matters in respect of the amended Undertaking Response 708. The Court also directed the parties to adjust the Complex Civil Litigation Plan deadlines to accommodate the questioning while preserving the commencement of the trial on October 13, 2026.

Procedures disclosed to the Alberta Energy Regulator

Undertaking 865 required CNOOC Canada to determine and advise how it identified which procedures were utilised in respect of the produced emulsion pipeline called the K1A (the "PE Pipeline"). In previous questioning, CNOOC Canada had advised that it could not determine what policies and procedures it had in place for the pipelines at issue. However, following the Pipeline Failure, CNOOC Canada had advised the Alberta Energy Regulator ("AER"), in response to a request to produce all procedures utilised on the pipeline, about certain start-up procedures, shut-down procedures, and procedures for temperature or pressure changes of the PE Pipeline. The Court found the inquiry relevant and material because the previous response to the AER suggested that CNOOC Canada had information responsive to the undertaking, yet CNOOC Canada's response appeared to have shifted. The Court clarified there was no suggestion that the AER was misled, and ordered Undertaking 865 to be responded to.

Costs rulings across multiple applications

Two costs rulings rounded out the decisions. In 2026 ABKB 90, the Court addressed costs following the Privilege Application (2023 ABKB 689). The parties had largely agreed regarding costs for the Privilege Application; however, there remained the issue of the cross-examination of Marianne "Chuck" Davies, former general counsel for CNOOC. Ms. Davies' affidavit was originally tendered in connection with Action 1901 18478, and Wood Group cross-examined her on that affidavit. The affidavit was relied on extensively by CNOOC and by CNOOC's then corporate representative Mike Dlugan during the Privilege Application. CNOOC did not dispute that Wood Group was successful in the Privilege Application, but opposed Wood Group receiving costs for the cross-examination and transcripts of Ms. Davies, arguing this was res judicata and double recovery. The Court did not accept the res judicata argument, but instead considered as a factor the fact that Wood Group had previously sought the costs for the cross-examination of Ms. Davies following the APEGA Judicial Reviews (2024 ABKB 603), where those costs were dismissed along with the rest of the costs sought by Wood Group against CNOOC in the APEGA Costs Decision (2024 ABKB 638). The Court also noted the difference in cost scales: costs under the APEGA Costs Decision were under Column 1 of Schedule C, whereas the costs sought in the main action were at Column 5 at a four-times multiplier. Ultimately, the Court found this was a case of mixed success for the parties and therefore each party shall bear their own costs.

Adjournment application costs awarded to Wood Group

In 2026 ABKB 202, the Court ruled on costs following the Adjournment Application (2024 ABKB 607). Wood Group had applied for an adjournment from the initial scheduled trial date of September 2025, arguing that the discovery of documents was such an intensive exercise that the original date was no longer workable. Wood Group applied for the adjournment to be sine die, while CNOOC argued that a delay of approximately four months, leading to a trial beginning in January 2026, was appropriate. The Court had determined that an adjournment to October 13, 2026 was appropriate and rejected the sine die request. On costs, the Court found that Wood Group was substantively successful in the application, noting that the four-month delay leading to a January 2026 date proposed by CNOOC was not a workable date, and that Wood Group's request for a sine die adjournment did not preclude its entitlement to costs. Wood Group was awarded costs at Column 5 of Schedule C on a multiple of four, which the Court noted is the regular tariff employed and agreed to by the parties throughout these proceedings. No exact monetary amount was specified in the decisions; costs are to be calculated pursuant to the applicable tariff schedule.