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Joint Interest Auditor Code of Conduct: Background

Appendix A: Confidentiality

It is PASC's intent that operators will rely on this Auditor Registry rather than continue to create individual confidentiality agreements for joint interest audit situations. This can save all parties considerable time and effort while still achieving the desired benefits.

General Principles:
The courts have expressed a general expectation that all participants in a joint operation will keep confidential all activities or results of the joint operation until such time as it is public knowledge. This is irrespective of whether the governing agreements have confidentiality clauses or not. Some joint interest agreements have a paragraph on confidentiality, while the underlying land or exploration agreements (typically the CAPL operating procedure) have more extensive confidentiality provisions.

Past Use of Confidentiality Agreements:
Given the principles above, then why do we need confidentiality agreements and standards of behavior for joint interest auditors that includes confidentiality requirements?

  1. Joint interest auditors can be exposed to an operator's confidential information that is unrelated to the joint operation being audited.
  2. Contracted joint interest auditors (as opposed to staff auditors) are not participants nor signatories to the joint interest agreements so are not directly bound by their terms. They are not participants; they are third party contractors.
  3. Reminder of their existing legal and professional obligations lest they inadvertently or purposely disclose information that should have been kept confidential;
  4. The advent of electronic audits whereby the auditor is logged directly onto the operator's systems or has received an electronic dump of all applicable joint interest transactions or documents from the operator.

Other factors:
If payroll or other private information is provided to a Joint interest auditor, then that auditor & their organization &/or client have the obligation to treat this private information in a manner that meets or exceeds the requirements of the applicable privacy act or this confidentiality agreement or the joint venture agreements (whichever is the more stringent).

Be cautious regarding "Public Information", as a general guideline, joint interest auditors should still keep information confidential because we are not public relations professionals and could still cause a misinterpretation of the information if we purposely or inadvertently disclose it.

Concerns with Varying Confidentiality Agreements:
The preceding explains why so many operators adopted a requirement for joint interest auditors to sign confidentiality agreements before allowing the audit to proceed. Unfortunately, this has lead to several concerns:

  1. Any separate confidentiality agreement should not unilaterally override the rights and obligations of the existing joint venture agreements. For example, existing audit rights or confidentiality requirements under the governing agreements should not be reduced or limited by these separate confidentiality agreements.
  2. If any conflict exists between the separate confidentiality agreement and the existing joint venture agreements, then the existing agreements should take precedent. Unfortunately, this kind of statement is usually not included and as such, creates a legal quagmire which could negate the benefits of a separate confidentiality agreement.
  3. Some separate confidentiality agreements are excessively harsh, restrictive or overly lengthy with considerable legal language that requires an undue effort to review (and likely negotiate revisions) before it can be executed. This can delay the start of the audit. So this adds administrative time and cost to prepare for an audit for both the operator and auditor. Not to mention, the logistical problems if timing needs to be adjusted and either the operators or auditor's availability is tight.
  4. Confidentiality Agreements seem to be requested for each audit and sometimes more than one Confidentiality Agreement to conduct a single audit. This ties up the time of auditors; audit administrators / leads / coordinators / management or clients; joint venture representatives; lawyers; etc. in the negotiation and execution of individual confidentiality agreements or the resolution of conflicts between different agreements. This is simply not effective use of our industry's limited time and resources.

Clauses dealing with access to information and confidentiality in the 1990 CAPL are 305, 307 and 1801. Similar clauses exist in both the 1981 and 2007 CAPL, although clause numbers may vary. Many of these clauses are where conflicts have arisen between the governing agreements and subsequently requested confidentiality agreements.

  • There are no restrictions on keeping copies of records and in fact, clause 305 explicitly allows copies and extracts with no qualification as to the format (paper, electronic, manual summarization, et cetera)
  • Clause 1801 specifically includes disclosure to consultants who require such information to provide their services to the Joint operator(s) and that none of the Parties or representatives may disclose to any third party other than those involved in the provision of those services.

All Joint Account information is confidential information of the parties that own a piece of the Joint Account and its net assets. A portion of the Joint Account information being in the public domain only means that particular information is public and not confidential.

Appendix B: Procedures

New registrations for the registry will be accepted at all times during the year. After your initial registration, there will be an annual sign-off indicating you, as an individual, have read and will comply with the code of conduct. Administratively, this will be done in conjunction with the annual PASC dues process. Memberships and registry entries will expire at the same time. Once your registry entry expires, you will no longer appear on the auditor registry. To have your name displayed on the registry, you must indicate you have read and comply with the Code of Conduct. To remove your name from the list because you are no longer auditing or retiring from audit, you can let it lapse at renewal time or uncheck the Comply box. Members and non-members alike will renew their registry information at the same time.

This will be a web based process where the individual auditor controls the content and timing of presentation of their information. Once you have entered your information, you are responsible for maintaining it, including changes in contact information or removal from the registry.

The intent with the annual sign-off is two-fold:

  • It gets another reminder in front of the auditors about the Code of Conduct, including any updates that might be made.
  • It also self-regulates the list. Because the list will expire each year, coincident with the PASC membership year end, if you don't intentionally go in to sign-off that you are complying with the Code of Conduct, your name will not automatically reappear on the registry list. This helps to maintain a current, workable list for industry in that any individuals who retire or change careers do not remain on the list.

You will receive reminder emails prior to the expiry of your membership and/or registry entry. Prompt attention to your renewal and/or sign-off will ensure you remain on the list at all times.

The list provides industry participants with an easily accessible list of auditors that are currently working in industry. It also provides auditors with a single location to reach a number of industry participants and to communicate your participation in the Code of Conduct.