Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions - exemption granted from the requirement to include financial statements and management's discussion and analysis in an information circular for an exchangeable share entity participating in an arrangement.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.

Form 51-102F5 Information Circular, Item 14.2.

Citation: Storm Exploration Inc., Re, 2010 ABASC 330

July 21, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

STORM EXPLORATION INC.

(THE FILER)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirement under Item 14.2 of Form 51-102F5 Information Circular (the Circular Form) of the Legislation to include the ARC Resources Financial Statements (as defined below) and the ARC Resources MD&A (as defined below) in the information circular (the Circular) delivered to the holders (the Filer Shareholders) of the Filer's voting common shares and non-voting common shares (collectively, the Filer Shares) in connection with a special meeting to approve a plan of arrangement (the Arrangement) under the Canada Business Corporations Act among the Filer, ARC Energy Trust (ARC) and ARC Resources Ltd. (ARC Resources) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this Application;

(b) the Filer has provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

The Filer, ARC and ARC Resources

The Filer

1. The Filer is a corporation continued under the laws of Canada. The principal office of the Filer is located in Calgary, Alberta.

2. The Filer is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada. The Filer is not in default of securities legislation in any jurisdiction of Canada.

3. Filer Shares are listed on the Toronto Stock Exchange (TSX).

ARC

4. ARC is an unincorporated open-ended investment trust established under the laws of the Province of Alberta pursuant to a trust indenture dated as of May 15, 2006 between ARC Resources and Computershare Trust Company of Canada, as trustee, as amended and restated. The principal office of ARC is located in Calgary, Alberta.

5. ARC is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada. ARC is not in default of securities legislation in any jurisdiction of Canada.

6. ARC's trust units (ARC Units) are listed on the TSX.

7. ARC has filed a "current AIF" (ARC AIF) and has "current annual financial statements" (ARC Annual Financial Statements) (as such terms are defined in National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101)) for the financial year ended December 31, 2009.

ARC Resources

8. ARC Resources is a corporation amalgamated under the laws of the Province of Alberta. The principal office of ARC Resources is located in Calgary, Alberta.

9. ARC Resources is a reporting issuer in each of the provinces of Canada. ARC Resources is not in default of applicable securities legislation in any jurisdiction of Canada.

10. ARC holds all of the issued and outstanding voting common shares of ARC Resources and the issued and outstanding Series A exchangeable shares (Series A Exchangeable Shares) of ARC Resources are publicly held.

11. The common shares of ARC Resources are not listed or posted for trading on any exchange or quotation and trade reporting system. Series A Exchangeable Shares are listed on the TSX and are exchangeable as at July 14, 2010 for ARC Units on a 1 Series A Exchangeable Share for 2.79848 ARC Units basis.

Arrangement

12. Pursuant to the Arrangement, ARC will acquire all of the existing and outstanding Filer Shares. As consideration, the Filer Shareholders will receive for each Filer Share:

(a) at their election, 0.5700 ARC Units or 0.2021 Series B exchangeable shares (Series B Exchangeable Shares) of ARC Resources (which number of Series B Exchangeable Shares is based on the anticipated exchange ratio for such Series B Exchangeable Shares to ARC Units of 2.82, as of closing, and is subject to adjustment to reflect the actual exchange ratio); however, the Filer Shareholders who are non-residents of Canada or tax-exempt shareholders will not be entitled to elect to receive Series B Exchangeable Shares;

(b) a cash payment of approximately $1.00 at closing, which represents the proceeds of the sale of the Filer's Surmont asset to a separate purchaser; and

(c) 0.3333 common shares of a new, separate junior exploration and production company (ExploreCo Shares), which will be staffed with certain members of the Filer's management team and whose primary assets will be undeveloped land primarily in the Umbach, Cabin/Kotcho/Junior and Horn River Basin areas plus equity positions in Storm Gas Resource Corp., Storm Ventures International Inc., Bridge Energy Norge ASA and Bellamont Exploration Ltd.

13. In addition, each of the Filer Shareholders will receive 0.4 of a warrant (ExploreCo Warrant) per ExploreCo Share entitling the holder to acquire one ExploreCo Share for each whole ExploreCo Warrant at a price equal to the net asset value of the ExploreCo Shares until that date which is 15 days from the effective date of the Arrangement.

14. Pursuant to the Filer's constating documents and applicable securities laws, the Filer Shareholders will be required to approve the Arrangement at a meeting of the Filer Shareholders (the Meeting). The Arrangement must be approved by not less than two-thirds of the votes cast by the Filer Shareholders at the Meeting. The Meeting is anticipated to take place on August 16, 2010 and the Circular is expected to be mailed in mid-July 2010.

15. The Arrangement will be a "restructuring transaction" under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) in respect of the Filer and will therefore require compliance with Item 14.2 of the Circular Form and National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107).

Disclosure in the Circular

16. Pursuant to Item 14.2 of the Circular Form, if securityholder approval is required of a "restructuring transaction under which securities are to be changed, exchanged, issued or distributed", then disclosure is required for each entity, other than the issuer, whose securities are being changed, exchanged, issued or distributed if the issuer's securityholders will have an interest in that entity after the restructuring transaction is completed. Therefore, disclosure is required in the Circular for ARC Resources.

17. Item 14.2 of the Circular Form requires, among other items, that the Circular contain the disclosure (including financial statements and management's discussion and analysis (MD&A)) prescribed under securities legislation and described in the form of prospectus that ARC Resources would be eligible to use immediately prior to the sending and filing of the Circular for a distribution of its securities. Therefore, the Circular must contain the disclosure in respect of ARC Resources prescribed by Form 41-101F1 Information Required in a Prospectus (the Prospectus Form) and National Instrument 41-101 General Prospectus Requirements (NI 41-101).

18. Items 8.2(1)(a) and (b) and 8.2(2) of the Prospectus Form require the Filer to include MD&A corresponding to each of the financial years ended December 31, 2009 and December 31, 2008 and the interim period ended March 31, 2010 of ARC Resources (the ARC Resources MD&A) in the Circular.

19. Item 32.2(1) of the Prospectus Form requires the Filer to include certain annual financial statements of ARC Resources in the Circular, including: (i) an income statement, a statement of retained earnings, and a cash flow statement of ARC Resources for each of the financial years ended December 31, 2009, December 31, 2008 and December 31, 2007; and (ii) a balance sheet of ARC Resources as at December 31, 2009 and December 31, 2008 (the ARC Resources Annual Financial Statements). Item 32.3(1) of the Prospectus Form requires the Filer to include certain comparative interim financial statements of ARC Resources in the Circular, including: (i) an income statement, a statement of retained earnings, and a cash flow statement of ARC Resources for the three month period ended March 31, 2010 and comparative financial information for the three month period ended March 31, 2009; (ii) a balance sheet of ARC Resources as at March 31, 2010 and as at March 31, 2009 (together with the ARC Resources Annual Financial Statements, the ARC Resources Financial Statements).

20. Subsection 4.2(1) of NI 41-101 requires that the ARC Resources Annual Financial Statements must be audited in accordance with NI 52-107.

Exemption Sought

21. The financial statements of ARC are reported on a consolidated basis, which includes the financial results for ARC Resources. Pursuant to an MRRS decision document dated January 31, 2001 (ARC Energy Trust, ARC Resources Ltd, 908563 Alberta Ltd., Startech Energy Inc., and Impact Energy Inc., 2001 LNABASC 65) and an MRRS decision document dated May 24, 2005 (ARC Resources Ltd., 2005 ABASC 392), ARC Resources does not report its financial results independently from the consolidated financial statements of ARC. Further, management of ARC Resources, after consulting with ARC's auditors, believes that the ARC Resources Financial Statements, if prepared, would be misleading, since there are transactions between ARC Resources and ARC that are eliminated when consolidation is performed at the ARC level. To present the ARC Resources Financial Statements, which would exclude accounts of ARC, would present the effects of only one side of the financing activities between ARC Resources and ARC. This would result in significant intra-group balances and intra group interest expense being reflected on the ARC Resources Financial Statements. Additionally, an agreement exists between ARC and ARC Resources whereby ARC Resources pays a regular payment to ARC related to royalty and interest income from operations. To present the ARC Resources Financial Statements excluding the accounts of ARC, would present only one side of the intra-group royalty and interest income. As a result, the presentation of these intra-group transactions would present a confusing and potentially misleading picture of financial performance.

22. The ARC AIF and the ARC Annual Financial Statements will be incorporated by reference in the Circular. The ARC AIF includes disclosure, to the extent it is required by NI 51-102, regarding the business, assets, operations and share capital of ARC Resources.

23. The Circular will contain prospectus level disclosure regarding the Filer, ARC, and ARC Resources (other than the ARC Resources Financial Statements and ARC Resources MD&A), including detailed disclosure regarding the terms and conditions of the Series B Exchangeable Shares and will contain sufficient information to enable a reasonable securityholder to form a reasoned judgement concerning the nature and effect of the Arrangement.

24. As Series B Exchangeable Shares are exchangeable for ARC Units, it is the financial statements and MD&A of ARC and not the ARC Resources Financial Statements and ARC Resources MD&A that are relevant to the Filer Shareholders who may elect to receive Series B Exchangeable Shares.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.

"Blaine Young"
Associate Director, Corporate Finance
Alberta Securities Commission