Category Archives: Oil & Gas

EPEA v. Limitations Act: Test Set By Alberta Court For Extending Limitation For Environmental Claims

The Alberta Court of Queen’s Bench has set the “test” to be followed in s. 218 applications pursuant to the Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12 (“EPEA”) in its May 19, 2016 decision in Lakeview Village Professional Centre Corporation v Suncor Energy Inc, et al 2016 ABQB 288.

Background

The plaintiff had purchased lands in the Lakeview subdivision of Calgary in 1998. The plaintiff was aware that a gas station was formerly on the site. This raised concerns of potential contamination of the lands; however, an initial environmental assessment found no significant contamination.

A number of years later, in 2013, the plaintiff received an offer to purchase the lands, prompting another environmental assessment. This assessment found contamination at a level that required remediation of the lands, including the removal of piping, concrete and soil. The plaintiff has spent approximately $400,000 on remediation to date, with further costs expected.

The Action

As a result of these remediation costs, the plaintiff wishes to recoup some or all of these costs from former owners of the lands, including the successor of the gas station operator and the vendor of the lands who commissioned the first environmental assessment (Suncor and Commonwealth Business Management Ltd. (“Commonwealth”)).

The Problem

Normally, the Plaintiff’s action would be out of time under the Limitations Act, R.S.A. 2000, c. L-12, as the contamination / sale of land occurred well past the 10-year ultimate limitation period. However, there is a provision in EPEA that permits a judge to extend the limitation period in some cases.

The Law

Section 218 of EPEA provides that a judge may extend a limitation period where the basis for the action arises out of a “release of a substance into the environment”. The purpose of this extension is that sometimes, contamination may not be identified for several years.

Where an application is made, s. 218 does identify a list of things for a judge to consider: (a) when the alleged adverse effect occurred; (b) whether the alleged adverse effect ought to have been discovered by the claimant had the claimant exercised due diligence in ascertaining the presence of the alleged adverse effect, and whether the claimant exercised such due diligence; (c) whether extending the limitation period would prejudice the proposed defendant’s ability to maintain a defence to the claim on the merits; (d) any other criteria the court considers to be relevant.

However, there was little in the way of case law on this issue, and there was no “test” to guide the court in considering these types of applications. In particular, does a court decide conclusively in these applications whether the limitation period should, or should not be extended? Or, can the court make a preliminary determination giving plaintiffs the green light to go ahead to trial, where the limitation argument may surface again?

The New Test

Ultimately, Justice Martin created a two-step approach for use in s. 218 applications:

  1. Is there sufficient evidence on the s. 218 factors to grant an extension of the limitation period?
  2. If there is not enough evidence to make that determination, or if there is sufficient evidence but an issue for trial could be determined prematurely, has the claimant shown a good arguable case for an extension? If so, the claimant is entitled to an extension of the limitation period subject to a final determination of the issue at trial.

The court reasoned that this approach respects the purpose of s. 218 while acknowledging the legitimate interest of a claimant to know whether to spend further resources on their claim. It also allows the court to extend the limitation period for obviously meritorious s. 218 cases or to weed out cases that are attempting to “abuse the system”.

The Decision

Lakeview was successful in its application and may now proceed with a claim against Suncor and Commonwealth.

The court found that the “adverse effect” may have been as early as 1969, through to as late as 2013, and that this time frame is “not so long ago that it would be unfair to allow the action to proceed against either party”.

Further, the court determined (on a preliminary basis only) that Lakeview had exercised due diligence when purchasing the property from Commonwealth. Lakeview had made it a condition of its purchase that Commonwealth provide information on the environmental status of the property. Commonwealth had commissioned its own environmental assessment which concluded that there was no evidence of significant contamination and no further investigation would be warranted.

The court found no prejudice to Suncor or Commonwealth as neither had presented any evidence that an extension to the limitation period would prejudice their ability to maintain a defence on the merits.

Finally, Commonwealth had attempted to argue that s. 218 only applied to parties that had caused or contributed to the contamination of the lands and as it was only an owner of lands (between Suncor and Lakeview), s. 218 did not apply.

The court, however, found that the wording of s. 218 is broad. Its opening paragraph refers to civil proceedings “where the basis for the proceeding is an alleged adverse effect”. The basis of Lakeview’s action is determining liability from the fallout of an alleged adverse effect. In addition, EPEA also contemplates the liability of a former owner for remediation in its definition of “persons responsible” for a contaminated site:

SECTION 107
Interpretation and application

107 (1) In this Part,

(c) “person responsible for the contaminated site” means

(i) a person responsible for the substance that is in, on or under the contaminated site,

(ii) any other person who the Director considers caused or contributed to the release of the substance into the environment,

(iii) the owner of the contaminated site,

(iv) any previous owner of the contaminated site who was the owner at any time when the substance was in, on or under the contaminated site,


[Emphasis added]

As such, the court found that this case was one contemplated by s. 218, where the harmful effects of contamination were not evident for a number of years, due diligence was shown, and there was no prejudice to the defendants. Accordingly, the court extended the limitation period for Lakeview’s claim and has allowed this matter to proceed to trial.

James Early

Canada’s National Conservation “Plan”?

Today the federal government announced a commitment of $252,000,000.00 ($252 million) over the next five years for various conservation initiatives that can be broadly divided into three priorities:

– conserving Canada’s lands and waters;

– restoring Canada’s ecosystems; and

– connecting Canadians to nature.

The commitment is broken down as follows:

– $100 million for the Nature Conservancy of Canada to protect sensitive lands over five years.

– $37 million for marine and coastal conservation over five years.

– $3.2 million to assist a national inventory of conserved areas in Canada over five years.

– $50 million to restore wetlands over five years.

– $50 million to help voluntary actions to restore and conserve species and their habitats over five years.

– $9.2 million to connect urban Canadians to nature over five years.

– $3 million for an Earth Rangers program to expand family-oriented conservation programming over three years.

This follows on the footsteps of news from Alberta, earlier today, that the province has commenced lease sales for seven plots of land (consisting of approximately 1700 hectares of mountain caribou habitat) in northern Alberta.

The leasing news from Alberta, itself, came after news that a federal panel of scientists, the Committee on the Status of Endangered Wildlife in Canada, concluded that all of Alberta’s mountain caribou herds should be considered endangered.

Today’s five-year commitment to the conservation of Canada’s environment is a smaller commitment than the Government has made to ensuring broadband service to 280,000 rural homes ($305,000,000.00 ($305 million) over five years).

It is hard to judge the impact of this announcement, but difficult not to be suspicious: it lacks any real detail (despite this being an election promise from three years ago), and follows on the heels of the gutting of federal environmental and fisheries laws by the government.

By James Early

Kinder Morgan: Who Participates?

While thousands of interested parties participated in the Northern Gateway hearings, the same cannot be said of the Kinder Morgan National Energy Board (“NEB”) pipeline review.

More than 2,100 people applied to participate in the Kinder Morgan hearings, though as few as 400 will be permitted to appear as intervenors at the hearing. New rules enacted by the federal government now limit participation to only those who are directly affected by the project.

In order to participate, the NEB must be satisfied that an applicant:

-is directly affected by the granting or refusing of a project application

-has relevant information or expertise for the NEB to consider; or

-both.

As part of the new rules, the NEB is to determine who is directly affected by considering the following two factors:

1. The nature of the person’s interest.

2. Whether the granting or refusing of a project application causes a direct effect on the person’s interest.

The first enquiry addresses whether a person has a specific and detailed interest, rather than a general public interest. Examples of interests that could support participation are: commercial, property or other financial interest (including employment); personal use and occupancy of land and resources; or use of land and resources for traditional Aboriginal purposes.

In relation to this second stage, the NEB will consider the degree of connection between the project and the interest, the likelihood and severity of harm a person is exposed to, and the frequency and duration of a person’s use of the area near the project.

The interpretation of these rules, however, is proving contentious.

In challenging the rules on participation, this week Forest Ethics Advocacy, amongst others, filed an application with the NEB alleging:

“…[the restriction on participation] is a draconian, undemocratic limitation of their constitutionally guaranteed freedom of expression…”

The applicants also allege that the NEB used a very narrow definition of the phrase “directly affected”, and that the NEB refuses to hear submissions on climate change or fossil fuels:

“This board cannot determine whether the proposed pipeline is in the public interest without a full consideration of the environmental effects… …[th]e project is being proposed in order to increase pipeline capacity in support of growing oil production. Without acknowledging that increased production of oil sands is having a devastating effect on the environment, and resulting in climate change, this board cannot even begin to address the issues which it has deemed relevant

The NEB application follows on the heels of a Tsleil-Waututh application, filed just a few days earlier in the Federal Court of Appeal. In this case, the First Nation claims that the NEB review process is unilateral and one-sided.

The First Nation has stated:

“…serious legal errors made by the federal Crown and NEB have led to a flawed and unlawful review process that puts Burrard Inlet and all peoples who live here at risk.

“The Crown and NEB are running roughshod over our Aboriginal Title and Rights. The process to review Kinder Morgan’s proposed pipeline expansion and tanker project was designed without First Nations consultation or public participation. The timelines appear to have been designed to rush through approvals,” says Chief Maureen Thomas, Tsleil-Waututh Nation.

“Legal materials to be filed in the Federal Court of Appeal will demonstrate that, among other things, the NEB lacked legal authority to start its review process because of the federal government’s failure to first consult Tsleil-Waututh on key decisions about the environmental assessment and regulatory review of the project.”

Regardless of the disposition of the NEB and Federal Court applications, what appears to be certain is that litigation in relation to the Kinder Morgan project is not likely to stop. Currently the Northern Gateway project is facing litigation on at least 10 fronts from a range of parties including First Nations and environmental groups.

By James Early

Environmental Protection Order issued by Alberta Government

Earlier this month, Alberta issued an environmental protection order to Locke Stock & Barrel Company Ltd. that outlined necessary steps to reclaim an oil and gas wellsite in the Municipal District of Foothills No. 31.

Under the environmental protection order, Locke Stock & Barrel Co. Ltd. must:

– conserve and reclaim the site in accordance with the 2010 Reclamation Criteria for Wellsites and Associated Facilities;

– remediate any contamination on site, or off-site which originated from the well or any of its activities;

– undertake soil and/or groundwater sampling at appropriate intervals to demonstrate acceptable remediation;

– submit a final report to Environment and Sustainable Resource Development (“ESRD”) summarizing all work that has been undertaken to remediate any contamination;

– apply to ESRD for a reclamation certificate for the well; and

– conduct weed spraying and maintenance on the site at least twice a year until ESRD issues a reclamation certificate to the company.

As the Environmental Law Centre recently noted, though, there were 16,975 wells abandoned between 1963 and 2002, and an additional 35,856 since 2002 in Alberta. Hopefully we will begin to see a lot more remediation orders issued in the coming months, and with greater diligence than in the past.

That begs the question: what is the effect of an environmental protection order in the case where the company or entity required to remediate declares bankruptcy? A recent Lexpert article noted:

“Many a stakeholder has been stunned by the broad powers of the Companies’ Creditors Arrangement Act (“CCAA”) to stay – and then compromise – nearly all clams against an insolvent company. This power has recently been confirmed to extend even over remediation orders issued by provincial ministries of environment (“MOEs”)…

“[The issue of insolvency vs. remediation orders is s]o hot that counsel for MOEs have suggested that CCAA is in danger of becoming a “regulatory car wash,” arbitrarily cleansing debtors of environmental obligations and leaving taxpayers to pick up the tab.”

The decision reached by the Supreme Court of Canada in Abitibibowater in 2012 set a worrying precedent. In that case, the Supreme Court held that there are three requirements orders must meet in order to be considered claims that may be subject to the insolvency process.

First, there must be a debt, a liability or an obligation to a creditor. The first criterion was met because the MOE had identified itself as a creditor by resorting to environmental protection enforcement mechanisms.

Second, the debt, liability or obligation must be incurred as of a specific time. This requirement was also met since the environmental damage had occurred before the time of the CCAA proceedings.

Third, it must be possible to attach a monetary value to the debt, liability or obligation. The Supreme Court determined that it was possible.

In Nortel Networks v MOE, litigation that has been working its way through the Ontario courts, the Ontario Court of Appeal lifted stays of remediation orders that had been put in place pursuant to the CCAA. Nortel applied for leave to appeal this decision to the Supreme Court, but last week Nortel’s application for leave was dismissed.

In assessing the Supreme Court’s reasoning in Abitibibowater the Ontario Court of Appeal summarized its interpretation of the ruling as follows:

“In determining whether a regulatory order is a provable claim, a CCAA court must apply the general rules that apply to future or contingent claims. As I read it, the Supreme Court’s decision is clear: ongoing environmental remediation obligations may be reduced to monetary claims that can be compromised in CCAA proceedings only where the province has performed the remediation work and advances a claim for reimbursement, or where the obligation may be considered a contingent or future claim because it is “sufficiently certain” that the province will do the work and then seek reimbursement.” [my emphasis]

In other words, if a province wishes to avoid the ‘car washing’ of its remediation order against a bankrupt polluter, it should not take steps to remediate the contaminated site itself, nor show any intent to remediate.

In terms of the Locke Stock & Barrel Co Ltd. environmental protection order, it is good to see Alberta utilizing some of the tools available to it to fix environmental problems. In some circumstances, however, it could be all for naught if the party subject to a remediation order declares bankruptcy and the obligation to remediate is “car washed” away by the CCAA. Remediation would likely then be left to the province in question, and, consequently, taxpayers like you.

By James Early

Carbon Capture, Alberta’s Licence to Drill

Last week, the Government of Alberta announced that, as part of “Budget 2014”, Alberta will continue to invest in two carbon capture and storage projects that, it says, will reduce greenhouse gas emissions from oil sands upgrading.

The report added that these two projects will commence in 2015 and will store 2.76 million tonnes of carbon dioxide per year, the equivalent, Alberta says, of taking 550,000 cars off the road each year.

What happens to the carbon dioxide once it is pumped underground? Is it safe? Will it leak? What energy has to be expended to actually pipe the carbon dioxide to its final resting place? Perhaps these questions need to be asked, and answered. Likely the carbon dioxide will be used to extract even more oil from the ground – adding more gas-using vehicles to our roads?

One thing is for sure, carbon capture and storage is being used by industry and the Alberta and Canadian governments as a licence to continue along the unsustainable path of developing the Alberta tar sands.

By James Early

Bill 18 – 2014: Water Sustainability Act (British Columbia)

On Tuesday, March 11, 2014 the B.C. Government introduced its new Water Sustainability Act (the “Act”). In planning the overhaul of the 105-year-old Water Act, the B.C. Government recognized that:

“Water is our most important natural resource:  without it, there would be no life on Earth. We all need it – for drinking, washing, cooking, growing food, and supporting every aspect of a healthy environment, a growing economy and our prosperous communities.

 

British Columbia has more than 290 watersheds, including fish-bearing rivers and streams, lakes and wetlands and the Government recognized that with the a growing population, a changing climate and expanding development, the pressures on those waters were growing and steps needed to be taken to ensure that water was able to meet today’s needs, and the needs of generations to come.

The Act will repeal most of the Water Act by modernizing its language and will do the following:

– re-enact the regulatory scheme for the diversion and use of stream water and apply that scheme to both stream water and groundwater;

– authorize the establishment of water objectives and requirements that water objectives be considered in decision making under the Act;

– mandate the consideration of the environmental flow needs of a stream in licensing decisions;

– move various provisions from the Fish Protection Act respecting sensitive streams, bank-to-bank dams and fish population protection orders to the Act as well as provisions respecting the protection of streams;

– provide new powers to be applied when streams are at risk of falling or have fallen below their critical environmental flow thresholds to modify the existing precedence of water use for the purpose of protecting the aquatic ecosystem of streams and aquifers and essential domestic uses;

– rename water management plans as water sustainability plans and provide new regulatory powers that can be exercised on the recommendation of a water sustainability plan, including regulations restricting the authority of approving officers, restricting the use of land or resources, reducing water rights, imposing requirements in respect of works and providing for dedicated agricultural water that can only be used for prescribed land and purposes;

– authorize an administrative monetary penalty scheme;

– authorize regulations providing powers and duties of officials under the Act to officials under other enactments;

– repeal most of the Water Act, leaving only provisions related to water users’ communities, and renames the Water Act as the Water Users’ Communities Act;

– make consequential amendments to other Acts.

The Act is certainly a positive step from the archaic Water Act, though there are already suggestions that the Act is vague, watered-down and leaves too much of the decision making to the discretion of regulators. Staffing levels are also being cited as a cause for concern, with a particular fear that low staffing levels will result in lower monitoring standards and enforcement.

Other criticisms of the Act include the fact that it is merely a “framework” which leaves much of the details to future regulations and that it fails to recognize water as a human right or public trust.

The B.C. Government maintains, however, that the Act makes B.C. an environmental stewardship leader. Time will tell.

Over the next thirty days, the B.C. public will be consulted on the issue of fees for major industrial water users before Minister Polak makes a recommendation to the Treasury Board on that issue. The Act is expected to be in force in Spring, 2015.

By James Early.

Government Fails in Species Protection

On February 14, 2014, the Federal Court of Canada determined that the Ministers of Environment, and Fisheries and Oceans, acted unlawfully in failing to propose recovery strategies for the Pacific Humpback Whale, the Nechako White Sturgeon, the Marbled Murrelet and the Southern Mountain Caribou within the statutory timeframes prescribed in the Species At Risk Act, S.C. 2002 c. 29 (“SARA”).

SARA requires that, where a species is identified as being endangered, threatened or extirpated, the competent minister must publish a proposed recovery strategy within a fixed period of time, and publish a final recovery strategy shortly thereafter.

A number of Environmental NGO’s, including the David Suzuki Foundation, Greenpeace Canada and the Sierra Club of British Columbia Foundation, commenced Judicial Review proceedings in the Federal Court of Canada seeking declaratory relief regarding the Ministers’ conduct and orders of mandamus to compel the Ministers to perform their statutory duties.

The action prompted the Government to begin to fulfill its duties including publishing proposed recovery strategies for three of the four species before the hearing commenced, as well as the publication of the final recovery strategy for one of the species. These were, however, several years after the expiry of the relevant statutory timeline.

Of course, one of the species at risk is the Pacific Humpback Whale. It was in relation to this species that the final recovery strategy was released on October 21, 2013 – more than four years after it was due. It was released, however, two months prior to the Joint Review Panel for the Enbridge Northern Gateway Project (“JRP”) decision to recommend approval of the construction of the Northern Gateway Pipeline, which would facilitate the transport of bitumen, by tanker, through identified critical Pacific Humpback Whale habitat.

Pursuant to s. 2 of SARA, critical habitat is defined as habitat that is necessary for the survival of the species in question. As a result of the final recovery strategy, the Pacific Humpback Whale benefits from mandatory (as opposed to discretionary) protection.

As it relates to the Northern Gateway Pipeline, the JRP suggests that, in deciding to recommend approval, it took a precautionary approach and found that the project would not have a “significant adverse impact” on the Pacific Humpback Whale.

So, to take stock for a moment: the Pacific Humpback Whale is threatened; protected by a final recovery strategy; and its “critical habitat” has been identified. As such, shouldn’t SARA prevent any adverse impact if it is to achieve its goal? Let us remind ourselves that the goal of SARA is to:

…to prevent wildlife species in Canada from disappearing, to provide for the recovery of wildlife species that are extirpated (no longer exist in the wild in Canada), endangered, or threatened as a result of human activity, and to manage species of special concern to prevent them from becoming endangered or threatened.

The JRP concluded that there would be an adverse impact to the threatened Pacific Humpback Whale. In any event, however, it made a decision to create a greater risk, for a species already at risk. There is something fundamentally wrong with this. For a further discussion, see here. For legal proceedings that have arisen as a result of the JRP decision and its implication for Pacific Humpback Whales, see here.

Back to the matter at hand, the Federal Court of Canada, in addition to declaring that the Minsters’ actions were unlawful, also permitted the applications for manadamus to be adjourned sine die (essentially meaning: sometime down the road). This looming threat of further court action should, hopefully, keep the Federal Government on its toes with regard to completing the long-outstanding final recovery strategies for the Nechako White Sturgeon, the Marbled Murrelet and the Southern Mountain Caribou.

By James Early.