Decision Date:  June 27, 2011

Panel:  Alan Andison

Keywords: Oil and Gas Activities Act – s. 72(3); preliminary decision; stay; RJR-MacDonald Inc. v. Canada (Attorney General) (1994), 111 D.L.R. (4th) 385 (S.C.C.)

Daniel Kerr appealed a decision of the Oil and Gas Commission (“Commission”) to issue a permit.  The permit authorizes Canadian Natural Resources Limited (“CNRL”) to drill and operate a well, and construct and operate road access, on land that is owned by Mr. Kerr.  Mr. Kerr appealed the permit on several grounds, including that the fracturing process used to recover oil and gas may contaminate ground and surface water on his property, and that the issue of CNRL paying appropriate financial compensation to Mr. Kerr for its use of, and potential damage to, his property was unresolved.

As a preliminary matter, Mr. Kerr requested a stay of the permit under section 72(3) of the Oil and Gas Activities Act, pending the Tribunal’s decision on the merits of the appeal.  Mr. Kerr advised that he was seeking a stay because he was negotiating with CNRL about compensation through a process administered by the Surface Rights Board, which is a separate agency from the Tribunal.  Landowners can apply to the Surface Rights Board for assistance in resolving disputes on the terms of entry onto their land and associated compensation, and for a determination of damages from oil and gas activities caused by entry onto their land.

Both the Commission and CNRL opposed the application for a stay.

In determining whether a stay ought to be granted, the Tribunal applied the three-part test set out in the Tribunal’s Rules of Practice and Procedure.  The three-part test is based on the Supreme Court of Canada’s decision in RJR-MacDonald Inc. v. Canada (Attorney General).

With respect to the first part of the test, the Tribunal found that the appeal raised serious issues to be decided, which were not frivolous, vexatious or pure questions of law.  The Tribunal noted that section 72(2) of the Oil and Gas Activities Act limits the grounds on which a landowner may appeal a decision of the Commission; specifically, a landowner may appeal “only the basis that the determination was made without due regard to” a submission previously submitted by the landowner to the Commission, or a report on consultation and notification submitted to the Commission by the permit applicant.  The Tribunal found that the question of whether the Commission gave due regard to Mr. Kerr’s submissions before it issued the permit was, on its face, a serious issue.

Regarding the second part of the test, the Tribunal found that Mr. Kerr failed to establish that that his interests would likely suffer irreparable harm unless a stay was granted.  The Tribunal found that his submissions regarding the risk of water contamination on his property were speculative.  Also, the Tribunal noted that regulatory safeguards are in place to protect water resources from contamination by oil and gas activities, and that CNRL intended to isolate the well bore from surrounding aquifers by setting surface casing to a depth of 400 metres.  In addition, the Tribunal found that the concerns raised by Mr. Kerr were not “irreparable” in nature according to the test set out in RJR-MacDonald, because the asserted harm in relation to his interests as a landowner appeared to be compensable, either by agreement with CNRL or under the Surface Rights Board process.

Turning to the third part of the test, the Tribunal found that a stay would prevent CNRL from commencing the permitted activities until after the Tribunal decided the merits of the appeal, and the delay would likely harm CNRL’s financial interests, whereas Mr. Kerr had not established that his interests would suffer irreparable harm if a stay was denied.  Weighing the balance of convenience, the Tribunal concluded that CNRL would suffer greater harm if a stay was granted, than Mr. Kerr would suffer if a stay was denied.

Accordingly, the application for a stay was denied.