Decision Date:  March 22, 2012

Panel:  Alan Andison, Monica Danon-Schaffer, Tony Fogarassy

Keywords: Oil and Gas Activities Act – s. 72(2); Administrative Tribunals Act – ss. 41, 42; Oil and Gas Activities Act General Regulation – s. 17(6)(b); permit; land owner; due regard; notice; procedural fairness; remedy; emergency response plan; application not to disclose evidence

Marilyn Gross appealed two permits issued by the Oil and Gas Commission (the “Commission”). The permits authorized Murphy Oil Company Ltd. (“Murphy”) to drill, operate and flare two horizontal wells on land that is owned by Ms. Gross. Her land is located outside of Dawson Creek. No one resides on her land.

The permits authorized Murphy to use an existing well pad and access road that it constructed on Ms. Gross’ property under a previous permit. In 2008, Murphy received a permit to drill a vertical well and build an access road on her property. Also in 2008, Murphy signed a surface lease agreement with Ms. Gross, whereby Murphy provided her with compensation for using her land.

In mid-2010, Murphy decided to apply to drill the two horizontal wells using the existing well pad and access road. In August 2010, Murphy notified Ms. Gross of its proposal, and in September 2010, Murphy representatives met with her lawyer and her daughter. In October 2010, Murphy invited Ms. Gross to provide written comments to Murphy and/or the Commission regarding the proposal.

In November 2010, Ms. Gross’ lawyer sent a letter to Murphy, with a copy to the Commission, stating several concerns or questions, including: a request for information about the well that was drilled in 2008; request for relocation of the access road; certain requests in relation to a surface lease; concern about whether the existing well pad could accommodate the new wells; whether Murphy completed an environmental assessment, given that the watershed around the well site runs into the river that supplies water supply to the City of Dawson Creek; request for limits on flaring; and disclosure of future plans for pipelines that may connect to the well.

In response, the Commission advised Ms. Gross’ lawyer that he should have Ms. Gross sign a representation agreement if she wished to “transfer” her rights under the Oil and Gas Activities Act (“OGAA”) to her lawyer. In reply to the Commission, Ms. Gross’ lawyer clarified that Ms. Gross was not transferring her rights to him, and that he was acting as her legal counsel. Neither Ms. Gross nor her lawyer heard from the Commission again until May 2011, after the permits were issued. Meanwhile, in January 2011, Murphy sent a letter to Ms. Gross’ lawyer that responded to the concerns listed his November 2010 letter.

In March 2011, Murphy submitted its permit applications to the Commission. Murphy’s applications included a consultation report containing copies of the lawyer’s November 2010 letter to Murphy and the Commission, and Murphy’s response.

In mid-April 2011, the Commission issued the permits to Murphy, and notified Ms. Gross that the permits had been issued. Her lawyer was not notified.

In early May 2010, Ms. Gross’ lawyer learned from another agency that the permits had been issued. He immediately contacted the Commission, to request copies of the permits and ask why the Commission had not responded to the concerns in his November 2010 letter.

On May 15, 2011, Ms. Gross’ lawyer appealed the permits, on her behalf, to the Tribunal. The appeals were filed after the expiry of the 15-day statutory appeal period for land owners, and therefore, Ms. Gross’s lawyer requested that the Tribunal exercise its discretion under the Administrative Tribunals Act to grant an extension of time to file the appeals.

On June 15, 2011, after receiving written submissions from all parties, the Tribunal issued a decision granting the request for an extension of time to file the appeals (Decision Nos. 2011-OGA-006(a) & 2011-OGA-007(a)).

The Tribunal conducted an oral hearing on the merits of the appeals. Ms. Gross submitted that the Commission failed to accept her lawyer’s November 2010 letter as her official submission regarding the permit applications under section 22(5) of the OGAA, and failed to give her submission “due regard” in making its determinations to issue the permits, contrary to section 72(2) of the OGAA. She also argued that the Commission’s procedure was unfair because it failed to provide her or her lawyer with copies of Murphy’s permit applications so she could make an informed submission under section 22(5), and it failed to notify her lawyer when the permits were issued. In addition, regarding the merits of the permits, she reiterated many of the concerns expressed in the November 2010 letter. Ms. Gross requested that the permits be cancelled, and there be a full and fair reconsideration of her concerns before the Commission makes new determinations on the permit applications.

Both the Commission and Murphy Oil opposed the appeals. They submitted that the concerns in the November 2010 letter were either given due regard by the Commission, or were outside of the Commission’s jurisdiction. They also submitted that section 72(2) of the OGAA limits the scope of appeals filed by land owners, and the Tribunal has no jurisdiction to conduct a new hearing of the appeals. Further, Murphy submitted that the Tribunal is limited to reviewing the Commission’s determinations based on a standard of “patent unreasonableness”, which would require the Tribunal to give some deference to the Commission’s determinations. As a separate issue, the Commission requested that certain evidence be received by the Tribunal to the exclusion of the public, pursuant to the Tribunal’s Rule 50(2).

First, the Tribunal addressed the issue regarding the nature of its powers in deciding appeals filed by land owners. The Tribunal adopted its findings in another appeal (Daniel Kerr v. Oil and Gas Commission, Decision No. 2011-OGA-005(b), issued December 12, 2011), where it concluded that the Tribunal’s statutory powers and procedures in appeals filed by land owners, and the procedural rights of all parties in an appeal, are no different than in those filed by other eligible persons. While the Tribunal does not have the express power to conduct an appeal as a new hearing of the matter, its powers and procedures are indicative of a hybrid appeal process that is more like a new hearing than a true review on the record that was before the Commission. In addition, based on the relevant legislation, the Tribunal is not required to defer to the Commission’s determinations.

Second, the Tribunal considered whether the Commission’s determinations to issue the permits were made without due regard to a submission previously made by Ms. Gross under section 22(5) of the OGAA, or the consultation report that Murphy Oil submitted to the Commission. The Tribunal found that the Commission made two procedural errors in making its determinations: it failed to ensure that Ms. Gross or her lawyer was provided with copies of Murphy’s permit applications so they could properly respond to the proposal; and, it failed to recognize that Ms. Gross was represented by a lawyer who had made a submission under section 22(5) on her behalf. Regarding the first error, the Tribunal held that the Commission’s policy not to disclose permit applications conflicted with section 17(6)(b) of the Oil and Gas Activities Act General Regulation (“Regulation”), which required the Commission to make all permit applications publicly available. Regarding the second error, the Tribunal found, based on the evidence, that the Commission disregarded the November 2010 letter, both directly and as a part of Murphy’s consultation report. The letter was Ms. Gross’ only submission under section 22(5) of the OGAA. By disregarding the letter, the Commission made its determinations as if she had made no submission, and it failed to give “due regard” to her submission contrary to section 72(2) of the OGAA.

The Tribunal then considered each of the concerns or questions in the November 2010 letter. With two exceptions, the Tribunal concluded that they were either beyond the scope of the appeals, were addressed in the Commission’s determinations, or were without merit. The exceptions were: Ms. Gross’ request for disclosure of Murphy’s Emergency Response Plan, which the Tribunal ordered to be disclosed to Ms. Gross and the Commission; and, the lack of a baseline assessment of water quality in a lake on Ms. Gross’ property, which drains into the river that is the local municipal water supply, which the Tribunal ordered Murphy to complete.

Third, the Tribunal considered the appropriate remedy in the circumstances. The Tribunal found that, although the Commission made errors in reaching its determinations, the full hearing of the appeals before the Tribunal, including the consideration of Ms. Gross’ submission under section 22(5) of the OGAA, cured the defects in the Commission’s procedures. In addition, the Tribunal found that sending the mater back to the Commission with directions to start the decision-making process afresh would duplicate what was achieved through the appeal process. The Tribunal held that, in these circumstances, the appropriate remedy was to confirm the permits, subject to the Tribunal’s directions to make minor amendments to the permits.

Finally, the Tribunal considered the Commission’s application under Rule 50(2) that certain portions of Murphy’s consultation report be received by the Tribunal to the exclusion of the public. The Tribunal denied the request, on the basis that the Commission already had an obligation under section 17(6)(b) of the Regulation to make the information available to the public, because the information was filed in support of Murphy’s permit applications.

Accordingly, the appeals were allowed, in part.