Decision Date:  December 24, 2012

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

Marilyn Gross appealed two permits issued by the Oil and Gas Commission (the “Commission”). The permits authorized Murphy Oil Company Ltd. (“Murphy Oil”) to drill, operate and flare two horizontal wells on land that is owned by Ms. Gross. The permits also authorized Murphy Oil to use an existing well pad and access road that it constructed on Ms. Gross’ property under a previous permit. More detailed information about the appeals is provided in the Board’s decision on the merits of the appeals, referenced below.

On March 22, 2012, following an oral hearing of the appeals, the Tribunal issued a decision allowing the appeals, in part (Decision Nos. 2011-OGA-006(b) & 2011-OGA-007(b)). The Tribunal found that the Commission made procedural errors in reaching its determinations to issue the permits. However, the Tribunal held that the full hearing of the appeals before the Tribunal cured the defects in the Commission’s procedures. The Tribunal held that, in these circumstances, the appropriate remedy was to confirm the permits, subject to the Tribunal’s directions to make two minor amendments to the permits.

On November 1, 2012, Ms. Gross’ legal counsel applied to the Tribunal for an order that Murphy Oil must pay Ms. Gross’ costs associated with the appeals. Ms. Gross submitted that costs should be granted because the Commission’s issuance of permits is part of a process in which oil and gas companies may expropriate rights from land owners, and awarding costs would help to “level the playing field” for land owners. Ms. Gross also submitted that the Tribunal’s Rule 32(3), which states that the Tribunal will only order party-to-party costs in special circumstances, is inconsistent with sections 11 and 47 of the Administrative Tribunals Act, which authorize the Tribunal to make rules of practice and procedure, and to order a party to pay the appeal costs of another party.

Murphy Oil objected to the application for costs. The Commission made no submission on the application.

The Tribunal held that its discretion to award costs under section 47(1)(a) of the Administrative Tribunals Act is broad, and is not expressly limited to circumstances where the conduct of a party has been improper, vexatious, frivolous or abusive. However, for policy reasons, the Tribunal has adopted an approach to award party-to-party costs only in special circumstances. This approach is intended to discourage frivolous or vexatious appeals, and abusive conduct, to ensure that appeals proceed in an efficient and fair manner. In addition, the appeal process is intended to be more accessible and less costly than court proceedings, and costs awards can go either way – an order may be made in favour of, or against, a party to an appeal. All of the appeals to date have been filed by land owners, who often do not have legal counsel. The Tribunal held that the risk of having to pay another party’s appeal costs could be daunting to parties with limited financial resources and could discourage potential appellants from filing legitimate appeals. Taken together, the Tribunal found that these policy considerations are consistent with the express purpose of its rule-making power in section 11 of the Administrative Tribunals Act, which is “to facilitate the just and timely resolution of the matters before it.”

In addition, the Tribunal found that there was no indication in the legislation that the Tribunal should exercise its discretion to award costs to “level the playing field” for land owners. The Tribunal noted that it hears appeals of determinations made under the Oil and Gas Activities Act, and those determinations do not include issues of expropriation, or how much compensation oil and gas companies should pay to land owners for using private property. Those issues are within the jurisdiction of the Surface Rights Board, a separate tribunal empowered to assist land owners in resolving disputes about the amount of compensation that oil and gas companies should pay to land owners. As such, the Tribunal held that the Surface Rights Board is the appropriate forum for addressing matters of compensation.

Finally, the Tribunal held that the circumstances in this case did not warrant ordering Murphy Oil to pay Ms. Gross’ appeal costs. Murphy Oil did not engage in abusive or inappropriate conduct during the appeal process, and there were no other special circumstances that would warrant an award of costs. Ms. Gross’ success in the appeals was mixed at best, and was limited to the Tribunal ordering two minor amendments to the permits. In these circumstances, the Tribunal concluded that each party should bear its own costs.

Accordingly, the application for costs was denied.