Decision Date: April 22, 2014

Panel: Gabriella Lang

Keywords: Oil and Gas Activities Act – s. 25(1) and (2); pipeline; private property; permit conditions; consent order

Encana Corporation appealed a permit (the “Permit”) issued by the Oil and Gas Commission (“OGC”), which authorized Encana to construct and operate a pipeline, subject to a number of conditions. Encana appealed the Permit on the basis that two of the conditions (the “Conditions”) provided in the Permit were not warranted in the circumstances.

Encana applied for the Permit on March 23, 2010. The pipeline, which was the subject of the Permit, was planned to transverse the northeast corner of a parcel of land owned by Laurene and Wesley Ilnisky (the “Landowners”), and would be used to transport hydraulic fracturing water. After applying for the Permit, Encana sent the Landowners a stakeholder consultation letter, which described the application and showed a map of the applied-for pipeline. In response to the consultation letter, the Landowners raised concerns about, among other things, the potential for contamination of two water source dugouts located on their property, approximately 547m and 647m from the applied-for pipeline.

On April 30, 2013, the OGC issued the Permit to Encana, subject to a number of conditions. Some of the conditions appeared to respond to the concerns raised by the Landowners. Two such conditions may be broadly summarized as follows: condition 6 of the Permit required Encana to identify, in their emergency response plan, the water source dugouts and associated drainage connectivity as “specific value at risk of contamination”; condition 7 required Encana to take water samples from the water source dugouts and conduct contamination testing on an ongoing basis.

On May 15, 2013, the Landowners appealed the Permit to the Oil and Gas Tribunal (“Tribunal”), raising concerns with the use of a Flexsteel pipe for the pipeline, and requesting that Encana perform water testing, as proposed in condition 7, on each of the water source dugouts “after each Spring run off”. However, the Landowners subsequently withdrew their appeal.

On May 30, 2013, Encana appealed the Permit on the basis that conditions 6 and 7 were not warranted in the circumstances. As a remedy, Encana requested that the Tribunal strike the two conditions.

Before the OGAT heard Encana’s appeal, Encana requested a settlement meeting (mediation) to take place during the time when the appeal hearing was scheduled. The Tribunal granted this request, as it was supported by all parties to the appeal.

During the mediation, the parties reached an agreement with respect to conditions 6 and 7 of the Permit. With the consent of the parties, the Tribunal sent the matter back to the OGC with directions to delete conditions 6 and 7 and replace them with two new conditions. Condition 6 was only subject to minor changes in the language of the condition. Condition 7 was amended to require Encana to perform surveys of the pipeline for leaks on an ongoing basis, rather than requiring Encana to perform water sampling and testing.

Accordingly, the matter was sent back to the OGC with directions to amend the Permit, with the parties’ consent.