Decision Date: June 27, 2016

Panel: Alan Andison

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

Penalty Ranch Ltd. (the “Applicant”) appealed a decision of the Oil and Gas Commission (“Commission”) to issue a permit authorizing Crew Energy Inc. (“Crew”) to drill and operate an oil and gas well on certain Crown lands subject to a number of conditions. The well authorized by the permit was one of five wells that Crew intended to construct on the same well pad.

The Applicant holds an agricultural lease over the Crown lands covered by Crew’s five well permits, including the permit that was the subject of the appeal. The Applicant conducts ranching and farming operations on the Crown lands. A family owns and operates the Applicant, and owns and occupies a home on private land adjacent to the Crown lands covered by the permit. Four unnamed natural springs and a marsh are located on or near the Crown lands covered by the permit, and the Applicant relies on at least one of those springs for livestock and home use.

In May 2015, Crew sent a notice and invitation to consult to the Applicant regarding Crew’s proposal to drill the wells. In response, the Applicant sent a written submission to the Commission objecting to Crew’s proposal, and expressing numerous concerns about the proposal.

In February 2016, the Commission issued five well permits to Crew, including the appealed permit. The Applicant appealed the permit, and requested a stay of the permit pending the Tribunal’s decision on the merits of the appeal.

After the appeal was filed, the Commission amended the permit to include several more conditions that were intended to provide additional protection to water resources, including requirements for Crew to test and monitor the water quality and flow rate at the springs.

In determining whether a stay ought to be granted, the Tribunal applied the three-part test set out in the Tribunal’s Rules. That 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. The primary issue was whether the Commission gave due regard to the Applicant’s written submission before the permit was issued. The Applicant’s submission expressed concerns about contamination of an aquifer, air pollution, flaring, the drilling path, the proximity of the drilling to a family home, and the disturbance caused by noise from trucking, fracking and flaring. The Tribunal found that those issues were not frivolous, vexatious or pure questions of law.

Turning to the second part of the test, the Applicant had to establish that its interests would likely suffer irreparable harm unless a stay was granted. The Tribunal found that the Applicant had raised concerns that were too speculative to support a finding that denying a stay, and allowing the permitted activities to proceed, would likely result in irreparable harm to the Applicant’s interests. For example, there was insufficient evidence to conclude that denying a stay would likely result in permanent contamination or other harm to natural resources such as the aquifer, springs, or marsh. In addition, the Tribunal found that the Applicant was entitled to compensation for damage arising from Crew’s oil and gas activities on the Crown lands that are leased by the Applicant.

Turning to the third part of the test, the Tribunal concluded that the balance of convenience weighed in favour of denying a stay. The Tribunal found that Crew had provided evidence that it would suffer increased costs if a stay was granted and construction of the well was delayed until the merits of the appeal were decided. The Tribunal found that the risk of financial harm to Crew’s interests, if a stay was granted, outweighed the potential harm to Applicant’s interests if a stay was denied.

Accordingly, the application for a stay was denied.