Decision Date: June 5, 2017

Panel: Alan Andison

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

Canada Energy Partners Inc. (“CEP”) appealed an order issued by the Oil and Gas Commission (“Commission”). The order required CEP to suspend disposal activities at a well that CEP owned and operated in northeastern BC. CEP used the well to dispose of “produced water”, a type of waste water from oil and gas activities, by injecting it into an underground geological unit. The Well is located approximately 3.3 km from the Peace Canyon Dam, which is owned and operated by BC Hydro and Power Authority (“BC Hydro”). The Commission issued the Order shortly after BC Hydro informed the Commission that the stability of the Peace Canyon Dam may be affected by seismic activity caused by water disposal activities. CEP requested a stay of the order, pending the Tribunal’s decision on the merits of the appeal.

The Well had operated between 2008 and 2010 before operations voluntarily ceased. CEP purchased the well in late 2016 and began the process to re-activate the well. Disposal operations at the well resumed in January 2017, and continued until the Commission issued the order on March 16, 2017. In issuing the order, the Commission determined that disposal activities at the well increased the risk of an induced seismic event that could generate the peak ground accelerations necessary to cause damage to the Peace Canyon Dam, and the consequences would be severe if such an event occurred. The Commission decided that it was necessary to suspend disposal activities to mitigate a risk to public safety and to protect the environment, pending a review of additional technical information.

On March 30, 2017, CEP appealed the order on several grounds, including that the order was unfair, was not supported by scientific information or evidence, and amounted to an expropriation of the well, CEP’s only source of revenue.

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. 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, which were not frivolous, vexatious or pure questions of law.

Turning to the second part of the test, CEP had to establish that, if a stay was denied, its interests would likely suffer irreparable harm between the date when the order was issued and when the Tribunal issued a final decision on the appeal. The appeal hearing was scheduled to conclude on June 18, 2017. The Tribunal held that if a stay was denied, disposal operations would remain suspended and CEP would have no revenues for several months. The Tribunal found that the loss of revenues may cause financial hardship for CEP, but the loss would be temporary, because the revenues from disposal operations would be delayed rather than permanently lost if the appeal was successful. The evidence showed that CEP would be able to resume disposal operations if the appeal was successful, as the well’s operations had a history of stopping for long periods of time and then re-starting. Furthermore, the Tribunal found that the loss of revenue for a few months would be unlikely to cause CEP to go out of business, suffer permanent market loss, or suffer irrevocable damage to its business reputation. In fact, CEP’s evidence showed that CEP had continued to exist as a company during two previous six-month periods when it operated at a significant net loss. The Tribunal concluded that CEP had failed to establish a likelihood of irreparable harm to its interests if a stay is denied.

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, if a stay was granted, the risk of harm to the public interests served by the order outweighed the temporary financial hardship that CEP would suffer if a stay was denied. Although there is no evidence that the well’s past operations caused any harm to the Peace Canyon Dam, this was not conclusive of whether the well’s recent or future operations pose a risk of harm to the Dam, the environment, or public safety. The Tribunal noted that the order was issued under section 49(1)(b) of the Oil and Gas Activities Act, which authorizes the Commission to issue orders when necessary to mitigate a risk to public safety or to protect the environment. In this case, the order was issued to allow the Commission time to assess and, if necessary, mitigate, the potential risks to public safety and the environment in the unlikely event that induced seismic activity from the well’s disposal operations caused the Peace Canyon Dam to slide a few millimetres to a few centimetres, which could trigger a series of events that would pose serious risks to public safety and the environment, including the Dam’s ability to withstand further seismic events. The suspension of disposal activities allowed the Commission time to conduct its technical review without the risk that such an event may occur before the risk level is properly assessed.

Accordingly, the application for a stay was denied.