Decision Date: August 21, 2017

Panel: Alan Andison

Keywords: Oil and Gas Activities Act – ss. 26, 49(1); disposal well; seismic risk; suspension order; public safety, environmental protection; burden of proof

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 triggered by water disposal activities at the well.

The well had operated between 2008 and 2010 before operations voluntarily ceased. CEP purchased the well in late 2016 and sought to re-activate it. 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 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.

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 also argued that it was unfair for CEP to have the burden of establishing that the order should not have been issued. CEP requested that the Tribunal reverse the order, or alternatively, provide directions or conditions as may facilitate the continued operation of the well. If the Tribunal refused to grant either of those remedies, CEP proposed that the well be deemed a “preventative safety expropriation” by BC Hydro and the financial loss be borne equally by CEP, BC Hydro, and the Commission.

First, the Tribunal considered whether the order should be rescinded due to any procedural errors in the Commission’s process that led to the order. The Tribunal found that the order was issued under section 49(1)(b) of the Oil and Gas Activities Act (“OGAA”), and unlike section 26 of that Act, section 49 does not require the Commission to give a permit holder an opportunity to be heard before issuing a suspension order. In addition, the Tribunal found that the appeal process had cured any procedural defects that may have occurred in the Commission’s process. Although the Commission issued the order without input from, or prior notice to CEP, CEP was accorded a full and fair hearing before the Tribunal.

Next, the Tribunal considered whether there is insufficient evidentiary or legal basis for the order. The Tribunal held that each party, including the appellant, has the burden of proving, on a balance of probabilities, the facts that the party relies on to support its arguments. Although CEP argued that it was unfair for it to have the burden of establishing that the order should not have been issued, the Tribunal found that there is no reason to apply a different evidentiary burden to CEP than to any other party. The Tribunal also considered CEP’s argument that the burden of proof should apply to the likelihood that the well’s operations will actually affect, rather than the risk that they may affect, the Peace Canyon Dam with respect to public safety and the environment. The Tribunal held that the language in section 49(1)(b)(i) indicates that the focus of such orders is not on the likelihood of actual harm to public safety or the environment; rather, the focus is on the proactive protection of the environment and mitigating risks to public safety. The order sought to mitigate a newly discovered risk while the Commission gathered more information to better understand and assess that risk. The order reflected a cautious approach to mitigating a newly identified, but poorly understood, risk. The order was preliminary, proactive, and temporary in nature. In assessing whether the order should have been issued, those factors must be considered.

Based on the evidence, the Tribunal found that the information before the Commission when it issued the order indicated that there was a real, but poorly understood, risk that disposal activities at the well may cause an induced seismic event that could de-stabilize the Peace Canyon Dam. Moreover, based on new evidence presented to the Tribunal, uncertainty remained regarding the ability to predict an induced seismic event that could damage infrastructure. If disposal activities at the well triggered a seismic event that was strong enough to cause movement or slippage of the Dam, it would reduce the Dam’s ability to withstand further seismic events, and would require a drawdown of the reservoir behind the Dam involving constant spilling of water and/or a shutdown of the generating station upstream at another dam. An extended period of spilling would damage the Dam’s spillway, cause adverse impacts on fish, and could lead to short-term power outages and/or importing power at a cost of $20 million to $190 million. If another induced seismic event occurred while the Dam was compromised, the consequences could be even more serious. Given the significant consequences in terms of the risk to public safety and the potential harm to the environment if disposal activities at the well triggered a seismic event that adversely affected the Dam, the Tribunal found that it was prudent to suspend disposal operations at the well to mitigate those risks until the Commission could gather more information and better assess that risk. Finally, the Tribunal held that although it may award costs associated with an appeal, it has no authority to award damages or compensation for losses suffered.

Accordingly, the appeal was dismissed.