The Alberta Court of Appeal recently issued a tough reminder that oil and gas service companies need municipal approvals to operate – and not just assumptions or assurances that those approvals will come.

Background

In Site Energy Services Ltd. v Wood Buffalo (Regional Municipality), 2015 ABCA 106, the applicant, Site Energy, leased four lots in the Hamlet Commercial District for temporary offices, parking, washrooms, security and fuel storage to support its work on a pipeline project.  It applied to the respondent, Wood Buffalo, for development permits. Wood Buffalo refused the application because it categorized the use as an “Industrial Support Facility”, which was neither a permitted nor discretionary use in the District under the Land Use Bylaw.

Rather than appeal the refusal, Site Energy continued operating because it anticipated reaching “an understanding” with Wood Buffalo.  It had, on other occasions, commenced operations without permits in anticipation of subsequent approval.

Wood Buffalo issued a stop order, requiring Site Energy to remove its equipment and buildings.  Site Energy appealed the stop order to the Subdivision and Development Appeal Board (the “Board”), arguing that the use could and should be re-categorized as a “Business Support Facility”, a discretionary use in the District.  The Board upheld the stop order and appears to have reasoned that it could not issue development permits for the alternate use because only the stop orders (and not the earlier refusal) had been appealed.

The Decision

On application for leave to appeal, Site Energy argued that under Municipal Government Act (the “MGA”) section 687(3) (d), the Board had the power to issue a development permit on an appeal of a stop order – even where the earlier permit refusal was not appealed.  The Court of Appeal concluded that it was, indeed, unclear whether the Board could issue a development permit under the MGA in these circumstances.

Site Energy did not argue at the leave application, as it had at the Board, that the use should have been re-categorized as a “Business Support Facility”.  That was reasonable, given the definitions of the two uses.  The result was that only the Industrial Support Facility use could be considered.  The Court confirmed that while a Board might have been able to issue a permit for an allowed use on an appeal of a stop order, it could not permit the indefinite continuation of a use that was not allowed in the District.

Leave to appeal was denied.

Implications

This case raises an interesting strategic and legal question – whether a development permit can be obtained on an appeal of a stop order.

The practical reminder from the case is simply to get first things done first.  So often, use and development of land proceeds in advance of approvals – sometimes on the basis of assumptions and sometimes on the basis of unofficial assurances.  But proceeding before both the permit and any agreement with the municipality are final can be extremely costly.  Where zoning does not allow the use, it will be stopped.  If the use is discretionary and the municipality refuses a permit, it will be stopped (though a refusal can be appealed on legal or jurisdictional grounds).  But even where the municipality issues a permit after the use has started, the applicant can expect onerous terms because all parties realize the applicant is in no position to walk away.

The Site Energy case does not deal with the interaction between municipal controls and approvals by the Natural Resources Conservation Board ("NRCB"), the former Energy Resource Conservation Board ("ERCB"), the former Alberta Energy and Utilities Board ("AEUB"), the Alberta Energy Regulator ("AER") or the Alberta Utilities Commission ("AUC").  Nonetheless, it is worth noting here that companies should approach those approvals strategically.​ Under section 619 of the MGA, such an approval takes precedence over municipal controls – but only to the extent of the approval.  An approval sought from the NRCB, ERCB, AEUB, AER and AUC should, so far as possible, clearly and unambiguously cover as much of the operation as possible because anything outside the approval will be subject to municipal control.

A final note on optics.  The Court characterized Site Energy’s continued operations in the face of the stop order as “reckless” and as demonstrating a “brazen disregard” for municipal processes. Companies should understand that it is possible to convince Council to change a parcel’s zoning to allow a desired use or to convince a Board or Court to overturn a decision, and that those efforts will be more successful where there is a demonstrated respect for municipal processes.