The Alberta legislature on Wednesday passed Bill 12, Preserving Canada’s Economic Prosperity Act (“the Act”). The Act, which has been referred to in the media as the “turn off the taps” legislation, is the latest response to escalating tensions among the British Columbia, Alberta and Canadian federal governments over pipeline and energy matters.

The Act itself is reasonably simple — the export of crude oil, natural gas or refined fuels from Alberta without an export licence is prohibited.

There is an important caveat, however, before an export licence is required; the Minister of Energy must first make an order requiring such a licence to be obtained. In considering whether to make an order, the Minister is required to take into account whether adequate pipeline capacity exists to maximize the return on crude oil and diluted bitumen produced in Alberta, whether adequate supplies and reserves of natural gas, crude oil and refined fuels will be available for Alberta’s present and future needs, and any other relevant matter.

Of interest, while the Act requires the Minister to consider the financial return to Alberta on diluted bitumen in determining whether an order requiring an export licence should be made, it does not actually prohibit the export of bitumen or diluted bitumen without such a licence.

Offences under the Act are punishable on conviction by a fine of up to $10 million per day for corporations who violate its stipulations. Corporate officers authorizing, participating in or acquiescing to an offence may also be liable, on conviction, to a fine of up to $1 million per day.

The Act also grants the Minister of Energy the authority to issue orders to stop unauthorized exports.

At present, no orders have been made requiring that licences be obtained, and accordingly, no licence to export natural gas, crude oil or refined fuels out of Alberta is required at this time. The government of Alberta has not indicated when, or if, or against whom, it intends to make any such orders. The government has also not indicated whether any transition period will be granted to allow existing exporters to obtain a licence if such an order is made.

The government of British Columbia has already indicated that it intends to bring an action against Alberta to challenge Alberta’s constitutional authority to enact the export restrictions in the Act.