The Alberta Court of Appeal decision on October 28, 2009 in Kelly v Alberta (Energy Resources Conservation Board) vacated the January 16, 2009 decision of the ERCB to deny the Appellants standing to be heard and grant licenses to Grizzly Resources Ltd. (Grizzly) to drill two sour gas wells and remitted the matter to the ERCB for redetermination. This case establishes that residents living within a Protective Action Zone (PAZ) have rights that may be directly and adversely affected by approvals for sour gas well applications and as such, have standing under section 26(2) of the Energy Resources Conservation Act (ERCA).

As a result of the October 28, 2009 decision by the Court of Appeal, the ERCB temporarily suspended the issuing of licences for sour wells, facilities and pipelines. In response to the Court’s direction, the ECRB susequently issued Bulletin 2009-41. This Bulletin clarified the intention and operation of the PAZ and Directive 71, which governs emergency preparedness and response.

Facts

In July 2008, Directive 71 was amended to create the PAZ, which is calculated based upon anticipated exposure levels of 130 ppm H2S for a 60-minute period. A level of 100 ppm H2S provides for the boundary of the Emergency Planning Zone (EPZ). The purpose of the PAZ was to provide a means for an operator to prioritize response efforts within the EPZ. As a result of the review leading to Bulletin 2009-41, the PAZ was reduced to being no larger than the EPZ, clarifying that an additional response zone was not created by the revised Directive 71.  

In addition to the changes to Directive 71, Directive 56 was revised to include notification and consultation requirements for all operators of existing and prospective sour licences located within the EPZ/PAZ. All operators must provide:

  • Written confirmation to the ERCB that the correct model was used to calculate the EPZ, for previously submitted well licenses; and  
  • For previously submitted facility or pipeline licenses, operators must either;  
    • Conduct a supplemental participation involvement program, including all residents within the EPZ; or  
    • Recalculate the EPZ using the correct model and conduct a new public consultation program.

Commentary

The importance for proponents to provide comprehensive detail in their applications to the ERCB cannot be overstated. For matters involving questions of fact and technical analysis, the Court of Appeal must defer to the ERCB. Therefore, the assessments of technical analysis, preference of evidence and findings of fact made by the Board are not subject to appeal. An operator is encouraged to provide comprehensive technical information. Directive 71 states that “[t]he ERCB regulatory system ensures that there is an effective level of preparedness to implement ERPs.”1 This core principle ensures that an operator has identified potential hazards and is able to provide sufficient resources to respond to an incident. Therefore, the ERCB has the ability to determine if the proposed response measures are sufficient to address the needs of interveners, such as Kelly, without having to resort to legal questions of standing.

Operators should evaluate their submissions to the ERCB during the course of consultation activities and in preparation of the application to ensure that:

  • All regulatory requirements are met or exceeded;  
  • All possible public safety strategies have been addressed;  
  • Any technical criteria supporting the applicant’s position that a party is not directly or adversely affected by the proposed activity are included; and  
  • Public consultation efforts have engaged all relevant parties and all objections have been addressed, if not resolved.  

This approach enables the ERCB to make a determination upon an application of the facts as opposed to legal arguments.

The finding in the Kelly decision that the ERCB erred in law, results in additional costs and uncertainty for the operator such as prolonged regulatory process, or costs due to being denied the ability to produce their wells.

Technically complete and robust applications will increase the level of confidence that the ERCB has with an operator and in turn the confidence that both the Courts and the public have in the Board. An applicant is well served by ensuring that the ERCB has everything necessary to render a decision based on a factual finding; so that the Court may ultimately defer to the ERCB’s decision. While such an approach may not prevent an appeal of an ERCB decision, it may prevent the Court from vacating a license or ERCB approval.