Decision Date: August 30, 2018

Panel: Norman Yates

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

Penalty Ranch Ltd. (the “Applicant”) appealed nine permits issued by the Oil and Gas Commission (“Commission”) to Crew Energy Inc. (“Crew”). The permits authorize Crew to drill and operate nine natural gas wells from one well pad (the “12-09 well pad”) located on Crown land, subject to a number of conditions. The Applicants also applied for stays of the permits, pending the Tribunal’s decision on the merits of the appeals.

The Applicant holds an agricultural lease over the Crown land covered by Crew’s permits. The Applicant conducts ranching and farming operations on the Crown land. A family owns and operates the Applicant, and owns and occupies a home on private land approximately two kilometres away from the well pad.

Four natural springs and a marsh are located on or near the Crown land. One of those springs is located approximately 2.2 kilometres from the well pad and a short distance uphill of the main driveway to the home. The Applicant uses that spring for drinking water, domestic and livestock needs. It is the Applicant’s principle source of potable water. The other springs are also, or may be, used for watering livestock or other ranching activities.

Previously, the Applicant appealed five other permits (the “Prior Appeals”) issued to Crew for natural gas wells at other well pads located on or near the Crown land used by the Applicants. In the Prior Appeals and the present appeals, the Applicant’s primary concern was the potential impact of drilling and hydraulic fracturing (fracking) on the marsh, the underlying aquifer, and the springs. In 2018, the Tribunal dismissed the Prior Appeals (Decision No. 2016-OGA-001(b) – 003(b), 006(b) & 2017-OGA-004(a)).

In the stay applications, the Applicant submitted that the permitted activities may cause irreparable harm to the environment, and particularly to the marsh and the aquifer that feed the springs. The Applicant argued that Crew had less risky, alternative locations where it could operate.

In determining whether the stay applications ought to be granted, the Tribunal applied the three-part test set out in the Tribunal’s Rules of Practice and Procedure, which 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 appeals raised serious issues regarding the potential contamination of groundwater sources, and health concerns, arising from the permitted activities. The Tribunal found that those issues were not frivolous, vexatious or pure questions of law. Therefore, the Tribunal proceeded to consider the next part of the test.

Turning to the second part of the test, the Applicant had to establish that its interests would likely suffer irreparable harm unless a stay was granted. The Tribunal found that the Applicant failed to do so. There was insufficient evidence to conclude that denying a stay would likely result in contamination of the aquifer, springs, or marsh. There was no evidence of problems caused by fault lines in the area, or that Crew’s previous drilling activities had affected the quality or quantity of water from the springs.

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 Crew would suffer increased costs if a stay was granted. The Tribunal found that the risk of financial harm to Crew’s interests, if a stay was granted, outweighed the potential harm to Applicant’s interests if a stay was denied.

Accordingly, the stay applications were denied.