Decision Date: September 20, 2017

Panel: Alan Andison

Keywords: Oil and Gas Activities Act – s. 72(3); preliminary decision; stay; pipeline; permit; soil erosion; agricultural land; public interest; RJR-MacDonald Inc. v. Canada (Attorney General) (1994), 111 D.L.R. (4th) 385 (S.C.C.)

Richard Bruce Mitchell and Sharan Mitchell appealed a pipeline permit that the Oil and Gas Commission (“Commission”) issued to ARC Resources Ltd. (“ARC”). The permit authorized ARC to construct and operate a sour gas pipeline, subject to certain conditions, on private land including land owned by the Appellants. The gas is considered “sour” because it contains up to 1.5% hydrogen sulphide. The pipeline, which includes a 20 metre wide right-of-way, would run parallel to the eastern boundary of the Appellants’ land, adjacent to a ditch which is beside Rolla Road. The Appellants farm the land, which is within the Agricultural Land Reserve.

In January 2017, ARC sent the Appellants an invitation to consult regarding the proposed pipeline. ARC advised that it intended to apply for a permit to construct and operate a sour gas flow line across their land, and planned to start construction between the third quarter of 2017 and the third quarter of 2018.

In February 2017, the Commission received a written submission from the Appellants which set out several concerns about the proposed pipeline. Among other things, the Appellants raised concerns about safety, the pipeline route, and soil instability and erosion where ARC proposed to build the pipeline.

Subsequently, ARC’s representatives met with the Appellants and provided a written reply to their concerns. ARC’s written reply acknowledged the Appellants’ concerns related to culverts, ditches, and inadequate drainage, especially during spring runoff. ARC advised that it would discuss the drainage issues involving ditches adjacent to the Appellants’ property with the Ministry of Transportation, with the intention of creating a plan to address issues with water backing up on the Appellants’ land during peak runoff.

In July 2017, the Commission issued the pipeline permit. The Commission’s decision rationale acknowledged that the Appellants had raised concerns including erosion, undersized culverts, the pipeline route, and safety. The decision rationale concluded that “no outstanding concerns have been indicated in the Land and Habitat review.” Regarding agriculture, the decision rationale stated that a Schedule A Site Assessment was completed, and “[n]o outstanding concerns have been indicated in the Agricultural review.” A “Schedule ‘A’ Assessment” report for the pipeline right-of-way (the “Gemini Report”) had been prepared for ARC by Gemini Corporation.

On August 11, 2017, the Tribunal received the Appellants’ Notice of Appeal.

In their Notice of Appeal, the Appellants alleged, among other things, that there was inadequate drainage where the pipeline was to be built, and water backs up onto the land during spring runoff and periods of heavy rainfall, which would lead to erosion of the pipeline right-of-way. They argued that the Commission permitted the pipeline to be built in a location that will allow soil to be eroded and permanently washed away. Documents attached to the Notice of Appeal included photographs of a flooded area, which appeared to be the Appellants’ land near Rolla Road, and an August 7, 2017 email from ARC representatives to the Appellants regarding flooding and erosion in the area.

After filing their appeal, the Appellants applied to the Tribunal for a stay of the permit, pending the Tribunal’s final decision on the merits of the appeal. In support of their application, the Appellants provided a copy of the Gemini Report.

In determining whether a stay 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 appeal raised serious issues which were not frivolous, vexatious or pure questions of law.

In the second part of the test, the Appellants had to establish that their interests would likely suffer irreparable harm if a stay was denied. ARC acknowledged that there were issues regarding water run-off and erosion on the Appellants’ land where the pipeline would be built. The August 7, 2017 email from ARC’s representatives indicated that there were no plans to deepen the ditch, and ARC had prepared no formal report regarding the ability of culverts to handle the water flow in the ditch. It also stated that ARC’s construction plans in wet sensitive areas relied on the “Schedule A” report (i.e., the Gemini Report). The Tribunal found that the Gemini Report was prepared when the ground was covered by snow, which prevented a full assessment of soil stability, drainage, land contour, and the risk of erosion. The Gemini Report stated that the site may have “erosion, streams, drainages, low areas, and other areas that may be of concern” that were not observed or taken into account.

The Tribunal found that, if soil was eroded and permanently lost as a result of the pipeline’s construction, it would amount to “a permanent loss of natural resources” constituting irreparable harm according to the RJR-MacDonald test. However, the Appellants provided insufficient evidence for the Tribunal to conclude that there was a likelihood that soil would erode or farming productivity would be lost if the pipeline construction proceeded. While the Appellants’ evidence raised questions about the Commission’s decision rationale and its reliance on the Gemini Report, and it appeared that flooding was likely to re-occur in or around the pipeline right-of-way, it was unclear whether pipeline construction would coincide with flooding or high run-off conditions that are prone to erosion, or would exacerbate existing flooding problems.

Turning to the third part of the test, the Tribunal found that ARC would suffer some operational delays and financial harm if a stay was granted, but there was no evidence that a stay would irreparably harm its interests. The Tribunal also found that, if the appeal is unsuccessful, most of the financial harm that ARC would suffer as a result of a stay would be temporary or the result of business risks that ARC knowingly chose to take.

In addition, the Tribunal found that there was evidence that flooding and high water run-off remained a risk in and around the pipeline right-of-way where it would cross the Appellants’ land. The Tribunal also found that any permanent loss of soil due to erosion would constitute irreparable harm to the Appellants’ interests.

The Tribunal also noted that, according to the RJR-MacDonald test, the public interest objectives of the legislation may be considered as part of the balance of convenience. The Tribunal held that one of the objectives of the legislation in this case is to manage and mitigate the environmental effects of oil and gas activities, in the public interest. Therefore, in deciding an application for a stay of a permit issued under that legislation, there is a general presumption that the permitted activities are consistent with legislated environmental objectives and the public interest. However, the Tribunal found that it could not make that assumption in this case.

The Tribunal found that the permit’s requirements and the Commission’s decision rationale relied on the Gemini Report’s recommendations for managing and mitigating the impacts of the permitted activities on agricultural land during pipeline construction. The Gemini Report was the key (and perhaps only) site report that the Commission considered, yet it contained significant limitations and gaps with respect to the impacts of the permitted activities on agricultural land. In these circumstances, Tribunal held that it could not assume that the permit provided adequate protection against the impacts of the pipeline construction with respect to drainage, erosion, soil instability, and the potential for permanent soil loss. Denying a stay would result in ARC proceeding with construction, despite the informational gaps and uncertainties regarding potential effects of the permitted activities on agricultural land and associated environmental values.

In these circumstances, the Tribunal concluded that the balance of convenience favoured granting a stay, pending the Tribunal’s decision on the merits of the appeal. Accordingly, the Appellants’ application for a stay was granted.  


Decision Date: September 20, 2017

Panel: Alan Andison

Keywords: Oil and Gas Activities Act – s. 72(3); preliminary decision; stay; pipeline; permit; soil erosion; agricultural land; public interest; RJR-MacDonald Inc. v. Canada (Attorney General) (1994), 111 D.L.R. (4th) 385 (S.C.C.)

Richard Bruce Mitchell and Sharan Mitchell appealed a pipeline permit that the Oil and Gas Commission (“Commission”) issued to ARC Resources Ltd. (“ARC”). The permit authorized ARC to construct and operate a sour gas pipeline, subject to certain conditions, on private land including land owned by the Appellants. The gas is considered “sour” because it contains up to 1.5% hydrogen sulphide. The pipeline, which includes a 20 metre wide right-of-way, would run parallel to the eastern boundary of the Appellants’ land, adjacent to a ditch which is beside Rolla Road. The Appellants farm the land, which is within the Agricultural Land Reserve.

In January 2017, ARC sent the Appellants an invitation to consult regarding the proposed pipeline. ARC advised that it intended to apply for a permit to construct and operate a sour gas flow line across their land, and planned to start construction between the third quarter of 2017 and the third quarter of 2018.

In February 2017, the Commission received a written submission from the Appellants which set out several concerns about the proposed pipeline. Among other things, the Appellants raised concerns about safety, the pipeline route, and soil instability and erosion where ARC proposed to build the pipeline.

Subsequently, ARC’s representatives met with the Appellants and provided a written reply to their concerns. ARC’s written reply acknowledged the Appellants’ concerns related to culverts, ditches, and inadequate drainage, especially during spring runoff. ARC advised that it would discuss the drainage issues involving ditches adjacent to the Appellants’ property with the Ministry of Transportation, with the intention of creating a plan to address issues with water backing up on the Appellants’ land during peak runoff.

In July 2017, the Commission issued the pipeline permit. The Commission’s decision rationale acknowledged that the Appellants had raised concerns including erosion, undersized culverts, the pipeline route, and safety. The decision rationale concluded that “no outstanding concerns have been indicated in the Land and Habitat review.” Regarding agriculture, the decision rationale stated that a Schedule A Site Assessment was completed, and “[n]o outstanding concerns have been indicated in the Agricultural review.” A “Schedule ‘A’ Assessment” report for the pipeline right-of-way (the “Gemini Report”) had been prepared for ARC by Gemini Corporation.

On August 11, 2017, the Tribunal received the Appellants’ Notice of Appeal.

In their Notice of Appeal, the Appellants alleged, among other things, that there was inadequate drainage where the pipeline was to be built, and water backs up onto the land during spring runoff and periods of heavy rainfall, which would lead to erosion of the pipeline right-of-way. They argued that the Commission permitted the pipeline to be built in a location that will allow soil to be eroded and permanently washed away. Documents attached to the Notice of Appeal included photographs of a flooded area, which appeared to be the Appellants’ land near Rolla Road, and an August 7, 2017 email from ARC representatives to the Appellants regarding flooding and erosion in the area.

After filing their appeal, the Appellants applied to the Tribunal for a stay of the permit, pending the Tribunal’s final decision on the merits of the appeal. In support of their application, the Appellants provided a copy of the Gemini Report.

In determining whether a stay 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 appeal raised serious issues which were not frivolous, vexatious or pure questions of law.

In the second part of the test, the Appellants had to establish that their interests would likely suffer irreparable harm if a stay was denied. ARC acknowledged that there were issues regarding water run-off and erosion on the Appellants’ land where the pipeline would be built. The August 7, 2017 email from ARC’s representatives indicated that there were no plans to deepen the ditch, and ARC had prepared no formal report regarding the ability of culverts to handle the water flow in the ditch. It also stated that ARC’s construction plans in wet sensitive areas relied on the “Schedule A” report (i.e., the Gemini Report). The Tribunal found that the Gemini Report was prepared when the ground was covered by snow, which prevented a full assessment of soil stability, drainage, land contour, and the risk of erosion. The Gemini Report stated that the site may have “erosion, streams, drainages, low areas, and other areas that may be of concern” that were not observed or taken into account.

The Tribunal found that, if soil was eroded and permanently lost as a result of the pipeline’s construction, it would amount to “a permanent loss of natural resources” constituting irreparable harm according to the RJR-MacDonald test. However, the Appellants provided insufficient evidence for the Tribunal to conclude that there was a likelihood that soil would erode or farming productivity would be lost if the pipeline construction proceeded. While the Appellants’ evidence raised questions about the Commission’s decision rationale and its reliance on the Gemini Report, and it appeared that flooding was likely to re-occur in or around the pipeline right-of-way, it was unclear whether pipeline construction would coincide with flooding or high run-off conditions that are prone to erosion, or would exacerbate existing flooding problems.

Turning to the third part of the test, the Tribunal found that ARC would suffer some operational delays and financial harm if a stay was granted, but there was no evidence that a stay would irreparably harm its interests. The Tribunal also found that, if the appeal is unsuccessful, most of the financial harm that ARC would suffer as a result of a stay would be temporary or the result of business risks that ARC knowingly chose to take.

In addition, the Tribunal found that there was evidence that flooding and high water run-off remained a risk in and around the pipeline right-of-way where it would cross the Appellants’ land. The Tribunal also found that any permanent loss of soil due to erosion would constitute irreparable harm to the Appellants’ interests.

The Tribunal also noted that, according to the RJR-MacDonald test, the public interest objectives of the legislation may be considered as part of the balance of convenience. The Tribunal held that one of the objectives of the legislation in this case is to manage and mitigate the environmental effects of oil and gas activities, in the public interest. Therefore, in deciding an application for a stay of a permit issued under that legislation, there is a general presumption that the permitted activities are consistent with legislated environmental objectives and the public interest. However, the Tribunal found that it could not make that assumption in this case.

The Tribunal found that the permit’s requirements and the Commission’s decision rationale relied on the Gemini Report’s recommendations for managing and mitigating the impacts of the permitted activities on agricultural land during pipeline construction. The Gemini Report was the key (and perhaps only) site report that the Commission considered, yet it contained significant limitations and gaps with respect to the impacts of the permitted activities on agricultural land. In these circumstances, Tribunal held that it could not assume that the permit provided adequate protection against the impacts of the pipeline construction with respect to drainage, erosion, soil instability, and the potential for permanent soil loss. Denying a stay would result in ARC proceeding with construction, despite the informational gaps and uncertainties regarding potential effects of the permitted activities on agricultural land and associated environmental values.

In these circumstances, the Tribunal concluded that the balance of convenience favoured granting a stay, pending the Tribunal’s decision on the merits of the appeal. Accordingly, the Appellants’ application for a stay was granted.