Preliminary and Final Decisions

Penalty Ranch Ltd. v. Oil and Gas Commission

Decision Date:
November 1, 2019
File Numbers:
Decision Numbers:
Third Parties:
Crew Energy Inc., Third Party

Decision Summary

Decision Date: November 1, 2019

Panel: Darrell Le Houillier

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 a permit issued by the Oil and Gas Commission (“Commission”) to Crew Energy Inc. (“Crew”). The permit authorizes Crew to construct and operate a water containment facility on Crown land that is subject to an agricultural lease held by the Applicant (the “Agricultural Lease”). The facility will include two in-ground containment ponds to store water produced from Crew’s oil and gas activities, including water injected into natural gas wells and any chemicals added during the production/treatment process.

The Applicant operates a cattle ranch. When the Applicant appealed the permit, it also requested a stay of the permit pending the Tribunal’s decision on the merits of the appeal. In its stay application, the Applicant submitted that denying the stay and allowing the permitted activities to proceed before the appeal was decided would create a risk of irreparable harm to groundwater, vegetation, and the Applicant’s cattle. The Applicant maintained that the area experiences earthquakes that could cause a spill of the stored fluids. Also, the stored fluids could contaminate the vegetation on surrounding grazing land due to evaporation. If cattle consumed toxins arising from the stored fluids, it would severely impact the Applicant’s business.

In determining whether the stay ought to be granted, the Tribunal applied the three-part test from 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 that were not frivolous, vexatious or pure questions of law. Therefore, the Tribunal proceeded to consider the second part of the test.

In 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 no evidence that the permitted activities were likely to contaminate groundwater, or soil and vegetation where the Applicant’s cattle graze. There was also no evidence as to how this harm, if it occurred, would impact the Applicant’s ranching business. Furthermore, there was no evidence that odours or toxic gases were likely to be emitted from the facility.

Although the Applicant provided evidence that leaks have occurred at other fluid storage facilities operated by other companies, the Tribunal found that the design of Crew’s storage facility, together with extensive conditions in the permit designed to prevent, detect and mitigate leaks and spills, distinguished the permitted facility from those that leaked in the past.

The Applicant also provided a photograph of a dead bird in one of Crew’s ‘C-ring’ above-ground fluid storage facilities. However, the Tribunal found that the permit requires Crew to prevent wildlife and birds from entering, landing in, or ingesting fluids from the permitted facility. Evidence of a dead bird in one of Crew’s C-rings did not automatically mean that birds or other animals would likely enter the permitted facility and die. Finally, the Tribunal held that even if the permitted activities caused damage to the Applicant’s interests as holder of the Agricultural Lease, the damage would be compensable, and would not be irreparable.

Turning to the third part of the test, the Tribunal concluded that the balance of convenience favoured denying a stay. The Tribunal found that Crew would suffer increased costs if a stay was granted. Moreover, it appeared that granting a stay may pose greater risks to the environment, because Crew would continue using 13 C-rings instead of the permitted facility. The Tribunal found that the risk of harm, if a stay was granted, outweighed the potential harm to Applicant’s interests if a stay was denied.

Accordingly, the stay application was denied.