The Alberta Court of Appeal recently issued a tough reminder
that oil and gas service companies need municipal approvals to
operate – and not just assumptions or assurances that those
approvals will come.
In Site Energy Services Ltd. v Wood Buffalo (Regional
Municipality), 2015 ABCA 106, the applicant, Site Energy,
leased four lots in the Hamlet Commercial District for temporary
offices, parking, washrooms, security and fuel storage to support
its work on a pipeline project. It applied to the respondent, Wood
Buffalo, for development permits. Wood Buffalo refused the
application because it categorized the use as an "Industrial
Support Facility", which was neither a permitted nor
discretionary use in the District under the Land Use Bylaw.
Rather than appeal the refusal, Site Energy continued operating
because it anticipated reaching "an understanding" with
Wood Buffalo. It had, on other occasions, commenced operations
without permits in anticipation of subsequent approval.
Wood Buffalo issued a stop order, requiring Site Energy to
remove its equipment and buildings. Site Energy appealed the stop
order to the Subdivision and Development Appeal Board (the
"Board"), arguing that the use could and should be
re-categorized as a "Business Support Facility", a
discretionary use in the District. The Board upheld the stop order
and appears to have reasoned that it could not issue development
permits for the alternate use because only the stop orders (and not
the earlier refusal) had been appealed.
On application for leave to appeal, Site Energy argued that
under Municipal Government Act (the "MGA") section 687(3)
(d), the Board had the power to issue a development permit on an
appeal of a stop order – even where the earlier permit
refusal was not appealed. The Court of Appeal concluded that it
was, indeed, unclear whether the Board could issue a development
permit under the MGA in these circumstances.
Site Energy did not argue at the leave application, as it had at
the Board, that the use should have been re-categorized as a
"Business Support Facility". That was reasonable, given
the definitions of the two uses. The result was that only the
Industrial Support Facility use could be considered. The Court
confirmed that while a Board might have been able to issue a permit
for an allowed use on an appeal of a stop order, it could not
permit the indefinite continuation of a use that was not allowed in
Leave to appeal was denied.
This case raises an interesting strategic and legal question
– whether a development permit can be obtained on an appeal
of a stop order.
The practical reminder from the case is simply to get first
things done first. So often, use and development of land proceeds
in advance of approvals – sometimes on the basis of
assumptions and sometimes on the basis of unofficial assurances.
But proceeding before both the permit and any agreement with the
municipality are final can be extremely costly. Where zoning does
not allow the use, it will be stopped. If the use is discretionary
and the municipality refuses a permit, it will be stopped (though a
refusal can be appealed on legal or jurisdictional grounds). But
even where the municipality issues a permit after the use has
started, the applicant can expect onerous terms because all parties
realize the applicant is in no position to walk away.
The Site Energy case does not deal with the interaction between
municipal controls and approvals by the Natural Resources
Conservation Board ("NRCB"), the former Energy Resource
Conservation Board ("ERCB"), the former Alberta Energy
and Utilities Board ("AEUB"), the Alberta Energy
Regulator ("AER") or the Alberta Utilities Commission
("AUC"). Nonetheless, it is worth noting here that
companies should approach those approvals strategically. Under
section 619 of the MGA, such an approval takes precedence over
municipal controls – but only to the extent of the approval.
An approval sought from the NRCB, ERCB, AEUB, AER and AUC should,
so far as possible, clearly and unambiguously cover as much of the
operation as possible because anything outside the approval will be
subject to municipal control.
A final note on optics. The Court characterized Site
Energy's continued operations in the face of the stop order as
"reckless" and as demonstrating a "brazen
disregard" for municipal processes. Companies should
understand that it is possible to convince Council to change a
parcel's zoning to allow a desired use or to convince a Board
or Court to overturn a decision, and that those efforts will be
more successful where there is a demonstrated respect for municipal
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
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