Canada: Alberta Court Protects Regulatory Approvals From Collateral Attack But Allows Trespass Claim Founded On Aboriginal Title To Proceed (For Now…)

On June 5, 2015, the Alberta Court of Queen's Bench issued its decision in Ominayak v Penn West Petroleum Ltd., 2015 ABQB 342 (found here). On application by Penn West, the Court refused to strike a Statement of Claim in its entirety based on it being a duplicative of a similar claim against the Crown and an abuse of process. However, the Court ordered that the Claim must be amended to remove all allegations and relief sought which amounted to a collateral attack on regulatory approvals that had been previously obtained by Penn West.

The decision is a clear confirmation that Alberta courts will not allow claims, even when they are based on claims of aboriginal title, where they collaterally attack regulatory approvals when available steps were not taken to challenge those approvals directly.  On the other hand, the decision did allow a claim for trespass, founded on aboriginal title claims, to proceed to the next stage of the litigation notwithstanding the regulatory approvals that were in place. If this matter proceeds to trial, and if aboriginal title is ultimately established, an Alberta court may have to resolve the competing claim of aboriginal title against the right of the oil and gas industry to carry on oil and gas operations in good faith reliance on valid and unchallenged regulatory approvals.

Background Facts

In Ominayak, Justice Simpson of the Alberta Court of Queen's Bench considered an application by Penn West Petroleum Ltd. and Penn West Exploration (collectively, "Penn West") to strike a Statement of Claim (the "Claim") filed on November 29, 2013 (amended December 9, 2013) by the Lubicon Lake Nation (the "LLN"), in relation to lands in the vicinity of Sawn Lake and Haig Lake, Alberta (the "Lands"). The Claim asserted aboriginal title and rights on lands described as "traditional lands", and sought a declaration that all approvals that had been previously issued to Penn West for the production of oil on the Lands, were illegal and void. The Claim also included an allegation of trespass founded on the same claim of aboriginal title.

On June 7, 2013, the LLN had previously commenced an action against the provincial and federal governments, which also asserted aboriginal title and rights, and which sought a declaration that the approvals previously issued were either illegal and of no effect, or burdened and encumbered by the LLN's aboriginal rights (the "Crown Claim").  

Prior to conducting any activities related to the Sawn Lake Program, Penn West had obtained a number of regulatory approvals between April 2011 and December 2013 (the "Approvals"). During the course of its consultation with the LLN, Penn West had been advised by the Chief of the LLN that he had received a package of consultation materials from Penn West, and that he did not have any concerns with the Sawn Lake Program. Following this, Alberta Sustainable Resources and Development advised Penn West that consultation with respect to the Lands was adequate. Thereafter, the LLN apparently changed its position and, in May, June and August 2012, filed letters of objection with the ERCB. The objections were considered by the ERCB and rejected on the basis that the approvals did not directly and adversely affect the LLN. The LLN took no steps to challenge the ERCB's decision, including filing an application for judicial review.

Penn West sought to strike the Claim on the basis that it was an abuse of process since it virtually duplicated the Crown Claim, and since it constituted a collateral attack on regulatory approvals previously granted.

The Decision

After canvassing the applicable law, Justice Simpson held that while the Penn West action was identical to the Crown action in many respects, the causes of action were distinct, since the actions had been commenced against different defendants and involved different claims – private claims, in the case of the Claim against Penn West, and public claims, in the case of the Crown Claim. Accordingly, he concluded that duplication between the two actions did not constitute an abuse of process. Additionally, it was held that the LLN had to plead its right to possession in order to support its cause of action in trespass and as such, the duplication between the pleadings in the two actions in terms of the LLN's assertion of aboriginal title and rights, did not constitute an abuse of process. It was held that these issues were, at best, procedural in nature and, to the extent the assertion of aboriginal title and rights overlapped, concerns about inconsistent verdicts could be dealt with by way of consolidation of the two actions or an adjournment of one action until the other was concluded.

However, on the issue of collateral attack, it was found that the portions of the Claim attacking the validity of the Approvals were invalid, constituting a collateral attack. The Court ordered that the Claim be amended to remove those allegations. Citing the Supreme Court of Canada decision in Behn v Moulton Contract Ltd. (found here) and the British Columbia Court of Appeal decision in Canadian Forest Products Ltd. v Sam (found here), both 2013 decisions, it was held that there was a process in place with respect to a tribunal providing decisions subject to judicial review and appellate review, and that this was the process which must be followed until aboriginal title is established, neither of which, to date, had been done by the LLN. It was noted that since no issue was taken during consultation and, indeed, since Penn  West was advised by the LLN that there was no problem with the Project, "it is even a stronger case of a repudiation of the duties of mutual good faith that animates the discharge to [sic] the Crown's constitutional duty to consult First Nations."

Interestingly, the Court went on to state that "[t]o allow a collateral attack on the open and transparent tribunal process with the additional protection of judicial review and appellate review, would give rise to a high degree of risk for corruption", in that "[i]f the process can be collaterally attacked, it would create great temptation for corporations to offer payoffs to claimants or provide contracts to them for little or no service so as to avoid collateral attacks".

Industry Implications

The allegations in the Claim attacking the validity of the regulatory approvals were ordered struck. On this point, the Court made the following comments:

Further, it creates legal and economic uncertainty if the tribunal process is not followed and the authorization process highjacked by later aboriginal rights claims. How can a corporation proceed with authorized development if some time later it might face legal action despite its best efforts to follow the law?

In this sense, despite mixed success by Penn West on its motion to strike the Claim in its entirety, the court's application of the collateral attack doctrine may be viewed by industry as a positive step in terms of adding some degree of certainty and predictability to the Province's regulatory approval process. A party will be precluded from challenging the validity of regulatory approvals previously obtained, outside of the procedure specifically established for a challenge of this nature.

That said, this may have little practical effect in this particular case, given that the LLN has been left to establish its right of possession by way of aboriginal title and rights, and to pursue its claim in trespass.

The Court noted that at some point in the action, Penn West may wish to raise the validity of the Approvals as a defence, and that the issue of "statutory authority" may in turn be raised by the LLN in response, although these were "matters to wait for another day".  This is a critical component of the case, as it will bring directly into issue the question of whether the Alberta oil and gas industry is entitled to rely on the defence of statutory authority in response to a claim of trespass based on aboriginal title where oil and gas operations are conducted in good faith reliance on valid and unchallenged regulatory approvals.  It seems that were a court to find otherwise, it would significantly impact regulatory certainty and the settled expectations of the oil and gas industry.

We also note that the decision raises the fact that it is the Lubicon Lake Band led by Chief Billy Joe Laboucan, and not the claimant LLN led by Chief Bernard Ominayak, which is recognized by the provincial and federal governments as the elected representatives of the Lubicon Cree.  We expect that at some point in this litigation, and in the related Crown Claim, the question will have to be addressed as to whether the LLN has the authority to make the aboriginal title claim.

We intend to continue following this litigation and to report any further developments, including any judicial dispositions following a possible amendment of pleadings by Penn West to claim a defence on the basis of the validity of the approvals previously issued.

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