Canada: Decisions May Pave Way For Challenge Of ERCB Licences

For the second time in recent months, the Alberta Court of Appeal has granted leave to appeal an ERCB decision to landowners who faced relatively light scrutiny of the merits of their case. These leave decisions illustrate that the "prima facie meritorious" component of the "serious and arguable" test for leave to appeal is not being rigorously applied by the court. As a result, ERCB licences may be challenged more readily by landowners in the future.

On February 12, 2008 the Alberta Court of Appeal granted leave to appeal in Kelly v. Alberta (Energy and Utilities Board) (Kelly), a decision of the Energy Resources and Conservation Board (the ERCB) approving two sour gas wells near the hamlet of Rocky Rapids. The two successful grounds of appeal were that Directive 56 requirements are legally binding on the ERCB and therefore should have been followed by the ERCB, and that granting the well licenses presented a potential breach of section 7 of the Canadian Charter of Rights and Freedoms (the Charter). Berger J.A. granted leave in this case because these grounds of appeal met the test of being "arguable." However, an explanation of the merits of those grounds was not provided.

Additional appeals to be heard

The Court of Appeal will also hear an appeal concerning Directive 56 this spring in Graff v. Alberta (Energy and Utilities Board). The question in that case is whether the ERCB fettered its discretion and erred by, conversely, relying on Directive 56 in determining that a family was not "directly and adversely affected" by a proposed sour gas well.

Leave to appeal was also granted last summer in Lavesta v. Alberta (Energy and Utilities Board) in favour of the landowners who challenged the decision of the former Energy and Utilities Board (the EUB) concerning the "need" for a proposed 500 kV transmission line from the Edmonton to Calgary areas. The landowners in that case sought review (and received leave to appeal) on five grounds. The Court of Appeal again found the grounds to be "arguable," but did not consider why the case was meritorious (which consideration is a component of the "arguable" test, as discussed more particularly below).

For example, on the issue of whether broad and general (rather than personal and specific) notice was appropriate for a high-level and general hearing relating to the planning of Alberta electricity transmission infrastructure, the court ruled: "it is arguable that [the applicants] were entitled to better notice ... than they received. [T]herefore ... leave ought to be granted with respect to this ground of appeal." The court did not inquire as to what notice the law generally requires in such circumstances.

Similarly, on the issue of whether leave should be granted because the EUB did not consider an argument of "environmental equity," the court concluded:

[T]he issue of the environmental impact was addressed briefly, but [environmental equity was] not specifically addressed ... it is an issue that has not been addressed by the courts, and if endorsed, it would be an issue that would have significant impact upon this, and any subsequent litigation. Thus, I am prepared to grant leave on this issue.

The court did not address whether the environmental equity argument itself had merit.

Test for leave to appeal

The test for obtaining leave to appeal is to demonstrate a "serious, arguable point," which is evaluated by considering whether the point:

  • is of significance to the practice;
  • is of significance to the action itself;
  • is prima facie meritorious; and
  • will unduly hinder the progress of the action.

In Kelly, Berger J.A. identified this four-pronged test, as well as the appropriate standards of review, at the outset of the decision; but, he did not apply it specifically in respect of each of the three grounds of appeal raised by the landowners, other than coming to the alternate conclusion of an "arguable" point.

The landowners proposed three grounds of appeal as follows:

  • that Directive 56 requirements were binding on the ERCB and, as several of them were not followed in the course of the application process, the ERCB was without jurisdiction to issue the approval;
  • that the ERCB had no jurisdiction to delegate its decision-making powers to staff in the course of making the approval and, accordingly, was without jurisdiction to issue the approval; and
  • that the ERCB process, by neither issuing an evacuation order nor providing for compensation for residents choosing to relocate during the drilling period within which the landowners were found to be at "above average risk," breached section 7 of the Charter of Rights and Freedoms, which prohibits any denial of life, security of the person or liberty absent a proceeding in accordance with fundamental justice.

The court did not explicitly consider whether the first and third grounds of appeal were "prima facie meritorious" and it is unclear why each of these two successful grounds meets that test.

For example, considering the first ground of appeal, guidelines (including ERCB directives) are generally not legally binding. In Thamotharem v. Canada (Minister of Citizenship & Immigration), the Federal Court of Appeal stated, "The word 'guideline' itself normally suggests some operating principle or general norm, which does not necessarily determine the result of every dispute." This is consistent with the court's determination in Carpenter Fishing Corp. v. Canada that "Policy guidelines outlining the general requirements for the granting of licenses are not regulations; nor do they have the force of law." Indeed, a decision made solely by reference to the mandatory prescription of a guideline, despite a request to deviate from it in the light of particular facts, may be set aside. In Maple Lodge Farms v. Government of Canada, the Supreme Court of Canada held that regulators cannot fetter their discretion by treating the guidelines as binding and excluding other relevant reasons.

With respect to the successful third ground of appeal, Berger J.A. noted that he was "mindful" of the recent Supreme Court of Canada decisions in Charkoui v. Canada (Citizenship and Immigration), Chaoulli v. Quebec (Attorney General) and Godbout v. Longueuil (City). These cases all concerned breaches of section 7 of the Charter and relate to security certificate procedures, access to private health insurance, and being required to reside within a municipality as a precondition to employment with that municipality, respectively.

The purported section 7 breach in the Kelly case would seem to be that there is a physical risk from a sour gas leak, should residents not relocate, and/or a deprivation of liberty in the event that residents are forced to do so absent compensation (the ERCB decision is silent on the compensation question). However, Berger J.A.'s decision to grant leave on this ground of appeal again does not explain how the threshold of "prima facie meritorious" is met.

Significance for Parties

All of these leave decisions illustrate that the Alberta Court of Appeal is not rigorously applying the "prima facie meritorious" component of the "serious and arguable" test for leave to appeal. This means that ERCB licences may be challenged more readily by landowners in the future. Furthermore, in light of the uncertainty about whether the requirements of Directive 56 are legal obligations, producers should ensure compliance and assemble an evidentiary record demonstrating compliance both at a hearing and in the event of a leave to appeal application.

Shawn Denstedt is a partner in the firm's Calgary office. JoAnn Jamieson is a senior associate in the firm's Calgary office. Matthew Keen is an associate in the firm's Calgary office. Ryan Rodier is an associate in the firm's Calgary office.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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