Recently, the Provincial Court of Alberta found Land Petroleum International Inc. (Land Petroleum) guilty of the rarely prosecuted offence of failing to permit or assist an inspection ( 2021 ABPC 87). Specifically, Land Petroleum was ordered to pay a $92,000 fine for failing to permit and assist an inspector from the Alberta Energy Regulator (AER) with access to its gas plant facility near Ponoka, Alberta (Facility) for the purpose of conducting an inspection pursuant to section 96(4) of the Oil and Gas Conservation Act ( Act).
Pursuant to the Act, the AER, and any person authorized by it, may enter and inspect any place used or occupied in connection with a well or place where oil or gas is refined, produced, handled, processed or treated. All persons are required to permit and assist the AER in such inspections. Failing to fulfill this statutory duty is an offence under the Act.
Similar provisions appear in many regulatory statutes across Canada, providing inspectors with not only the power to enter and inspect facilities, but also putting an obligation on owners, operators and other persons present at the facility to assist the inspectors (including by furnishing relevant information). See for example: Alberta's Environmental Protection and Enhancement Act (see section 209), British Columbia's Environmental Management Act (see sections 109 and 110), Ontario's Environmental Protection Act (see section 184) and the federal Canadian Environmental Protection Act, 1999 (see sections 227 and 228). While the specific wording of each of these statutes must be examined to determine the scope of the powers they grant to inspectors, this court decision is nevertheless helpful to gain an understanding of the general scope of the obligation to assist inspectors, and how a failure to provide assistance may be treated by the courts.
- The Facts
The AER scheduled an inspection of Land Petroleum's Facility for August, 2018. Following a request, the AER agreed to re-schedule the inspection provided that certain information was provided by Land Petroleum by an agreed upon deadline. When Land Petroleum failed to provide the requested information by the deadline, the AER provided notice that the inspection would proceed on an expedited basis and authorized three inspectors (Inspectors) to inspect the Facility.
On August 20, 2018, the AER Inspectors requested access to the Facility. However, the Inspectors were informed by an employee of Land Petroleum that they would be unable to access the Facility without the approval of Bill Fung, the sole director and majority shareholder of Land Petroleum at the time. The AER later received a call from Mr. Fung, who refused to grant access to the Facility without a search warrant and without the RCMP being present. On the same day, Mr. Fung also informed the AER Acting Manager and Regional Coordinator for Field Operations West (Coordinator) that:
- he did not recognize the AER's authority to inspect the Facility;
- the AER would have to obtain a search warrant to access the Facility before September 18, 2018; and
- he would consider it breaking and entering if the Inspectors attempted to enter the Facility and notify the RCMP.
The Inspectors eventually left the Facility and returned on both August 21 and 22, 2020. On August 22, they observed an employee open the gate and enter the Facility without closing the gate. They proceeded to enter the Facility through the open gate and conducted their inspection and found 22 non-compliances.
- The Provincial Court's Reasons
The court noted that because the section 96(4) charge against Land Petroleum was a public welfare offence and strict liability offence, as described in R v Sault Ste. Marie (City), the Crown was only required to prove that Land Petroleum committed the prohibited act.
As a result, the Crown had to prove beyond a reasonable doubt that:
- Land Petroleum existed and was a "person" within the meaning of section 96(4) of the Act;
- Land Petroleum prevented, hindered or obstructed or failed to permit or assist;
- the Inspectors were a person authorized by the AER to conduct such inspections and have access to the Facility; and
- the Inspectors sought to access the Facility to exercise their powers of access and inspection pursuant to the Act.
(a) Land Petroleum is a "Person"
The parties agreed that the Inspectors were authorized by the AER pursuant to the Act to inspect the Facility. Further, as a corporation and licensee, the court easily determined that Land Petroleum was a "person" within the meaning of the Act.
(b) Land Petroleum acted through Mr. Fung
For a number of reasons, the court concluded that Mr. Fung was the operating mind and authorized agent of Land Petroleum, including because he:
- was the sole director and major shareholder; and
- sent an email to the Inspectors on August 20, 2018, which included his name, his description as the President of Land Petroleum as well as its logo.
Consequently, the statements Mr. Fung made to the Inspectors were deemed to be Land Petroleum's statements.
(c) Land Petroleum failed to permit and assist the Inspectors
The court noted that the AER's inspection was not prevented but delayed. Further, such delay was sufficient for the court to find that Land Petroleum breached its statutory duty to permit or assist the inspection when Mr. Fung, as the operating mind of Land Petroleum, refused to grant the AER access to the Facility. Therefore, the court held that all of the elements of the offence under section 96(4) of the Act were proven beyond a reasonable doubt.
At sentencing, the court imposed an $80,000 fine. In addition, Land Petroleum was ordered to pay a 15% provincial surcharge, for a total of $92,000.
To determine the appropriate fine, the court applied the sentencing framework set out in R v Terroco. Industries Limited, 2005 ABCA 141 weighing the mitigating, neutral and aggravating factors to determine Land Petroleum's culpability. Notable factors considered to determine the sentence were:
- Land Petroleum had no prior record of offences (mitigating factor);
- no evidence of ascertainable harm (neutral factor) but the potential for harm was a significant aggravating factor;
- Fung's words and actions constituting the actus reus were reckless and demonstrated a high level of culpability (aggravating factor); and
- The fine was intended to provide specific deterrence to Land Petroleum and general deterrence to deter others from hindering or delaying such inspections.
- Key Takeaways
This decision serves as an important reminder to owners and operators of their duty to assist regulatory inspectors and to provide relevant information. Although many statutes offer an avenue for investigators and regulators to obtain warrants, the duty to assist inspectors is triggered without a warrant. However, owners and operators continue to have rights during inspections, including the right to disclosure of the purpose of the inspector's attendance and to ensure inspectors exercise only those powers given to them under the relevant legislation.
Proactively, training key employees, managers and officers, including personnel whose actions may be considered the actions of the company with respect to such regulatory inspections, is important. Personnel should be informed of their statutory obligations to cooperate with inspectors, their rights during inspections and the internal protocols to engage legal and compliance teams, if necessary.
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.