Potential Implications of Alberta’s Rescission of the Coal Policy

by Gavin Fitch, Q.C.


On June 1, 2020 the provincial government rescinded a decades-old policy that placed restrictions on the mining of coal in Alberta’s Eastern Slopes.

A Coal Development Policy for Alberta was issued in 1976 and was widely known as the “Coal Policy”. The Coal Policy covered many aspects of the coal development process, from the acquisition of exploration rights and coal leases to royalties, prices and marketing. However, the Coal Policy was best known for dividing a large area of the Eastern Slopes of the Rocky Mountains (where there are substantial coal deposits) into four different land use categories (“Coal Categories”) where coal development was prohibited (Category 1), restricted (Category 2) or generally encouraged (Categories 3 and 4).

In a media release announcing the rescission of the Coal Policy, Alberta Energy stated that with various regulatory, policy and planning advances over the past 45 years, the Coal Policy “became obsolete”. The announcement also stated:
Former category 1 lands will continue to be protected from coal leasing, exploration and development on public lands but will not infringe on private lands or freehold mineral rights. This will support critical watersheds, biodiversity (including numerous species at risk), as well as recreation and tourism activities along the eastern slopes of Alberta’s Rocky Mountains. Leasing outside of these areas will be subject to the same land use planning and management rules that apply to all other resources and industrial uses.
All coal development projects will continue to be considered through the existing rigorous Alberta Energy Regulator review process. This review is based on each project’s merits, including its economic, social and environmental impacts.


To understand what the rescission of the Coal Policy means, and in particular the elimination of the Coal Categories, it is critical to know how the Coal Policy defined the categories, in particular Categories 1 and 2. Category 1 lands were defined as those:

in which no exploration or commercial development will be permitted. This category includes National Parks, present or proposed Provincial Parks, Wilderness Areas, Natural Areas, Restricted Development Study Areas, Watershed Research Study Basins, Designated Recreation Areas, Designated Heritage Sites, Wildlife Sanctuaries, settled urban areas and major lakes and rivers. These are areas for which it has been determined that alternate land uses have a higher priority than coal activity. Category 1 also includes most areas associated with high environmental sensitivity; these are areas for which reclamation of disturbed lands cannot be assured with existing technology and in which the watershed must be protected.

Category 2 lands were defined as those:

in which limited exploration is desirable and may be permitted under strict control but in which commercial development by surface mining will not normally be considered at the present time. This category contains lands in the Rocky Mountains and Foothills for which the preferred land or resource use remains to be determined, or areas where infrastructure facilities are generally absent or considered inadequate to support major mining operations. In addition this category contains local areas of high environmental sensitivity in which neither exploration or development activities will be permitted. Underground mining or in-situ operations may be permitted in areas within this category where the surface effects of the operation are deemed to be environmentally acceptable.

The map from the Coal Policy showing the location of the various categories of land can be found here. Category 1 lands are yellow; Category 2 lands are blue.

As part of the rescission of the Coal Policy, Alberta Energy issued Information Letter 2020-23, which states:
With the rescission of the Coal Policy, all restrictions on issuing coal leases within the former coal categories 2 and 3 have been removed. Alberta will continue to restrict coal leasing, exploration and development within public lands formerly designated as coal category 1. This prohibition on coal activities is being continued to maintain watershed, biodiversity, recreation and tourism values along the Eastern Slopes of Alberta’s Rocky Mountains.

Having regard for how the Coal Policy defined Category 2 lands, and the map showing their location, it is clear that in fact a substantial amount of land in the Eastern Slopes that was formerly restricted from coal development has been now been opened to development. Under the Coal Policy, “limited exploration” was permitted in Category 2 lands but “commercial development by surface mining” was effectively prohibited. This prohibition has been removed.

One of the reasons stated for the rescission of the Coal Policy is that when the Coal Categories were created in 1976 “land use planning hadn’t yet been completed”; and that the categories are no longer needed given “today’s modern regulatory, land use planning and leasing systems.”

Alberta enacted the Alberta Land Stewardship Act (“ALSA”) in 2009 to “provide a means to plan for the future” and to “provide for the co-ordination of decisions by decision-makers concerning land, species, human settlement, natural resources and the environment”. Under ALSA, the province was divided into 7 areas for which a regional plan was to be created. To date, only 2 regional plans have been completed: the Lower Athabasca Regional Plan and the South Saskatchewan Regional Plan (“SSRP”).

The SSRP covers a portion of the southern Eastern Slopes that was also covered by the Coal Policy. However, a large portion of the Eastern Slopes north of the headwaters of the Oldman and Livingstone Rivers fall outside the SSRP and are not subject to any other regional plan. Thus, it seems fair to say that land use planning for the Eastern Slopes is still not completed. Further, with the rescission of the Coal Policy and the elimination of the Coal Categories, there is no land use plan in place for these lands.

The SSRP was adopted in 2014 and last amended in 2018. It is intended to guide development in the South Saskatchewan River basin until 2024. The SSRP addresses potential coal development and specifically states that the government will review the coal categories established by the Coal Policy:

to confirm whether these land classifications specific to coal exploration and development should remain in place or be adjusted. The review of the coal categories will only be for the South Saskatchewan planning region. The intent is for the SSRP and implementation strategies of the regional plan or future associated subregional or issue-specific plans within the region to supersede the coal categories for the purposes of land use decisions about where coal exploration and development can and cannot occur in the planning region.

This suggests that the SSRP contemplated the Coal Categories being replaced or superseded by new “adjusted” land use classifications developed under the SSRP that would guide decision-makers about where coal exploration and development can occur. What has happened instead is the Coal Categories have been eliminated but not replaced with anything new. Further, the intent of the government’s new policy appears to remove the categorization of lands for coal development. Instead, development will be reviewed by the Alberta Energy Regulator on a project-by-project basis, without the benefit of the guidance that would be provided by adjusted land use classifications under SSRP.

 It appears that the Coal Policy was rescinded to spur coal exploration and development in Alberta. The foregoing analysis suggests, however, that the elimination of the Coal Categories without them being replaced by a new planning regime may have unintended consequences.

First, as noted above, it raises the issue of the need to revise the SSRP. This could lead to legal challenges. Second, the environmental assessment process for major resource extraction projects like surface coal mines is already slow and cumbersome. Removing any guidance as to where coal development is appropriate arguably will burden the existing environmental assessment process even more by opening it up to debates about the appropriateness of coal development in a specific location.

Update on Site Rehabilitation Programs in Alberta, British Columbia and Saskatchewan

by Anna Fitz, Student-at-Law, and JoAnn P. Jamieson


On April 17, 2020, the federal government announced $1.7 billion in funding to clean up oil and gas sites in Alberta, British Columbia, and Saskatchewan. The goal of the federal funding was to create immediate jobs in the three provinces while helping companies avoid bankruptcy during the COVID-19 pandemic. 

All three provinces were quick to announce programs in the hopes of creating jobs and getting people back to work. This article provides an update on the programs in each province.

Alberta
Alberta received $1.2 billion, the bulk of the federal funding. On April 24, 2020, the Government of Alberta announced its “Site Rehabilitation Program,” which provides up to $1 billion in grants to oil field service contractors to perform well, pipeline, and oil and gas site closure and reclamation work. 

The goals of the program are to:
·       immediately get Alberta’s specialized oil field workforce back to work,
·       accelerate site abandonment and closure efforts, and
·       quickly complete a high volume of environmentally-significant work.

Inactive oil and gas sites may be nominated by landowners and Indigenous communities. Landowners can nominate inactive sites by emailing the required information (including the legal description of the land, landowners on the land title, and contact information) to the government. Indigenous communities can also nominate inactive sites by email; required information includes the name of the First Nation or M├ętis settlement, the legal description of the site, and the licensee information sign at the site. A detailed overview of the nomination process can be found here.

In order to be eligible for funding to do the work, service contractors must be located in Alberta and must offer jobs to Albertans. Eligible work includes closure on inactive wells and pipelines, Phases 1 and 2 environmental Site Assessments, remediation, and reclamation. Interested parties can apply on the Site Rehabilitation Program website.

The Alberta government will provide funding for the Site Rehabilitation Program in multiple increments. The first increment, which has now ended, reportedly received significant interest. The second increment is currently on-going, and will close for applications on June 18, 2020. Third and later increments will also become available.  

In addition to the Site Rehabilitation Program, the government of Canada has extended a $200 million repayable loan to the existing Orphan Well Association (“OWA”). Under the OWA, an orphan site is “a well, pipeline, facility or associated site that does not have a legally responsible and/or financially viable party to deal with its decommissioning and reclamation responsibilities.”

The OWA has a procurement process through which it selects from a list of prime contractors, who are then normally responsible for choosing their own subcontractors. However, with the new federal funding, the OWA is planning to collaborate with its prime contractors to select subcontractors (interested parties will be able to apply) for the additional work. The OWA anticipates allocating the new funding through a “staged process.” After further planning, OWA will be providing information about the process on its website.

British Columbia

On May 13, 2020, the Government of British Columbia (“BC”) announced its “Dormant Sites Reclamation Program” with which it is channeling its $100 million in federal funding toward cleaning up dormant sites. In BC, well sites are deemed “dormant” if they do not reach a threshold of activity for five years consecutively, or if they have failed to produce for at least 720 hours yearly.

The program is specifically for B.C. companies and contractors with experience in environmental contracting and/or oil and gas infrastructure abandonment. Applicants must have a valid contract with a BC-based oil and gas activity permit holder for a dormant site.

Eligible applicants can apply online, where the information they will need to provide includes the company details, permit holder name, well authorization number, and estimated cost of each work component.

The B.C. government will provide its funding in two increments, the first from May 25, 2020 to October 31, 2020. Funding for this first increment is up to $50 million. The second increment will commence on November 1, 2020 and run to May 31, 2021.

In both funding increments, the B.C. government will provide financial contribution up to 50% of the total estimated or actual costs (whichever is less), up to a total of $100,000 per application and per closure activity. The program has already received significant interest; in a news release, the province noted it received over 1,100 applications on the first day, which means the program was nearly fully subscribed.

B.C. landowners, local governments, and Indigenous communities can nominate dormant oil or gas sites on their land through an online process beginning June 15, 2020. The BC government noted that such nominations will be a priority in the second increment of funding.

Saskatchewan

On May 22, 2020, the Government of Saskatchewan initiated the “Accelerated Site Closure Program” (“ASCP”). Through this program, the Ministry of Energy and Resources will manage $400 million from the federal government for the abandonment and reclamation of inactive oil and gas wells and facilities.

The ASCP involves multiple phases, the first for up to $100 million (the future funding and applicable phases have not yet been announced). In order to be eligible, licensees must be in good standing regarding debts owed to the Crown as of March 1, 2020 (e.g. the Oil and Gas Administrative Levy, the Orphan Well Levy, etc.). Eligible licensees will receive a minimum of $50,000 toward their abandonment and reclamation projects.

The program provides that licensees nominate their wells and facilities through the IRIS system (Integrated Resource Information System). Service companies, interested in performing the work, must apply through SaskTenders beginning in the first week of June 2020. Further details on the application process, and who to contact with questions, can be found in the following bulletin.

The Saskatchewan government anticipates that up to 8,000 wells and facilities will be abandoned and reclaimed through the ASCP, which in turn will support approximately 2,100 full-time jobs. Saskatchewan plans to develop an Indigenous procurement strategy further into the program.

The first phase of the ASCP is now complete, and eligible licensees have received notice of their allocation.  

Moving Forward

The federal funding is a welcome boost to cleaning up inactive oil and gas sites in Western Canada. This is a significant step to subsidize old, inactive sites and lower the associated environmental risks. As the three programs also create jobs and contracting opportunities for local parties, the federal funding appears to be a big win for both the energy industry and the environment in all three provinces during these difficult times.

If you have further questions about any of the three cleanup programs in Alberta, British Columbia or Saskatchewan, please reach out to JoAnn P. Jamieson or Sean Parker, co-chairs of McLennan Ross LLP’s Energy, Environment and Regulatory Practice Group.

Bill 7: Alberta Government Aims to Set Deadlines for AER Project Approvals


By Marika Cherkawsky and Michael Barbero

On Wednesday, the Alberta Government tabled Bill 7, the Responsible Energy Development Amendment Act, (“Act”). If passed, the Act would allow Cabinet to specify time limits for the review and approval of energy projects by the Alberta Energy Regulator (“AER”). Bill 7 is intended to provide project proponents and other applicants with greater certainty as to approval timelines.   

Bill 7 does not prescribe the maximum timelines, rather it authorizes Cabinet to approve regulations establishing same (see s. 60(2) of Bill 7). In doing so, Bill 7 removes the requirement that the AER must make a written decision, with reasons, within “the time prescribed by the rules” after the completion of:
  •  a hearing on an application (s. 35(1));
  • a regulatory appeal (s. 41(1)); or
  • a reconsideration (s. 44(1)).
Instead, Bill 7 proposes amending section 60 of the Responsible Energy Development Act by including the following subsections:

(2) The Lieutenant Governor in Council may make regulations
  • (a) to establish time limits on the exercise of powers, duties and functions by the Regulator;
  • (b) to establish time limits in respect of any process, hearing or decision concerning which the Regulator may make rules under this Act or any other enactment.
(3) A regulation made under this section prevails over any rule that is made or amended by the Regulator with which it conflicts or is inconsistent to the extent of the conflict or inconsistency.

Uncertainty remains in relation to how the government will arrive at the prescribed timelines, what consultation or input from the AER will be received and whether or not the imposition of timelines will resolve the concerns voiced by industry. Moreover, the government has made it clear that the AER’s obligations to fully consider social and economic effects and the effects of any activity on the environment and landowners is unchanged.  

The government is hopeful that the changes proposed by Bill 7 will assist in restoring predictability to the regulatory process without sacrificing rigor in conducting assessments of proposed projects. Whether the imposition of deadlines will be effective in achieving this goal remains to be seen.

Alberta Energy Regulator Suspends Environmental Monitoring Due To COVID-19



On May 20, 2020, the Alberta Energy Regulator (“AER”) announced sweeping temporary suspensions to environmental monitoring requirements across Alberta’s energy industry. The suspensions are a follow-up to the Minister of Environment and Parks and Minister of Energy’s earlier suspensions to certain environmental reporting requirements. This is a significant development as the previous measures essentially suspended requirements to report routine monitoring information, while this new step actually suspends the underlying requirement to monitor in certain circumstances. The AER states this step is a measured response to public health concerns from the COVID-19 pandemic including legitimate concerns that energy operators will not be able to meet certain monitoring requirements while complying with the COVID-19 public health orders and guidelines.

Scope of the New Suspensions

While the AER caveats the announcement with the comment that “there must be a demonstration that the public health orders pose a challenge in completing the monitoring activity” and “any deferral of monitoring must have a low risk of potential short- and long-term impacts”, the scope of the monitoring suspensions is significant. The suspension affects the following monitoring activities:

  • Surface water quality testing and analysis with the exception of surface water released to the environment.
  • All groundwater sampling under Water Act licences and approvals but at least one monitoring event must take place in 2020.
  • Soil monitoring and groundwater monitoring under the Environmental Protection and Enhancement Act (EPEA) approvals with the exception of any monitoring necessary to protect human health and ecological receptors. 
  • Lab testing of water released except for domestic wastewater.
  • Volatile organic compounds and reduced sulphur compound monitoring, including fugitive emissions surveys carried out by third-party contractors.
  • Fugitive emissions leak detection and repair (LDAR) programs carried out by third-party contractors. Methane monitoring requirements must still be met.
  • Quality Assurance Plan (QAP) audits and verifications, including third-party audits, under the Continuous Emission Monitoring System (CEMS) Code. Approval holders are still required to maintain CEMS monitoring and report exceedances and meet federal multi-sector air pollutants regulation measurement requirements.
  • Audits and verifications, including third-party audits, under the Continuous Emission Monitoring System (CEMS) Code. Approval holders are still required to maintain CEMS monitoring and report exceedances and meet federal multi-sector air pollutants regulation measurement requirements.
  • Wildlife monitoring programs but wildlife deterrents and mitigations are to remain in place.
  • Wetland monitoring.
  • All research requirements under EPEA approvals.
  • All reclamation monitoring programs. The mitigation and repair of potential impacts, such as weed infestations and soil erosion, must continue.
  • Five-year integrity testing of aboveground storage tanks. Monthly visual inspections for evidence of problems must continue.
  • In addition, the AER provided the following regulatory modifications:
  • Operators that conduct twice-annual surveys to determine the volumes of fluid tailings and treated fluid tailings in their storage facilities are now required to perform only one of those surveys in 2020.
  • Pipeline deactivation - Internal and external corrosion mitigation and monitoring must continue on deactivated pipelines that are susceptible to corrosion.
  • Approval holders may apply to the AER to modify the frequency and timing of manual stack testing (stack surveys) and similar activities. 

Ongoing Reporting of Emergencies and Documentation of Reporting
 
The AER advises that operators must continue to report emergencies, including incidents, contraventions, and releases that have or may have the potential to impact the environment or public safety. Further, operators must continue to record and retain complete documentation relating to any reporting.

Interaction with Federal Requirements 

Similar to the initial measures implemented by the Province, the federal government has suspended certain requirements to report data due to COVID-19, however the data must still be collected. To date, the federal government has not suspended any monitoring requirements.

Termination

The AER suspensions and modifications will apply for so long as Ministerial Orders 17/2020 and 219/2020 and the public health orders are in effect, which are currently scheduled to last until August 14, 2020. However, the soil monitoring and groundwater under EPEA approvals must resume no later than September 30, 2020, with at least one monitoring event taking place in 2020. All timelines are subject to change as the situation develops.

Effect on Industry 

The suspensions and modifications come as a welcome relief to operators currently strained by COVID-19 restrictions on operations. Industry had raised concerns that the reporting suspensions put in place in March 2020 did not provide sufficient relief as the main challenges during the COVID-19 pandemic relate to attending on site and fulfilling the monitoring requirements, not the reporting of those results. 

For further information on how these developments may impact you or your business, contact JoAnn P. Jamieson in Calgary, Sean Parker in Edmonton or another member of our Environmental, Energy and Regulatory Practice Group.

Alberta Court of Appeal Finds the ‘Big Molly’ Project Triggered a Full Environmental Impact Assessment



In the recent decision of Alexis v Alberta (Environment and Parks), 2020 ABCA 188 (“Alexis”), the Alberta Court of Appeal interpreted important environmental legislation and provided guidance on when a full environmental impact assessment (“EIA”) will be required for a project.

The key issue in Alexis was whether the proposed silica-sand extraction project met the definition of a “quarry” under Alberta’s Environmental Protection and Assessment Act[1] (“EPEA”), and therefore was a “mandatory activity” under the Environmental Assessment (Mandatory and Exempted Activities) Regulation (“the “Regulation”).[2] The Court found that the project was a “quarry” and a “mandatory activity”, and accordingly triggered an EIA under section 44(1)(a) of EPEA.

The Big Molly Project 

The Alberta Court of Appeal’s decision in Alexis concerned a project known as “Big Molly”, located near the hamlet of Glenevis, Alberta. The company behind the Big Molly development, Wayfinder Corp. (“Wayfinder”), is in the business of extracting and processing silica-sand to be used in hydraulic fracturing operations. Once in operation, Big Molly was expected to cover 68.6 hectares and produce silica-sand at an annual rate of 500,000 tonnes for an estimated fifteen years.  

In October 2017, Wayfinder sought guidance from the Director of Alberta Environment and Parks (the “Director”) on whether an EIA would be required for Big Molly. The Director decided that the project did not trigger the requirement for an EIA under the applicable provisions EPEA.

Armin Alexis, a member of the nearby Alexis Nakota Sioux First Nation, subsequently filed an application for judicial review of the Director’s decision that an EIA was not needed. Mr. Alexis was concerned that Big Molly – without an assessment of the project’s environmental, social and economic implications – would have an adverse impact on the traditional activities of his community.  

The reviewing judge in the Court of Queen’s Bench found that the Director had reached a “reasonable conclusion”, and confirmed that Wayfinder would not be required to submit an EIA report. These findings were appealed by Mr. Alexis to the Court of Appeal.

Issue of Statutory Interpretation 

A majority of the Court of Appeal allowed Mr. Alexis’ appeal, and ordered the Director to require an EIA report from Wayfinder. In doing so, the Court clarified several principles underlying the assessment process set out in EPEA.
 
First, the Court referred to the recent Supreme Court of Canada decision in Canada v Vavilov,  2019 SCC 65 (“Vavilov”) for its analysis of the standard upon which decisions of statutory delegates (such as the Director, in this case) must be reviewed. Vavilov confirmed that the presumptive standard of review is now “reasonableness”, which is only rebutted in specific circumstances. A delegate’s decision is unreasonable if based on reasons that are “irrational and illogical… [exhibiting] circular reasoning, false dilemmas, unfounded generalizations or an absurd premise”.[3] In Alexis, all parties agreed that the Director’s decision should be subject to the standard of reasonableness.

Second, the Court examined the assessment-related provisions of EPEA. In order for an EIA to be triggered, the Big Molly project must meet the definition of a “mandatory activity” under the Regulation and the definition of a “quarry” under EPEA. If the undertaking failed to meet one or both of these definitions, Wayfinder would be relieved of the obligation to prepare and submit an EIA.  

Big Molly was expected to produce 500,000 tonnes of silica-sand each year, which greatly exceeded the 45,000 tonne threshold established under the Regulation. It was therefore found to satisfy one requirement, the definition of “mandatory activity”.  

The Court was then tasked with determining whether the project constituted a “quarry” or a “pit”.  The definition of “quarry” involves the removal of any mineral other than a coal or oil sands bearing substance. The definition of “pit” involves the removal of sand, gravel, clay or marl and expressly excludes a quarry (a pit cannot also be a quarry). In undertaking this analysis, the Court revisited the following principles on statutory interpretation: 
  • The statute in question, as well as related statutes on the same subject matter, should be read in their entirety. Statutory language cannot be fully appreciated without an understanding of the broader context in which it was written.  
  • The reason why the legislature passed the statute should be identified. Determining the aim of the statute – whether to “obviate some mischief, supply an inadequacy, to effect a change of policy, [or] to formulate a plan of government”[4] – will inform its interpretation.  
  • Exceptions in statute should be narrowly construed.  Put differently, individuals seeking the benefit of a statutory exception must clearly establish that they come within its terms.  
  • The potential permissible meanings of the statutory language, taking into account plain and ordinary language, must also be identified. A permissible meaning is one that a “reasonable reader who uses the language correctly would give to the text at the time of its production… words must not be given meanings they cannot possibly bear”.[5]

Director’s Decision “Irrational and Illogical”

After applying each of the above common law principles, the Court concluded that Big Molly was better characterized as a “quarry” than a “pit”. This determination, in light of the surrounding provisions of EPEA, “trigger[ed] the most rigorous environmental impact assessment process possible”.[6]    

Although the Director did not provide any reasons for her finding that an EIA was not required, the Court characterized the decision as “irrational and illogical”,[7] thereby falling short of the applicable reasonableness standard. The Court held that “[t]he Director could only have come to one rational conclusion” – that an EIA was required – which the Director failed to do. Ultimately, the Court ordered the Director to notify Wayfinder that it was required to submit an EIA report.

Takeaway

EPEA’s assessment process requires the early identification of an activity’s environmental, social and economic effects. In this way, proponents are required to integrate a project’s broader effects into their decision-making early on in the process.  

Significantly, the Alexis decision turned on a question of statutory interpretation that examined the broader environmental regime. This turned out to be a critical issue that arose in the planning phase of the project. Although Wayfinder sought to discharge its due diligence by obtaining advice from the regulator that an EIA was not required, it was vulnerable to the Director not interpreting the legislation correctly. 

The message to proponents is to tread carefully. As seen with other high profile projects in recent years, regulatory decisions on environmental and regulatory assessment processes may be subject to close scrutiny by the courts, and even reversed. While a determination early on that project does not trigger an EIA may be considered good news, it is important that the Director is applying EPEA and its requirements in a reasonable manner; otherwise, the project runs the risk of potential legal challenge.  

If you or your company have questions regarding the above article or any related issue, please do not hesitate to contact Sean Parker in Edmonton, JoAnn P. Jamieson in Calgary or another member of the McLennan Ross Energy, Environmental and Regulatory Practice Group.


[1] R.S.A. 2000, c. E-12, s. 1(ccc).
[2] Alta. Reg. 111/1993, Sch. 1(b)
[3] Alexis at para 36; Vavilov at para 104.
[4] Alexis at para 44.
[5] Alexis at para 47.
[6] Alexis at para 75.
[7] Alexis at para 21.