Building Relationships: Industry should look to family law of all places, to improve the fairness of energy projects

10/1/2009

Published in Alberta Oil Magazine October-November 2009
By Cindy Chiasson, Executive Director, Environmental Law Centre

Communication is recognized as a key element of good relationships, from marriages to corporate transactions. In the world of petroleum development, this generally takes the form of public consultation.

There are those on both sides of the development equation who malign consultation requirements – members of the public who feel it is a meaningless exercise in window dressing and individuals in industry who see it as another time- and money-consuming obstacle in the path to resource recovery. However, there are very valid reasons that public consultation is an important aspect of Alberta’s energy development process and some ways that it could be made better.

From a legal perspective, recovery of oil and gas in Alberta affects two sets of property rights. The law separates ownership of mineral rights from ownership of the land surface. In the vast majority of cases, mineral rights are held by the provincial government and leased to developers for recovery. The land surface is commonly owned by either private landowners or the provincial government.

Public consultation requirements are particularly relevant with respect to private ownership of the land surface. Given the obvious need for surface access to recover petroleum resources and the length of time for recovery, the start of the development process also begins a long-term relationship between the developer and the owners and users of the land surface. The Energy Resources Conservation Board (ERCB) has recognized this in its Directive 056: Energy Development Applications and Schedules, with a role for itself as the government regulator and possible involvement of additional interests.

Part of the challenge of public consultation is that Alberta’s energy regulatory system is predominantly focused on efficient recovery and use of energy resources, which does not necessarily lend itself to the most satisfactory consultation process for the public. While the ERCB is charged with making energy development decisions in the public interest, taking into account economic, environmental and social factors, historically economic factors have taken precedence. For example, the first and most detailed factor listed in Directive 056 for determining if an individual has the necessary status to be included in the consultation process is the potential for effects on economic and property rights and safety. Economic aspects of development tend to be more easily identified, measured and assessed compared to social and environmental factors.

The regulatory requirements for public consultation in oil and gas development come into play relatively late in the development process. There is no formalized public input process when mineral rights are leased. Online and paper notice of mineral rights being offered for auction is provided generally eight weeks prior to the sale, but there is no specific notice given to owners and users of the surface overlying those rights and no process for consultation before the auction. Under the Exploration Regulation, developers are required to get permission of the surface owner before carrying out exploration operations, but no particular form of consultation is specified.

The most detailed consultation requirements come into effect under Directive 056 when the developer plans to apply to the ERCB for approval for the well and any related facilities. Consultation requirements, including confirmations of landowner acceptance of the project (“non-objection”) are set out in detail in the directive. Those being consulted have a 14-day window within which to review materials and raise concerns.
In addition to the regulatory requirements, the Canadian Association of Petroleum Producers (CAPP) maintains a very extensive and thorough guide to public involvement, designed to cover energy development on a continuing basis from the earliest stages to final shutdown of a project. Although this guide offers excellent direction for developers, it is a voluntary document and thus operators can choose whether to use it and how much of it to apply to their development

The regulatory emphasis on resource recovery and the relative imbalance in funding and technical expertise between developers and the public tends to tilt the playing field significantly in favor of the industry. While Directive 056 requires information disclosure, responses to questions from landowners and explanation of technical details, the 14-day window increases pressure on landowners and users to indicate non-objection to proposed developments. This becomes even more problematic for landowners who live or own property in areas affected by multiple concurrent developments, as they must attempt to review, understand and assess the details of such proposals in their “spare” time with limited resources.

Although both Directive 056 and CAPP’s guide caution operators to be sensitive to timing considerations for landowners, neither address the situation of multiple developments nor suggest any type of co-ordination mechanism to assist landowners and other members of the public. A positive step would be to require co-ordinated public consultation by operators in the same geographical area.

The power imbalance and pressure to have owners provide confirmation of non-objection to enable applications to be treated as routine also push landowners and other members of the public to, at times, ask fewer questions and make hasty decisions. Many Albertans are unaware that they are not obliged to accept without question the information provided by the developer. Nor do many realize that they have the right and ability to negotiate with oil and gas companies on the terms of surface access.

This is a situation where a model from divorce law may be helpful to all involved. Where one spouse in a divorce is not represented by a lawyer, the courts will not consider an uncontested divorce application until a certificate of independent legal advice has been filed. A lawyer, independent of the other spouse’s lawyer, certifies that he or she has met with the unrepresented spouse and discussed that individual’s rights under the law and what he or she may be gaining or giving up. Effectively, it ensures that the unrepresented spouse makes an informed decision about the divorce. A similar form of independent certification, either from a lawyer or technical expert, could be used to indicate non-objection to a proposed project. When one considers the interface of rights between an oil or gas developer and a landowner, and the timeline of the relationship between those parties, the rights affected are likely no less significant than those of divorcing spouses.