CAEPLA releases latest edition of its Landowner Journal



CAEPLA is the Canadian Association of
Energy and Pipeline Landowners Associations.



Ontario Court reverses Michael Schmidt acquittals on raw milk charges

Farmer Michael Schmidt has been convicted on 15 of 19 charges related to the sale of raw milk after the Ontario Court of Justice overturned a previous decision by a Justice of the Peace.  Schmidt had been acquitted of all charges (see my earlier post from January, 2010), but on appeal Justice Peter Tetley rejected Schmidt's argument that selling raw milk to customers who are aware of any health risks was his legal right. 

Schmidt remains defiant, and has said that he will appeal the decision: "There's no stopping.  Nothing will stop me."  Schmidt says that he is prepared to go to prison over his right to provide raw milk. 

Schmidt has also been served with contempt of court charges stemmning from his alleged involvement in Our Cows Inc., a Chilliwack, B.C. operation that provincial authorities there have tried to shut down. 

Nebraska Senator stands up for Keystone XL landowners: Press Release

LINCOLN, NE, September 27, 2011 – Today, Senator Bill Avery, who could not be in attendance to present his remarks at a scheduled US State Department Hearing on the TransCanada Keystone XL Pipeline pending application, released this statement:

“For the record, I am not opposed to an international pipeline. I realize that there are currently hundreds of natural gas and oil pipelines across Nebraska and across the United States. I have sent a letter to President Obama and Secretary Clinton indicating that while I do not oppose the pipeline or its purpose, based on our historical need for oil and gas, I have several very serious reservations about TransCanada’s operations and procedure for route approval.

I am extremely concerned about TransCanada’s questionable record of pipeline maintenance. Keystone I has already experienced 12 spills in its first year but claims no fault because those spills were at pumping stations. That’s more first-year spills than any other pipeline in US history. Keystone I was recently issued a Federal Corrective Action Order in June, 2011 by the US Department of Transportation to take necessary action to protect the public, property and the environment from potential hazards associated with two spills this summer in Sargent County, North Dakota and Doniphan County, Kansas.

There is absolutely no denying that spills will happen. Enbridge dumped over 1 Million gallons of tar sand crude into Michigan’s Kalamazoo River, polluting and closing the waterway to fishing and swimming for 6 months. ExxonMobile spilled 42,000 gallons of oil into the Yellowstone River contaminating America’s National Park waterway. The good people of Louisiana, where I attended Tulane University, will suffer for decades from the tragedy of British Petroleum’s offshore explosion. Spills can and will happen. They will poison our waterways and kill our wildlife. The Sandhills are home to the endangered Whooping and Sandhill Crane migratory bird species, the endangered American Burying Beetle, and dozens of waterfowl and wildlife. Even worse, viscous tar sands, which won’t float like light sweet crude, will sink into our porous Ogallala Aquifer, contaminate our clean water systems, and cause catastrophic and irreversible damage. If we don’t stop this now, future generations will forever wonder why we allowed this to happen.

I am opposed to TransCanada’s questionable and deceptive tactics. It’s a very serious problem when a foreign corporation can enter our state and dictate what’s going to happen on our private property. Property that has been held by generations of Nebraska family farmers. The US State Department must acknowledge that TransCanada did not have the proper permits to threaten to invoke eminent domain. It’s unethical and it’s against the law. I have a copy of the letter they have sent to landowners threatening land condemnation. The intimidation and deception of our citizens is real.

Furthermore, I am outraged that TransCanada has briefed our legislative staff, partnered with our local unions, sent the Consulate General of Canada to meet with me, sponsored our Nebraska State Fair, and implied University of Nebraska backing on Husker gamedays all while declaring to be our friend.

Friends don’t send hostile letters to innocent landowners. They don’t infiltrate our state with unsubstantiated illusions about increased jobs and decreased oil prices at a time when working families, farmers and cattle ranchers are clinging to their livelihoods and barely making ends meet. Friends don’t turn a deaf ear when a state pleads for them to shelter their drinking water from toxic crude oil and their fragile ecosystems from erosion.

Our two US Senators have said no. One US Representative has said no. Our Governor, Dave Heineman, has asked the President to deny TransCanada’s permit based on location. Our University has told TransCanada to get their advertisements out of Memorial Stadium. 30 Nebraskans peacefully protesting TransCanada’s tactics have been arrested at the White House. Our Legislature is seriously considering – and I support – a costly Special Session to protect our state from TransCanada’s refusal to hear us that our Aquifer is Nebraska’s most precious resource. They’ve threatened our landowners with eminent domain and land condemnation, invaded our airwaves and newspapers with confusing and manipulative advertising and made questionable political contributions to our lawmakers. Today, TransCanada has caused hundreds of Nebraskans to take the day off, drive across the state and show up to again voice their serious concerns.

How many more times can Nebraska tell you?  We do not want our Ogallala Aquifer and Sandhills adversely affected by TransCanada’s dirty tar sand sludge. The Final Environmental Impact Study report indicated that for 65 miles, Keystone XL Pipeline will be less than 10 feet away from the Aquifer. That simply is not acceptable. The Aquifer provides 78% of Nebraska’s clean drinking water and provides 83% of Nebraska’s total irrigation water for livestock and crops. We do not want TransCanada jeopardizing our clean water, irrigation source or the livelihood of Nebraska’s family farmers with vague and unfounded promises. We will not risk a spill on our watch.

I’ve heard the arguments about ending our dependence on foreign oil. About Canada being a friendly nation we can count on. About TransCanada being a neighbor who will invest in our communities. I understand about the need for new jobs in a time of economic instability. And quite frankly, I am not moved. I am simply not convinced that these promises can or will be guaranteed by TransCanada. Are we willing to gamble away Nebraska’s environmental future on uncertainties? On temporary labor jobs and oil that, once refined, is not earmarked for American use? On a company who has a history of deceptive trade practices and faulty equipment installation?

Given that TransCanada refuses to be a friend and acknowledge their corporate responsibility, Nebraskans will continue to be resolute in the stewardship of our environment, our land, our history and heritage for the future of our children. We are unwavering in our support for what our families have spent generations protecting and we will not back down.

There is a solution, and we all know it. Absent a good faith effort from TransCanada to voluntarily propose to Nebraska another Pipeline route, the US State Department must reject this application and TransCanada must move the Keystone XL Pipeline east. Get it off of the majority of the Ogallala Aquifer. Keep it out of our extremely fragile ecosystem. Why is it so hard for TransCanada to move the Pipeline east? To follow its existing Keystone I pipeline route? Is it because they were deceptively acquiring land ahead of their application approval and would now have to obtain new landowner easement rights? Let me remind you: TransCanada’s bottom line is not our problem.

It is incumbent upon the US State Department to reject approval of this permit and require TransCanada to reroute the Keystone XL Pipeline away from the Sandhills and Ogallala Aquifer. Then, and only then, will this project win our confidence and likely acquire broad support in Nebraska. The Keystone XL Pipeline may be in the national interest, but the route is absolutely not in Nebraska’s interest. As Nebraskans, we respectfully request, no, we absolutely demand, the rejection of TransCanada’s permit application.”

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Keystone XL pipeline faces new challenge in Canada

The Keystone XL pipeline, already approved by regulatory authorities in Canada but facing continuing approvals challenges in the U.S., is now facing a new challenge in the Canadian regulatory arena.  On September 23, the Communications, Energy and Paperworkers Union of Canada (CEP) wrote to the National Energy Board (NEB) to raise concerns about whether Keystone XL has complied with the sunset clause in its Canadian approval certificate.  Condition 22 of Certificate OC-56 reads:

Unless the Board otherwise directs prior to 11 March 2011, this Certificate shall expire on 11 March 2011 unless construction in respect of the Project has commenced by that date.

In its letter to the NEB, the CEP says that it understands:

that the Board made no direction prior to March 11, 2011, and that no construction in respect of the Project had commenced by that date.  Accordingly, OC-56 expired on March 11, 2011, and there is no current approval that would allow TCPL to proceed further with the Keystone XL pipeline. 

The CEP says that when it asked about the apparent expiry of the Certificate, Ms. Saunders of the NEB advised that TCPL had undertaken some earth moving activity and, in doing so, commenced construction of the pipeline.  CEP challenges this assertion in its letter, reminding the NEB that various requirements to be carried out at least 60 days prior to the commencement of construction have also not been completed by TCPL.

The NEB has now issued a letter to the CEP and to TCPL saying that it would like to gather more information about the situation before responding to CEP's letter.  TCPL has the opportunity to file responding comments by October 14.  CEP may file reply comments by October 21.

An interesting development in a controversial pipeline project.  Worth keeping an eye on.

Ontario municipality loses claim over forgotten 1854 lakeshore road

An Ontario Superior Court judge has granted summary judgment dismissing a claim by the Municipality of Meaford related to a long-forgotten road on the shoreline of Georgian Bay.  In 1854, the former Township of St. Vincent passed a by-law to establish a public road on the lakeshore over lots 21-25 of Concession 6:

Be it therefore enacted by the Municipal Council of the Township of St. Vincent, that the road on the lakeshore from the side road between lots 21 and 22 be established a public road as far northward as the side road between lots 24 and 25.  One boundary to be four rods from high water mark and the lake the other boundary.  Any damages or costs accruing by establishing the said road to be paid by the requisitionists, all of which is hereby established.

The by-law was not registered on title to any land until after 2004, when it was discovered in a box stored in the basement of the Meaford municipal offices.  The public road as called for by the by-law would cover approximately 6,000 feet over three concession lots.

Following the discovery of the by-law, Meaford passed a new by-law which accepted the purported location of the public road over the south part of Lot 23 (about 600 feet affecting 10 cottage properties).  The by-law also directed that Meaford's lawyer take steps, including court action, to confirm municipal ownership of the road. 

Meaford commenced an action asserting that the public road was established over the defendants' properties as a result of the enactment of By-Law 11 and further as a result of the doctrine of dedication and acceptance of the road as evidenced by the expenditure of public funds on the road and the historic use of the road by members of the public.  Meaford sought a declaratory judgment that the Disputed Road is a public highway governed by the Municipal Act, 2001 and that it is owned by and under the jurisdiction of Meaford.  Meaford also sought a declaratory judgment that the defendants are trespassing on the road.

The defendants in the action included the cottage owners affected by the purported road.  They brought motions for summary judgment to have the action dismissed before trial.  Meaford brought a cross-motion asking for injunctions to preserve the Disputed Road pending trial.  On a motion for summary judgment, the critical issue is "whether a trial is genuinely necessary, not because it is to be given some preferred status in the administration of justice, but because the issue to be resolved cannot be truthfully, fairly and justly resolved without the forensic machinery of a trial."

Justice Daley found that the paper evidentiary record before him was sufficient to allow for the determination of the question as to whether there was a genuine issue requiring a trial.  In the end, he found that there was no genuine issue requiring a trial.  He cited several reasons, including:

• Meaford did not establish that a public highway existed prior to the enactment of the 1854 by-law;
• While the Township did have the necessary legislative authority to establish the road in 1854, there were no records that any work was done or any money was expended for the road after 1854;
• No survey of the 1854 by-law lands was ever completed;
• The Township failed to register the road by-law on title.  In this case, the registered interests of the defendant landowners take precedence over the unregistered interest of Meaford;
• There is no evidence that the road has been dedicated by the owner of the land for public use;
• Meaford has not offered evidence that a public road existed in fact during the modern era;
• The new by-law passed by Meaford is void as it was not passed for a proper municipal purpose.  Meaford preferred the wishes of a small group of citizens to the concerns raised by its own planner and prior to the enactment of the by-law failed to carry out all proper inquiries and to give timely and adequate notice of the contemplated by-law to the property owners who may be affected by it;
• Over 153 years passed between the enactment of By-Law 11 and when the plaintiff located the by-law and thereafter took steps to try to enforce it.  No evidence has been offered by the plaintiff to adequately explain the extraordinary delay in the municipality asserting its rights to a public roadway pursuant to the by-law.  It would be unjust to grant Meaford's claim.

The Unsatisfactory Approval Process for Keystone XL: Jocelyn Stacey

McGill University Doctor of Civil Law student Jocelyn Stacey has posted an article on ABlawg.ca about the shortcomings of environmental assessment legislation in Canada and the U.S. - Failing to Assess the Key Issue: The Unsatisfactory Approval Process for Keystone XL.  In particular, Ms. Stacey cites the failure of environmental assessment processes in the context of pipeline project approvals to address impacts of climate change:

This is not intended to be a comprehensive critique of environmental assessment legislation in Canada or the U.S. - there is no shortage of commentary on the merits and flaws of environmental assessment. Rather, what Keystone XL so aptly demonstrates is how easy it is for environmental assessment to not only to ignore, but actually obfuscate the impacts of climate change - arguably the most pressing environmental issue of the day and therefore the most in need of pre-development assessment.

The rhetorical trick that allows regulators to duck the real emissions issues is reliance on the fatalist assumption that, if this pipeline is not approved, then another will; thus, no increase in greenhouse gas emissions can be attributed to this particular project. For example, the NEB concluded:

In the Board’s view there is no evidence of a connection or nexus between the applied-for project and other projects or activities which would make emissions from upstream activities relevant to the Board’s considerations in this Application. The operation of the upstream facilities is not contingent on the construction of the Keystone XL pipeline; they will presumably continue to operate whether or not KXL is ever built (at 75).

Similarly, the report commissioned by the Department of State concluded:

… studies indicate that building versus not building Keystone XL would not of itself have any significant impact on: U.S. total crude runs, total crude and product import levels or costs, global refinery CO2 or life-cycle GHG emissions. This is because changing WCSB [Western Canadian Sedimentary Basin] crude export routes would not alter either U.S., Canadian or total global crude supply, (other than a small impact under a No Expansion scenario), or U.S. and global product demand and quality. The same slate of crude oils would have to be refined even if reallocated geographically (Ensys Energy & Systems Inc., Keystone XL Assessment - Final Report (Dec. 23, 2010) at 116).

This assumption allows regulators to consider the pipeline in isolation - disconnected from its effect on upstream production and downstream use - making it much easier to ascribe no impact to what is, in actuality, only one small component of a much larger development project. Perhaps even more puzzling, is that the fatalist assumption also enables regulators to shift the baseline against which impacts are measured. Why aren’t the impacts of emissions from Keystone XL measured against emissions today, not the wholly speculative emissions baseline that we assume will occur? In fact, what should be the conclusion of the assessment - “other than a small impact under a No Expansion scenario” - is relegated to parentheses, a trivial point only noted to ensure technical accuracy.

Ontario family sues wind farm over health effects

An Ontario couple, Lisa and Michel Michaud, of Thamesville, Ontario has filed a statement of claim in the Ontario Superior Court of Justice alleging that the Kent Breeze wind farm operation has caused them to experience nausea, sleep disruptions and vertigo in their home.  Kent Breeze has not yet filed a statement of defence.  The closest of the Kent Breeze wind turbines to the Michaud home is 1,146 metres away.  The defendants in the lawsuit are Kent Breeze Corporation, MacLeod Windmill Project and Suncor Energy Services. 

The Michauds allege that adverse health effects of the wind project began as soon as it started operations earlier this year.  The Michauds purchased their property in 2005. 

A press conference was held in Toronto to announce the lawsuit.

Enbridge plans to twin 345 km Athabasca oil pipeline

Enbridge Athabasca has announced its proposal to develop a new crude oil pipeline project called the Athabasca Pipeline Twinning Project in response to increased oil production in the Kirby Lake area in Alberta.  Enbridge says that the pipeline will "generally follow" the existing Athabasca Pipeline right-of-way.  Two new pump stations will also be added.  Enbridge anticipates construction to begin in the winter of 2013/2014 and in-service by early 2015.

Saskatchewan Court allows recreational development in ranchland to go forward

A number of ranch land owners in the R.M. of Loon Lake, Saskatchewan asked the Court of Queen's Bench to quash or overturn by-laws that rezoned 44 acres owned by Kenneth and Patricia Prosser from agricultural to recreational use.  In order to allow for development proposed by the Prossers, the R.M. needed to change the Land Use Concept Map and Zoning District Map, which establish the general land use and development goals of the R.M. as set out in its Basic Planning Statement.

The landowners first challenged the by-laws on the basis that they were illegal due to a lack of substance.  They asserted that the bylaws were passed for an illegal purpose, that being solely for the economic consideration of allowing the recreational development.  The Court ruled that economic considerations were not the sole considerations of the R.M. council in passing the by-laws.

The second challenge was on the basis that the by-laws were not passed according to the proper process.  The Court disagreed.

The third challenge was that the by-laws were inconsistent with the general goal of the Basic Planning Statement, which is to maintain the agricultural character of the municipality by protecting prime agricultural land from being taking out of production, restricting lakeshore development to properties already zoned lakeshore development and not allowing lakeshore development within one mile of intensive livestock operations.  The R.M. acknowledged the importance of these points in the Basic Planning Statement, but argued that they should not be to the absolute exclusion of all other development contemplated within the Statement.  The Court agreed this was a reasonable interpretation of the Statement.

The fourth challenge by the landowners was based on minimum distance separation requirements related to intensive livestock operations.  The Court found that the requirements did not preclude development of a recreational subdivision and noted that the proposed development was to be on marginal grazing land rather than prime agricultural land.  The livestock facilities affected were not considered intensive by the R.M. council.  The Court reviewed this issue and found that this decision of the council was reasonable.

The fifth challenge to the by-laws was that they lacked landowner support.  The Court confirmed that it was for the R.M. council to decide what is in the best interests of the R.M. as a whole.  The public had been given an opportunity to be heard on the proposed development, but the decision was to be made by the councillors.

The sixth challenge by the landowners was that the site conditions were not suitable for the proposed development.  The Court found there was a lack of evidence to support this position.  The members of council viewed the site and the conditions of the site and reached a "constructive and reasonable decision" that the site was suitable for the development.

The seventh basis for challenging the by-laws was that there was insufficient demand for development of this sort to warrant a new development.  The Court found this was a "narrow and unrealistic approach" to what is in the best interest of the R.M. as a whole.  Members of council were aware of a "strong demand for lakeshore lots in this area of Saskatchewan".

The eighth and final basis for challenge by the landowners was an alleged failure by the council to have regard to concerns set out in section 10.1 of the Basic Planning Statement (development review criteria).  Based on affidavit evidence from the R.M., the Court found that those concerns were considered in the passing of the by-laws.

Justice Acton of the Queen's Bench concluded as follows:

Based upon the law in Saskatchewan as previously stated, the decision of council in amending the Land Use Concept Map and the Zoning Bylaw must be reasonable.

The decision of the council of the R.M. was reasonable, transparent and well thought out based on its jurisdiction and the reasons set out earlier in this judgment. Council has shown an understanding of the sometimes competing concerns respecting the maintaining of primary agricultural land, the encouragement of development of agricultural activities, and the need to develop lakeshore developments on marginal lands adjoining bodies of water for recreational purposes.

The applicants are unhappy with the proposed development. They have ranched for generations in the peaceful solitude and tranquillity of the area.

Their desire to maintain this lifestyle is understandable.

However, council has a responsibility to all inhabitants of the R.M. It must make decisions based on the best interests of all of the inhabitants of the R.M. As stated in s. 31 of the PDA, the Official Community Plan is to provide a comprehensive policy framework to guide the physical, environmental, economic, social and cultural development of the municipality. This is a broad and general policy which must guide the R.M.

Council has decided that the approval of this recreational development is in the long-term best interest for the advancement of the respondent municipality without preventing the continued use and development of the ranch lands in the area by local residents.

Council’s decision is in a range of reasonable, possible decisions.

Read the decision at: Morton v Loon Lake (Rural Municipality No 561).

Case comment on Omers Energy oil and gas lease case available

Professor Nigel Bankes of the University of Calgary has posted a case commentary at ABlawg.ca on the recent Alberta Court of Appeal decision in Omers Energy Inc. v. Alberta (ERCB): case comment.  I posted a brief note on this case last week.

Enbridge to abandon 75 miles of the oil pipeline that contaminated the Kalamazoo River

Noel Griese of the Energy Pipeline News is reporting that Enbridge Energy Partners plans to replace 75 miles of pipeline in Michigan and Indiana related to the July, 2010 spill into the Kalamazoo River.  The Michigan Public Service Commission will be holding public hearings into the proposal, beginning with a pre-hearing conference on September 21.  Read Griese's article at: Energy Pipeline News.

The original announcement was made on May 12 in Houston:

HOUSTON, TX, May 12, 2011 (MARKETWIRE via COMTEX) --

Enbridge Energy Partners, L.P. (NYSE: EEP) (the "Partnership") today announced additional capital investments to replace portions of its Line 6B pipeline system that spans from Griffith, Indiana, through Michigan to the international border at the St. Clair River. This program will include replacement of approximately 75 miles of the pipeline in various locations in Indiana and Michigan, at an estimated cost of $286 million. These costs will be recovered through the Facilities Surcharge Mechanism ("FSM") that is part of the system-wide rates of the Lakehead system.

Earlier this year, the Partnership completed the replacement of 14 segments, totaling 9,000 feet, of Line 6B in southeastern Michigan and installed a new segment of pipeline under the St. Clair River, which will be operational by late June. This latest investment includes the replacement of five miles of pipeline immediately downstream of two pump stations in Indiana and three pump stations in Michigan as well as replacement of 50 miles of pipeline downstream of the Stockbridge station and delivery terminal northwest of the Detroit metro area. Subject to regulatory approvals, the new segments of pipeline will be installed in 2012 and will be staged to be placed in-service in consultation with, and to minimize impact to, refiners and shippers served by Line 6B crude oil deliveries.

The $286 million expenditures are in addition to the $210 million integrity expenditures on Line 6B recently announced by the Partnership for the year 2011, of which $175 million will be recovered through the FSM.

In actual fact, Enbridge is proposing to construct a new pipeline alongside the existing pipeline in a new 25 foot wide right-of-way.  Enbridge will abandon the existing pipeline in place, saying that this will "minimize additional disturbance along the route".  Enbridge has provided responses on its website to "frequently asked questions" for affected landowners, including questions about construction, disturbance and compensation: Frequently Asked Questions.

Alberta Court of Appeal interprets oil and gas lease

The Alberta Court of Appeal has dismissed the appeal by Omers Energy Inc. of a decision of the Energy Resources Conservation Board (ERCB) that suspended two gas well licences because the underlying lease had expired.  Omers attempted to rely on the Suspended Wells Clause in the lease to extend its term.  The clause would continue the lease as though operations were being conducted, provided the well was "capable of producing the leased substances".  The ERCB had found that "capable of producing" for the purposes of the lease meant capable of producing the leased substances in "meaningful quantities" in its present state and configuration.

The Court of Appeal agreed:

The Board did not err in finding that the phrase “capable of producing the leased substances” means the “demonstrated, present ability of a well on the lands to produce the leased substances in a meaningful quantity within the time frames contemplated in the lease.” (Board Decision 2009-037 at 9, hereafter Board Decision) The lease is a contract through which the lessor and lessee agreed to develop the leased substances for mutual benefit. This purpose would be defeated if the lease were interpreted in a manner that allowed it to continue almost indefinitely at a time when a drilled well is incapable of producing a meaningful quantity of oil or gas in its present state and operations are not being conducted to make it produce. Requiring a “meaningful” volumetric quantity was sufficient to determine this case. Considering each lease and its surrounding circumstances will allow this test to develop in a contextual setting. [emphasis added]

Read the decision at: Omers Energy Inc. v. Alberta (Energy Resources Conservation Board).

Omers Energy Inc. is an investment of OMERS - the Ontario Municipal Employees Retirement System - which has over $53 billion in net assets (at December 31, 2010).

Appeal Court agrees auctioneer not liable for selling cattle subject to security agreement

The Saskatchewan Court of Appeal has upheld the dismissal of a claim against an auctioneer for the tort of conversion for selling livestock that was subject to a security interest.  A secured creditor, Lloydminster Credit Union Limited, brought an action against an auction company, 324007 Alberta Ltd., which operates Heartland Livestock Services. The Credit Union had a security agreement, securing demand and other loans on livestock, with Robert Burroughs, a farmer.   Mr. Burroughs sold the livestock, using Heartland’s auction services, and did not account for the proceeds to the Credit Union.  The Credit Union sued Heartland in conversion.

Following a trial to resolve the dispute, Justice Pritchard of the Court of Queen’s Bench found that Heartland acted as an agent or intermediary between Mr. Burroughs and the buyers at the auction sale and could not be found liable for conversion in an action brought by the Credit Union.  Justice Pritchard held, in the alternative, that the Credit Union was unable to sustain an action in conversion against the auctioneer because the Credit Union was not entitled to immediate possession of the livestock covered by the security agreement.  As part of this latter proposition, the learned trial judge found that the Credit Union had consented to the sale of the livestock, albeit on the condition that the proceeds be deposited with it.

The Appeal Court upheld the trial judge's decision, but only on the basis that the Credit Union had consented to the sale of the livestock.  Where consent to the disposition of property can be proven, no liability in conversion can be found.  Conversion is an intentional tort (converting someone else's property to your use), and consent is often referred to as a "defence" because the defendant typically bears the burden of proving that the plaintiff had consented to the interference with the property. 

Read the decision at: Lloydminster Credit Union Limited v 324007 Alberta Ltd.

PetroBakken Energy seeks to abandon oil pipeline in place

In what is likely to become a more common occurrence, PetroBakken Energy Ltd. has applied to the National Energy Board for permission to abandon one of its pipelines in the ground.  The pipe is 580 metres in length and is connected to an oil well within the Alsask Gathering System, about 30 km east of Oyen, Alberta (it crosses the border with Saskatchewan).  Construction of the line was approved by the NEB in 2003, and the well ceased production in 2009. 

PetroBakken says it has no plans to put the line back into operation and now must either suspend the line, maintaining cathodic protection, or abandon it.  PetroBakken says that maintaining cathodic protection on the line to avoid corrosion is too expensive, so it chooses to attempt to clean the line and then leave it in place.  On the issue of "liability exposure", PetroBakken states in its application to the NEB:

The proposed abandonment of the pipeline segment is largely driven by legal obligation to meet the requirements of NEB regulation, which indicates that PetroBakken must either suspend or abandon any pipeline that has not operated for over 12 months.  Secondarily, but equally, or more importantly, the proposal to abandon is also being done for ethical reasons as the potential for ground contamination by the (unknown) product within the pipeline must be eliminated.  Leaving this potential risk in the ground (for no operational benefit) would be an unjustified environmental liability for PetroBakken, which could be minimized or eliminated by cleaning and abandoning the pipeline segment.

As the volume of contents remaining within the pipeline segment is uncertain, the environmental liability to the organization is unknown.  The cost to abandon is expected to be less than $10k, which is considered minimal when considering the potential environmental liability.

The Saskatchewan land affected by the line is privately owned.  PetroBakken says that it notified the landowner by phone and was told that the proposed abandonment was "fine".  The Alberta land is in a Special Area and is leased to a farmer.  Again, notification of the project was given by phone and the farmer apparently had "no issues".  The lands affected by the pipeline are apparently used for grazing purposes on both sides of the provincial boundary.

At about 1/2 a kilometre in length, this is a short pipeline to be abandoned.  However, it does give some indication of what might be in store for other landowners across the country facing pipeline abandonment in the future.  The NEB has issued a hearing order for the abandonment application, but no funding has been available for participation in the hearing either by directly affected landowners or other concerned parties.  Therefore, anyone wishing to participate in the process will do so at his or her own cost.  Unlike the situation in provincial jurisdictions, the NEB will make no costs award at the end of the process. 

This application demonstrates the failings of the NEB's recent creation of a participant funding program.  It is assumed that no funding has been made available in this case because of the relatively short length of the pipeline involved (participant funding is reserved for "large projects").  However, for the landowners directly involved, the pipeline is quite long enough to cause concern.  How long does a pipeline have to be before directly affected landowners will have access to "participant funding"?  Is the participant funding sufficient in any event to enable landowners to test the appropriateness of the abandonment plan that is being proposed? 

And can we expect moving forward that pipeline companies will choose to abandon small segments of pipeline on a continual basis rather than applying for the abandonment of large pipeline segments so as to avoid the participant funding program?  The NEB has made it quite clear in its previous decisions that it will allow companies to decide how they make their regulatory applications, even where it is clear that the manner in which those applications are made is intended to thwart the ability of landowners to participate in the process.

Read the PetroBakken application at: Abandonment Application.

Read the NEB Hearing Order at: Hearing Order dated September 6, 2011.

Ambiguity in will leads farm case to Saskatchewan Court of Appeal

The Saskatchewan Court of Appeal has upheld a lower court decision regarding the meaning of "oil well rights" in the will of the late Frederick J. Wernicke.  The problem was that Wernicke didn't have any rights in an oil well.  He did own an undeveloped freehold mineral title of nominal value in Alberta.  He also owned five quarters of farm land in Saskatchewan on which he received surface rental payments for gas wells.  In his will, Mr. Wernicke bequeathed 1/2 of his "oil well rights" to one son and 1/2 of the rights to another son.  On the basis of these bequests, the executors of the will, including one of the sons, transferred the Alberta mineral title to the two sons.

Other parties interested in the will sued the two sons over the Alberta property.  The trial judge ruled that "oil well rights" in the will meant freehold mines and minerals on the Alberta property.  The other interested parties then appealed that decision to the Court of Appeal, arguing that the ordinary meaning of "oil well rights" could not be mines and minerals.  The two sons argued that the expressed intentions of Mr. Wernicke were "clear, unambiguous and without equivocation".  The mineral title in Alberta included the rights to oil beneath the ground and it was his intention that the mineral title go to the two sons.  The Court of Appeal agreed.

Read the decision at: Wernicke v Quirk.