Depth of Cover Monitoring Requirements Absurd? So says the Ontario Divisional Court

Enbridge Gas Distribution Inc. has won an appeal from the dismissal of its small claims court action against a contractor over damage caused to a gas main in Holland Landing, Ontario.  Enbridge claimed that the contractor damaged the pipe when using a mechanical digging device to uncover a leaking septic tank.  Enbridge had asserted at trial that the entire incident could have been avoided if the contractor had called for a locate; the contractor was negligent.  On appeal, the Divisional Court agreed and awarded damages to Enbridge.

At trial and in the appeal, the issue of depth of cover over the pipe came into play.  The trial judge had found that the pipe was not buried at the minimum required depth (2 feet) and that Enbridge should have ensured proper depth.  However, the Divisional Court noted that there is no requirement in the applicable legislation or regulations (or the TSSA Guideline or the CSA Standard) that a gas main must remain installed at the minimum depth.

The Court reasoned:

There is no requirement that Enbridge must continually measure the depths of all of its buried pipelines. Such a finding would lead to the absurd result that utility companies would be required to constantly recheck their lines in the ground. It is a well-established principle of statutory interpretation that the Legislature does not intend to produce absurd consequences. If the Legislature intended this result, the Act, the Regulation, the TSSA Guideline or CSA Standard would have stated that utility companies must ensure that the pipes “remain” buried at a minimum depth.

Unlike the case of Sun-Canadian Pipeline v. Lockwood, where the Court found that the company had actual knowledge that the pipeline had insufficient cover on the property, there is no evidence that Enbridge had knowledge that its Gas Main was at less than the required depth at the property until after the incident occurred.

Although these comments must be read in light of the facts of this particular case, it will no doubt be of concern to pipeline landowners to find an appellate court in Canada suggesting that pipeline companies have no obligation to monitor the depth of cover over their pipelines.  In fact, the Divisional Court suggested that such a requirement would be absurd.

Read the decision at: Enbridge Gas Distribution Inc. v. Froese. 

NEB calls for public hearing re abandonment application; Company withdraws application

Just last week the National Energy Board (NEB) announced a written public hearing to consider an application by Enerplus Corporation to abandon a 2.53 km pipeline that crosses the Alberta-Saskatchewan border.  The Maple Creek Pipeline is a 114.30 mm O.D. line carrying sweet gas from Alberta wells to facilities in the Maple Creek Field in Saskatchewan.  The application proposed to abandon the line in place.  The primary land use along the line is cultivated cropland.

Yesterday, Enerplus wrote to the NEB to withdraw the abandonment application.  The Enerplus letter to the NEB says the decision to withdraw was "as a result of a recent internal review" of the facility.

OEB dismisses most of gas storage compensation claim

The Ontario Energy Board (OEB) has recently decided a gas storage case that follows on the heels of a Court of Appeal decision that determined that the OEB has exclusive jurisdiction to decide questions of compensation.  The applicants before the OEB were the claimants in the case dismissed by the Court of Appeal.  The applicants made an application to the OEB under section 19 and section 38(2) of the Ontario Energy Board Act, 1998 for a number of heads of relief.  In particular, the application under section 19 was for an order of the OEB determining that the contracts between the applicants and Union Gas Limited have been terminated.  The application under section 38(2) was for an order determining the quantum of compensation to which the applicants were entitled.

The OEB has now partially dismissed the application on a motion for summary judgment filed by Union Gas Limited.  In doing so, the OEB applied the test under Rule 20 of the Ontario Rules of Civil Procedure.  The OEB was satisfied that there was no genuine issue requiring trial with respect to at least part of the claim made by the applicants.  Union made two arguments on why the application should not be heard by the OEB.  Firstly, Union argued that there was significant delay on the part of the applicants bringing the application.  Secondly, union argued that it had binding compensation agreements with the applicants, which, together with the OEB's 1993 gas storage area designation order, have superseded any prior agreement between Union, its predecessors, and the applicants.

The OEB found that Union's rights to inject gas into, store gas in and remove gas from the Edys Mill Pool, and to enter into and upon the land in the area and use land for such purposes was governed solely by the designation order, and has been since 1993.  The designation order supersedes any previous agreement with respect to Unions rights to inject store and remove gas.  Whether previous contracts between the parties relating to the right to inject, store or remove gas have been formally canceled or not is essentially irrelevant as these rights are now governed by the designation order.

It was also noted by the OEB that the applicants' allegations of unspecified breaches of the designation order were not supported by any evidence or particulars.  Even if there had been breaches of the designation order, it was not clear to the OEB that such breaches would be the proper subject of a hearing under section 38 of the Act.  As there was no basis for any finding in this proceeding that Union had committed any breaches of the designation order, the OEB dismissed claims based on those alleged breaches.

With respect to just and equitable compensation under section 38 of the Act, the OEB determined that it had no jurisdiction over gas storage on the applicants' lands during the period prior to the designation order.  During the period from the designation order in 1993 to 1999, the OEB determined that the applicants had been paid compensation by Union pursuant to Unions gas storage leases.  Therefore, the OEB dismissed the claims for compensation for the period 1993 to 1999.

The period 1999 to 2008 was covered by a compensation order made by the OEB.  The applicants were members of the Lambton County Storage Association (LCSA), which had negotiated an agreement with Union with respect to compensation.  The board ruled that it had dealt with compensation issues in that order in a final manner and that no party affected by it may seek additional or other relief for the period of time it covers.  The fact that the OEB has jurisdiction over compensation does not mean that the OEB can revisit the issue.

The OEB accepted that it could hear an application with respect to compensation owed to some of the applicants for the post-2008 period.  There was no agreement in place between Union and some of the applicants and the OEB could set the level of compensation under section 38 of the Act.

Read the OEB decision at: Knight et al. v. Union Gas.

FRACKED: A PERSONAL ACCOUNT OF LIVING ON THE SHALE

From theclean.org:

FRACKED: A PERSONAL ACCOUNT OF LIVING ON THE SHALE

October 26, 2011: Nothing can prepare a person for the reality of high-volume "fracking"; certainly not the coaxing of suave salesmen who convince landowners to sign leases by telling them that they've won "the natural gas sweepstakes." And certainly not their description of benign completed gas wells that stand in green meadows, silently pumping money out of the ground.

When the frackers come, they arrive like an invading army:

Trucks by the hundreds, tankers, dump trucks, drilling rigs, fracking rigs. Five-acre drilling pads were bulldozed in the middle of farmers' best fields, million-gallon ponds were installed, roads were built, woods and fields were trenched and bulldozed for tie lines. Drilling rigs went up at an unbelievable rate. From one spot on our farm, I counted eight rigs.

Then the generators started. You could hear them a half-mile away.

Then the pumping stations - small, industrial sites with buildings and pipes sticking up out of the ground.

This is the scene as described by Libby Foust. Her family farm was the site of some of the first Marcellus wells in Bradford County, Pennsylvania.

Read the rest of the blog post at: theclean.org

The Marcellus Effect: Chesapeake's Force Majeure Letters Strike Again

Read Sue Heavenrich's post about Chesapeake Energy's ongoing attempts to claim "force majeure" as authority to extend gas drilling leases beyond the expiry of their terms (for failiure to drill): The Marcellus Effect.

National Energy Board says it's shifting from "reactive" to "proactive"

The National Energy Board (NEB) says it has decided to increase the number of pipeline performance measures beyond those currently collected by the Board through incident reporting requirements in the Onshore Pipeline Regulations, 1999.  The NEB claims this initiative will supplement existing measures such as spills and injuries with performance measures of activities that require planning and ongoing monitoring. This is anticipated to bring a predictive dimension to how a company manages its programs. The measurement of performance is intended to promote a shift from reactive to proactive management. Companies will be able to use the resulting data to trend and compare performance, and to encourage continual improvement. The NEB will also use the data to assist in compliance verification planning.

The NEB's Background Information enclosure describes deficiencies in its current overview of security and the environment:

The Board currently requires companies to report on incidents, such as releases of substances and serious injuries. These measures are "lagging indicators" because the information provides a historic view. The Board is taking action to promote safety, security and environmental protection by proposing that all Board-regulated companies also report on "leading" performance measures. "Leading" measures are predictive and forward looking, measuring aspects of processes and activities that are likely to contribute to a desired outcome. A mix of leading, lagging and qualitative measures can provide an overview of the effectiveness of a company in meeting program objectives.

Read the NEB's letter to Oil and Gas companies at: July 11, 2011 letter.