AER Signals Stringent Approach To Issuance Of Reclamation Certificates

In Decision 2016 ABAER 006, a hearing panel (the "Panel") of the Alberta Energy Regulator (the "AER") upheld an AER decision to refuse to issue a reclamation certificate to Canadian Natural Resources Limited ("CNRL").

Pursuant to environmental legislation in Alberta, operators of oil and gas wells must conserve and reclaim disturbed land to restore the landscape, soil and vegetation to a productive state so that the land can be used as it was prior to commercial development. A reclamation certificate is issued to an operator when a site is successfully reclaimed to the standards set by the AER. In this decision, the Panel affirmed the decision of the AER's Reclamation Programs Group (the "RPG") that determined that CNRL failed to adequately control the growth of undesirable plants on a site and had accordingly not reclaimed the site in question to the applicable standards.

To our knowledge, this is the first reported decision arising out of proceeding of this type for the AER and is significant in outlining and affirming the considerations and procedure of the AER in handling reclamation certificate applications. In particular, the AER made a number of important comments about introducing new evidence at the appeals stage which has implications in the broader regulatory context. While reclamation costs are not typically hugely significant for oil and gas operators (in particular in comparison to the costs of abandonment and remediation that can be extreme), they are a source of indeterminate liability for an operator that must be continually monitored and addressed. This decision fits within a trend by the AER of taking a stringent approach to enforcing environmental obligations and is noteworthy for operators who are already very cognizant of environmental liabilities in Alberta's struggling economy.

Background

In 2001, CNRL drilled a well at a site located in northwestern Alberta near Peace River (the "Well Site"). The well never produced and was subsequently abandoned and reclaimed in October of 2001 when CNRL seeded the Well Site with fescue, a type of grass. For the next 10 years, CNRL maintained the Well Site through spraying and mowing.

In May of 2014, CNRL applied to the AER for a reclamation certificate for the Well Site. In October of 2014, the AER decided to refuse to issue the reclamation certificate on the grounds that there was an increased amount of incompatible vegetation, in particular quack grass (a type of weed common in Alberta), on portions of the Well Site and access road. In the decision, the RPG noted that the quack grass interfered with the landowner's use of the adjacent lands.

In November of 2014, CNRL requested a regulatory appeal of the AER's decision under Part 1, Division 3 of the Responsible Energy Development Act, SA 2012, c R-17.3 and Part 3 of the Alberta Energy Regulator Rules of Practice, AR 99/2013 ("AER Rules of Practice").

On September 9, 2015, the AER decided to set the matter down for a public hearing. The purpose of the hearing was to determine whether the AER should confirm, vary, suspend or revoke its decision to refuse to issue a reclamation certificate.

Applicable Legislation

The obligation of an operator to reclaim land stems from section 137 of the Environmental...