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Professor Russell Brown-On Bill 2, the Responsible Energy Development Act

December 07, 2012

Bill 2 - the Critics are Correct

Alberta’s Legislative Assembly has recently passed Bill 2 – the Responsible Energy Development Act.  My colleagues at the University of Calgary (including Professors Shaun Fluker, Nigel Bankes and Nicki Vlavianos) have commented extensively (here, here, herea particularly important piece here, here, and here) on all its various facets, including its implications for the rights of surface rights-owners in Alberta.  So has St. Albert lawyer Keith Wilson (here and here).  The Calgarians and Mr. Wilson have, in my judgment, exposed serious problems in Bill 2’s shifting of rights away from landowners in favour of oil producers.  (Full disclosure:  I am also on the record as critiquing Bill 2 for having these flaws.)  I will not recount them here, since they are ably set out in the links above, except to say that, in my judgment, the most serious flaws are the removal of previously guaranteed rights to a hearing and to an appeal to an independent body.)

 Wilson, Fluker, Bankes, Vlavianos and Brown.  I think it would be fair to suppose that at least some of us occasionally find ourselves in disagreement with each other on property rights issues.  All of us are, however, lawyers who know how to read and discern the plain meaning and effect of statutes.  I stress this, because - now that Bill 2 has passed the House - the government has objected that critics (they single out Mr. Wilson, but have not addressed the concerns expressed by the University of Calgary law professors or by me) are misinterpreting key provisions of Bill 2.

As I will show below, Bill 2’s critics are not wrong.  They (that is, we) are reading its legal effects correctly. I will use as my reference point what appears from the government’s perspective to be the most contentious (and, let me reiterate, absolutely correct) critique of Bill 2:  that it strips landowners (that is, the owners of the surface rights) of their previously-held right to a hearing where a regulatory decision allowing an oil producer to undertake an energy project (think, for example, hydraulic fracturing, aka hydrofracking) on land directly and adversely affects the surface rights owner.  Potential direct and adverse effects might include concern that the wellbore is too close to a water reservoir, or that a bitumen recovery scheme might thermally effect the groundwater, or that the sour gas well will release hydrogen sulphide towards the spot where the kids wait for the school bus each morning. 

To cut to the chase, the longstanding legal regime governing these situations, under Section 26 of theEnergy Resources Conservation Act (the ERCA), has provided that surface-rights owners whose rights as such are directly and adversely affected, are entitled to be heard by the Energy Resources Conservation Board (the ERCB).  Because the construction of Section 26 is at issue between the government and critics of Bill 2, I set out the relevant provisions here: 

Hearings 

26(1)  Unless it is otherwise expressly provided by this Act to the contrary, any order or direction that the Board is authorized to make may be made on its own motion or initiative, and without the giving of notice, and without holding a hearing.

(2)  Notwithstanding subsection (1), if it appears to the Board that its decision on an application may directly and adversely affect the rights of a person, the Board shall give the person

(a)    notice of the application,

(b)    a reasonable opportunity of learning the facts bearing on the application and presented to the Board by the applicant and other parties to the application,

(c)    a reasonable opportunity to furnish evidence relevant to the application or in contradiction or explanation of the facts or allegations in the application,

(d)    if the person will not have a fair opportunity to contradict or explain the facts or allegations in the application without cross‑examination of the person presenting the application, an opportunity of cross‑examination in the presence of the Board or its examiners, and

(e)    an adequate opportunity of making representations by way of argument to the Board or its examiners.

Let's review.  Subsection (1) states that the ERCB may make orders without a hearing, unless some other provision in the ERCA says it can't. Subsection (2) then sets out one of those instances where the ERCB cannot make an order without a hearing:  specifically, where one of its decisions may directly and adversely affect the rights of a person.  

Another way of understanding this is that subsection (1) provides a general default rule - that the ERCB need not hold a hearing - that applies except where that default rule is displaced by an exception (that is, "Unless it is otherwise expressly provided by this Act to the contrary").  Subsection (2) creates an exception (hence "notwithstanding subsection (1)"), such that, if it appears to the Board that its decision may directly and adversely affect the rights of a person, then the Board must (“shall”) give that person notice AND an opportunity to know the case and to answer it, an opportunity to furnish evidence, rights of cross-examination and an opportunity to make submissions. 

In other words, they get a hearing.

To reiterate:  subsection (1)’s general provision that a hearing need not occur does not apply where a surface rights owner (or any other person) may be directly and adversely affected by the Board’s decision.  In that circumstance, they are automatically entitled to a hearing by operation of subsection (2).

This is the stuff of first-year law school statutory interpretation.  And this is not one of those cases where the statutory terms are ambiguous:  they admit of no possible alternative interpretation, or at least none that is legally reasonable.  Moreover, this is the interpretation presupposed in and by the decisions of the ERCB, of our courts and by Professor Shaun Fluker in his thorough (and, as I have already observed, absolutely correct) examination of Bill 2’s legal effects on the rights of landowners.

There appears, as an aside, to be no dispute that Bill 2 provides that surface rights owners who are directly and adversely affected by an energy project on their land will not have an automatic right to a hearing.  This is the effect of Section 34 of Bill 2, which provides:

Hearing on application

34(1)  Subject to subsection (2), the Regulator may make a decision on an application with or without conducting a hearing. 

(2)  The Regulator shall conduct a hearing on an application  22

 (a) where the Regulator is required to conduct a hearing pursuant to an energy resource enactment,

 (b) when required to do so under the rules, or

(c) under the circumstances prescribed by the regulations.

(3)  A hearing on an application must be conducted in accordance with the rules.

Again - no-one has disputed that the effect of Section 34 of Bill 2 is to deny landowners an automatic right to a hearing even where they are directly and adversely affected by an application to undertake an energy project on their land.  Defenders of Bill 2 are careful to avoid expressly stating that it fails to provide for that right. One government MLA, Jacquie Fenske, has circulated publicly three documents (here, here and here) guiding the government's statements on Bill 2.  While they are obviously crafted to stress what Bill 2's defenders see as its positive aspects (i.e. "Public notice will go to Albertans on energy projects. Landowners that are directly and adversely affected must be notified. Landowners will also be able to self-identify if they believe they are directly and adversely affected and will be able to provide information to the regulator" etc.), they do not expressly dispute that Bill 2 fails to furnish a right to a hearing of directly and affected landowners.  Landowners can "provide information", they are entitled to "be notified", they are being "empowered", but Bill 2's omission of a right to a hearing is not disputed. 

What DOES appear to be in dispute, however, is whether Section 26 of the ERCA, despite its easily understood operation as recounted above, ever did furnish such a right. One of the documents circulated by Ms. Fenske, entitled "Bill 2 - Key Messages", includes this statement:  "The Wildrose and Mr. Keith Wilson are cherry picking certain points to make their story add up. When they talk about Section 26 of ERCA they never mention the first part – “sub 1”. This is misleading to Albertans."

Given the contents of Section 26(1) of the ERCA, The suggestion here appears to be that subsection (1) means that there was no right to a hearing in the first place - i.e. that subsection (1) trumps subsection (2).  (I gather that some MLAs have been advancing this argument in public).  With respect, this is a plainly incorrect understanding of the effect of subsection (2)'s confinement of subsection (1)'s operation.  True, subsection (1) provides that there is generally no right to hearing.  That, however, is expressly conditioned by subsection (1)'s statement ("Unless it is otherwise expressly provided by this Act to the contrary"), and by subsection (2)'s provisions ("notwithstanding subsection (1)") such that directly and adversely affected landowners are entitled to a hearing.  In other words, subsection (1) does not trump subsection (2):  it's actually the other way around.

There are other problems with Bill 2 – notably, the doing away with appeals from the decision of the regulator to the independent EAB.  That might be the subject of a later post.  Today was all about statutory interpretation 101.


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