Declaration under Section 106 of the Oil and Gas Conservation Act
On October 30, 2017, the AER notified Gary Schellenberg and Lorne Hill of its intention to name them in a declaration pursuant to section 106 of the Oil and Gas Conservation Act (“OGCA”). The AER noted that it did not receive any response from Mr. Schellenberg or Mr. Hill on this matter.
The AER issued a declaration under section 106(1) of the OGCA naming Gary Schellenberg and Lorne Hill as persons in direct or indirect control of Golden Coast Energy Corp. (“Golden Coast”), a company that contravened or failed to comply with an AER order and has a debt to the AER.
Declaration under Section 106 of the OGCA
The AER explained that OGCA Section 106 applies where the AER considers it in the public interest to make a declaration naming one or more directors, officers, agents, or other persons who, in the AER’s opinion, were directly or indirectly in control of a licensee, approval holder, or working interest participant that has:
(a) contravened or failed to comply with an order of the AER; or
(b) an outstanding debt to the AER, or to the AER to the account of the orphan fund, in respect of suspension, abandonment, or reclamation costs.
The AER noted its previous holdings in OGCA section 106 decisions that:
(a) the purpose of a section 106 declaration is to prevent a licensee or person in control from continuing to breach requirements or incurring new breaches or debts, thereby safeguarding the public interest; and
(b) continued confidence in the regulatory system is best assured when licensees comply with AER requirements.
Background
Golden Coast held eight operational well licenses, five operational pipeline licenses, and three abandoned well licenses.
In March 2016, Golden Coast informed the AER that the company was ceasing operations, that the company’s last two directors, Mr. Schellenberg and Mr. Hill, had resigned, and that all of the company’s remaining assets would be forfeited to the AER. The AER issued Golden Coast a closure and abandonment order.
AER inspectors later discovered that a sour gas well licensed to Golden Coast was leaking.
The AER determined that Golden Coast failed to comply with the closure and abandonment order and failed to initiate immediate action in response to calls the AER inspectors made to the company’s emergency phone number regarding the leaking sour gas well.
The AER also found that Golden Coast had not paid its debt to the AER arising from (i) the AER’s emergency response to the leaking sour gas well; (ii) Golden Coast’s 2016 Orphan Fee Levy; (iii) Golden Coast’s Administrative Fees Levy; and (iv) associated penalties for nonpayment.
The AER found that:
(a) these non-compliances and nonpayment of debts were the result of Golden Coast’s decision to “walk away” from its AER licensed properties;
(b) simply notifying the AER of a licensee’s intention to “walk away” from its licensed properties does not absolve that licensee of its ongoing obligations under AER legislation;
(c) one of Golden Coast’s licensed properties subsequently posed a potential public safety and environmental risk, a fact highlighted by Golden Coast’s failure to ensure that calls to the company’s emergency telephone number regarding the leaking sour gas well initiated an immediate response. Golden Coast’s decision to “walk away” from its licensed properties and the company’s ongoing failure to comply demonstrate a blatant disregard for AER requirements; and
(d) as directors of Golden Coast at the time of the company’s noncompliances and nonpayment of debts, the named individuals were and are persons in control of Golden Coast.
The AER found that Golden Coast’s actions had undermined the regulatory system and posed an unacceptable risk to public safety and the environment. The AER concluded that issuance of a declaration was necessary to deter future noncompliance and uphold the credibility of the regulatory system and AER enforcement processes. It is not in the public interest to allow licensees like Golden Coast to simply “walk away” from their AER licensed properties and ongoing regulatory responsibilities.
