Oil and Gas – Regulatory Appeal
Application
This decision dealt with the regulatory appeal by AlphaBow Energy Ltd. (“AlphaBow”) of two orders issued by the AER’s Closure and Liability Management branch (“CLM”). CLM issued the first order on March 30, 2023, directing AlphaBow to demonstrate that reasonable care and measures (“RCAM”) were being provided at its sites. (“March Order”). CLM issued the second order on June 5, 2023, suspending AlphaBow’s licences (“June Order”) for failure to comply with the March Order.
A portion of the hearing in this proceeding was conducted in private to prevent disclosure of sensitive financial information and this decision was the redacted version available to the public. A separate confidential decision without the redactions was issued to the parties in the proceeding who signed confidentiality undertakings.
Decision
The panel of hearing commissioners assigned to this proceeding (“AER”) confirmed the decision of CLM to issue the March Order and the June Order.
Pertinent Issues
The March Order
The March Order compelled AlphaBow to do the following: submit for approval an RCAM plan within 30 days and implement the approved plan; submit for approval a plan to abandon all mineral-lease expired wells within 30 days and implement the plan within six months; submit proof of insurance; update the working interest participant information within 30 days; submit a third-party audited financial statements once finalized or within 180 days of fiscal year end; and, post a security deposit that represents 10% of AlphaBow’s inactive liability within 30 days.
The AER established the following issues in relation to the March Order: did CLM breach procedural fairness in issuing the order; and, was CLM’s discretion to issue the order unreasonable.
AlphaBow alleged that CLM breached procedural fairness by:
- failing to provide notice of the proposed March Order;
- denying AlphaBow the opportunity to defend against the March Order;
- denying AlphaBow knowledge of the case against it;
- making a decision tainted by a reasonable apprehension of bias;
- not providing adequate or intelligible reasons that sufficiently justified the decision; and
- making a decision that did not align with AER norms, guidelines and precedents.
The AER found that CLM did not breach procedural fairness in issuing the March Order. The AER was not satisfied that AlphaBow was deprived of notice, information or the ability to defend against the March Order. The AER held the AlphaBow did not meet the test to establish reasonable apprehension of bias and was not satisfied that AlphaBow provided adequate evidence to show that a reasonable person would think that CLM acted unfairly in issuing the March Order.
The AER found that AlphaBow did not establish that it suffered any breach of procedural fairness in relation to adequate and intelligible reasons, and justification for the March Order, including imposing the requirements for an RCAM plan, security deposit and third-party audited annual financial statements.
AlphaBow failed to convince the AER that the March Order did not align with AER norms, guidelines and precedents. The AER found that CLM’s discretion to issue the March Order was reasonable and confirmed the March Order.
The June Order
This order was issued as a result of AlphaBow’s failure to comply with the March Order. In the June Order, CLM directed AlphaBow to suspend and discontinue all licences in a safe manner.
The AER established the following issues for the June Order: did CLM breach procedural fairness in issuing the order; was CLM’s discretion to issue the order unreasonable; and did CLM fail to satisfy the requisite requirements of the Oil and Gas Conservation Act (“OGCA”) in issuing the order.
AlphaBow alleged that CLM breached procedural fairness by:
- the lack of an impartial decision-maker;
- failing to provide AlphaBow with the opportunity to know the case against it in relation to the June Order;
- failing to provide AlphaBow with the opportunity to adequately respond and make fulsome submissions
about the June Order;
- being unresponsive to AlphaBow’s submissions;
- providing inadequate reasons in the June Order;
- providing incoherent reasoning in the June Order; and
- being patently unreasonable.
The AER found that CLM did not breach procedural fairness in issuing the June Order. The AER held that AlphaBow did not meet the test to establish reasonable apprehension of bias. The AER was not satisfied that AlphaBow provided adequate evidence in the context to show a reasonable person would think that CLM had decided unfairly in issuing the June Order.
The AER was not satisfied that CLM was procedurally unfair regarding AlphaBow’s ability to know the case against it, the opportunity to respond and make fulsome submissions or CLM’s consideration of and response to AlphaBow’s submissions. The AER found that AlphaBow did not establish that it suffered any breach of procedural fairness regarding the sufficiency or coherency of the reasons in the June Order, including CLM’s authority for issuing the order.
The AER found that AlphaBow did not establish its allegation that the June Order was patently unreasonable. The AER also found that CLM exercised its discretion in a reasonable manner in issuing the June Order. In the AER’s view, CLM was justified in issuing the June Order as a reasonable and necessary response to protect the public and the environment. The AER was not satisfied that there was evidence to support that CLM intended to force AlphaBow into insolvency or prevent it from meeting its obligations by issuing the June Order or that requiring suspension and discontinuation of AlphaBow’s sites was unreasonable or harms the public and the environment.
The AER was not convinced that CLM failed to satisfy the requisite elements of section 27 of the OGCA in issuing the June Order. Consequently, the AER confirmed the June Order.
Conclusion
The AER concluded that CLM’s actions from March to June 2023 cannot be viewed in isolation and that they were a continuum of events that began potentially as early as the inception of AlphaBow as a company that gathered momentum in 2022, with declining regulatory compliance, resulting in restrictions being placed on AlphaBow’s licence eligibility. The March Order was issued because of AlphaBow’s inability to address compliance and its unresponsiveness to CLM’s requests, many of which were documented in the July 2022 licence eligibility decision.
The AER considered social, economic, and environmental effects, and impacts on landowners from AlphaBow’s operations in confirming these orders, which confirmation was in the public interest.
