The Applicants, BP Canada and Inter Pipeline Fund, were granted leave to appeal a decision of the Energy Resources Conservation Board in respect of approvals it granted to a different company, Taylor Processing Inc.

Administrative law – Natural resources – Oil and gas – Contracts – Hearings – Conduct of hearings – Decisions of administrative tribunals – Energy Resources Conservation Board – Judicial review – Appeals – Failure to provide reasons – Natural justice – Procedural requirements and fairness – Witnesses

Inter Pipeline Fund v. Alberta Energy Resources Conservation Board, [2011] A.J. No. 878, 2011 ABCA 242, Alberta Court of Appeal, August 8, 2011, P.W.L. Martin J.A.

Taylor Processing Inc. (“Taylor”) brought an application to the Energy Resources Conservation Board (the “Board”) seeking approval to operate a co-stream project at its existing Harmattan plant. Two interested parties, Inter Pipeline Fund (the “Fund”) and BP Canada, were granted intervenor status in that application and both opposed it.

The Board set a hearing timetable and both the Fund and BP Canada made an information request of Taylor. Several of Taylor’s responses were inadequate. In particular, Taylor was relying upon a report of Ziff Energy Group regarding the sufficiency of the gas supply for the area. Taylor did not answer some questions on the basis that it did not have the information. However, the questions could have been answered by Ziff if Taylor asked Ziff.

BP took issue with the adequacy of Taylor’s responses and asked the Board to postpone the deadline for submissions until Taylor answered the questions. The Board felt it had sufficient information to proceed and noted that Taylor was the applicant and needed to disclose all relevant information to have its application granted. In light of this conclusion, BP wanted to cross-examine Taylor’s witnesses. The Fund wanted to cross-examine Taylor’s witnesses but also intended to introduce its own expert evidence from Purvin & Gertz Inc. about the gas supply. Their report indicated that the gas supply was declining in the area and this would impact Taylor’s plans.

Shortly before the hearing, Taylor disclosed a document prepared by TransCanada Pipeline (TCPL) containing projections for gas supply. That document contained little or no analysis for the projections. Then, after the parties all provided their written submissions, Taylor disclosed that it was not going to rely on the Ziff report but was just going to rely on more general industry forecasts, including the TCPL projections.

At the hearing, Taylor’s witnesses could not answer questions regarding the forecasts relied upon by Taylor. This left no opportunity for the Fund or BP Canada to challenge the projections and conclusions put forward by Taylor. The Board then gave essentially the same weight to Taylor’s projections as to the Fund’s expert report. The Board approved Taylor’s application.

The Fund applied for leave to appeal the decision of the Board alleging the Board provided inadequate reasons. The Court of Appeal granted leave to the Fund in respect of the adequacy of reasons issue. The Court found there should have been a full explanation of the relevant findings given the contradictory expert evidence put forth by the Fund and the obvious deficiencies in the TCPL projections.

BP Canada and the Fund also applied for leave to appeal alleging a breach of procedural fairness. They argued they were denied procedural fairness because of the cumulative issues that took place before and during the hearing. More specifically, they noted that they did not receive adequate answers from Taylor during the information request process. This was supposed to be mitigated by their right to cross-examine Taylor’s expert witnesses at the hearing. Then Taylor did not rely on the Ziff expert report and their witnesses were not able to answer questions about the projections relied upon. The Court accepted this argument and granted leave to appeal.

Leave to appeal was granted to the Applicants, the Fund and BP Canada.

This case was digested by Scott J. Marcinkow of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact him directly at smarcinkow@harpergrey.com or review his biography at http://www.harpergrey.com.

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