In yet another indication of the increasing prominence of water use issues in BC, the Supreme Court of British Columbia recently upheld the practice of the BC Oil and Gas Commission to grant recurrent short-term water approvals for oil and gas activities under the Water Act. In Western Canada Wilderness Committee v British Columbia (Oil and Gas Commission), 2014 BCSC 1919, (a case we first reported on here) the petitioners, Western Canada Wilderness Committee and Sierra Club of British Columbia Foundation, alleged that the Commission’s practice of granting recurrent short-term water use approvals to the same oil and gas companies for the same location was in violation of the Water Act. The Court disagreed, holding that there was nothing illegal about the Commission’s practice of evaluating each successive application for an approval on a fresh basis and according to established criteria.
Under the Water Act, the ownership of all water in British Columbia, as well as the right to use it, is vested in the Crown. The government, through various agencies, may issue licences or short-term approvals to use water. In this case, the narrow issue was the Commission’s practice of issuing recurring short-term approvals. However, because the Ministry of Forests, Lands and Natural Resources Operations (FLNRO) employs a similar practice of issuing short-term approvals to various users (land or mine owners, municipalities, water users’ communities, federal and provincial ministries, and so on), the case has implications that go beyond the oil and gas industry.
As set out by the Court:
In order to consider an application for a s.8 [short term] approval, the applicant must provide FLNRO with information, such as the proposed source of the water, the point(s) of diversion of the water, the total volume of water to be used, the maximum rate of withdrawal, the time frame for the diversion and the purpose for which the water is to be used. FLNRO considers the application in terms of whether there are conflicting users, whether there is any environmental impact, how much water is available and the interests of third parties. Approvals normally restrict the amount of water, set the term of the approval and impose other appropriate conditions.
Similarly, pursuant to section 8(1) of the Oil and Gas Activities Act, the Commission has the authority to grant short-term approvals of no more than 24 months to oil and gas operators for the use or diversion of surface water sources in relation to “oil and gas activities”. In this case, the Commission had issued a number of short-term approvals to Encana in relation to the exploratory stages of its oil and gas plays in northeast British Columbia. Encana said that at the exploratory phase its water use would be of a short-term nature, and that its water use would change as its operations change throughout the life cycle of its operations, such that it may acquire a more permanent water use licence at more mature stages of the play.
The crux of the Petitioners’ argument was stated as follows:
The Commission grants repeated Section 8 Approvals that combine to authorize companies to use or divert water for more than one term and for more than 24 months. While no Section 8 Approval singularly exceeds one term or the statutory limit, multiple approvals are routinely granted over multiple years to the same company, for the same purposes, at the same locations and thereby violate s. 8 of the Water Act.
Accordingly, the issue before the Court was whether the Commission has the power to grant section 8 approvals that extend for more than one term or more than 24 months.
The Court approached the issue by setting out the process that the Commission and FLNRO follow in granting an approval in any given case:
Each application for a s. 8 approval undergoes a risk rating by the Commission. Section 8 approvals all have an expiry date and that date may not be extended or continued. If the approval has expired, the operator must re-apply for a new approval. It is the Commission’s policy, as confirmed by the applicable application manual, that any re-application is to be considered as a new or “fresh” application with updated field information and documentation being required from the applicant, consistent with what is outlined above. This new application is then fully reviewed afresh by Commission staff with all relevant and up to date data and input from relevant persons.
After conducting an extensive analysis of whether the Petitioners had standing to bring the case (they did) and the applicable standard of review (reasonableness), the Court dismissed the Petitioners’ argument by stating:
On a plain reading of section 8 of the Water Act, in context with the scheme of the Act, the object of the Act, and the intention of the legislature, there is simply no prohibition relating to consecutive short term water use approvals or even recurrent approvals lasting in total in excess of 24 months. I agree with Encana that, to the contrary, when read in context with the entire Act, this provision gives FLNRO, or the Commission in respect of oil and gas activities under the Oil and Gas Activities Act, broad discretion to provide for effective and efficient processes for the review of applications for short term water use approvals and to ensure that applications that are approved are in the public interest having regard to environmental, economic and social factors.
The Court went on to say that there is no basis in either the Act itself or from a public policy perspective to prevent someone who had previously received an approval from re-applying for the same or similar permission – the situation would be no different if a third party came along and applied for the same or similar approval. In either case, FLNRO or the Commission would have the statutory authority to consider the application and make a decision based on the present information before it.
The case provides clarity and reassurance to all those relying on short-term water approvals issued under section 8 of the Water Act and reassures regulators such as FLNRO or the Commission that the practice they have been following is a sound one. It is important to keep in mind though, as previously noted, that the Water Act is soon to be overtaken by the Water Sustainability Act, which expressly provides that approvals for both water and ground water may be recurrent. In the meantime, however, those seeking recurrent approvals under the existing Water Act are reminded that the Court was very clear that a recurrent approval is considered to be a new application and subject to the same application process as a new approval – meaning that existing approval holders will not be “grandfathered” or favoured in respect of an application for a recurrent renewal.