The Alberta Court of Appeal recently dismissed the appeal of a decision in which the judge had refused to extend the limitation period in an action over an oil well drilled decades ago that had caused environmental contamination.

What Happened?

Brookfield Residential (“Brookfield”) was the owner of a parcel of land in South Edmonton that it proposed to develop into a residential subdivision. Testing conducted in 2010 revealed that the land was contaminated with hydrocarbons and salt. Imperial Oil (“Imperial”) had drilled an oil well on the lands around 1949, which Brookfield alleged was the source of the contamination.

Brookfield commenced an action in 2012, seeking damages against several entities (including Imperial) arising from the environmental contamination of the land.

The statement of claim was issued well after the limitation period had expired, and well after the ten year ultimate limitation period in s. 3(1)(b) of the Limitations Act. Imperial brought an application for the summary dismissal of the claim against it on the basis that the limitation period had expired.

Brookfield responded by bringing a cross-application for an extension of the limitation period under s. 218 of the Environmental Protection and Enhancement Act (the “EPEA”), which allows a judge of the Court of Queen’s Bench to extend a limitation period under an Alberta law where the basis for the civil proceeding is an alleged adverse effect resulting from the alleged release of a substance into the environment.

Under s. 218(3) of the EPEA, the following factors must be considered by the judge:

(a) when the alleged adverse effect occurred;

(b) whether the alleged adverse effect ought to have been discovered by the claimant had the claimant exercised due diligence in ascertaining the presence of the alleged adverse effect, and whether the claimant exercised such due diligence;

(c) whether extending the limitation period would prejudice the proposed defendant’s ability to maintain a defence to the claim on the merits;

(d)   any other criteria the court considers to be relevant.

Lower Court Decision

The chambers judge summarily dismissed Brookfield’s action, concluding that it was not an appropriate case to extend the limitation period, stating:

“While there is some doubt about when the alleged adverse effect occurred, there is sufficient evidence to conclude that it occurred sometime between 1949 and the Well abandonment in 1961. I find that Brookfield has exercised sufficient due diligence. However, I also find that Imperial will suffer significant prejudice if I were to extend the limitation period.

While the Legislature has given the Court the discretion to extend the limitation period for actions related to environmental contamination, it has provided a number of specific factors to consider, including prejudice to the Defendant. Keeping in mind that the purpose of balancing these interests is clearly to ensure that the system is not open to abuse, I find that permitting an action to go ahead more than 60 years after the Defendant last was involved in the Well would be an abuse . . .

While it may be tempting to hold those responsible for environmental contamination accountable for their deeds, that objective must be tempered with fairness and a recognition of sound bases for limitation periods.”

Court of Appeal Decision

The Court of Appeal stated that, assuming Imperial was responsible for the contamination because it occurred at the time that the well was drilled, it was clear that the ten year ultimate limitation period had expired, unless the limitation period was extended under s. 218 of the EPEA.

The court then considered the criteria set out in s. 218(3) of the EPEA for extending the limitation period, as well as the underlying policy objectives for the existence and possible extension of limitation periods under both the EPEA and the Limitations Act. It stated that the discretion found in the EPEAreflects competing policy objectives:

“(a) the objective of much environmental legislation is that the “polluter pays”, and in some circumstances a polluter should not escape responsibility by the mere passage of time; and

(b) environmental contamination may be difficult to detect, meaning that the strict application of the “discoverability” rule to environmental claims may be unreasonable or unfair in some situations.”

The court then stated:

“A long passage of time makes it difficult to establish the proper standard of care. Setting the standard of care is contextual, relating to the time, place and level of knowledge and understanding of the industry. Modern standards of conduct should not, with hindsight, be applied to torts that occurred in another era.”

While the court acknowledged that it might not be impossible to demonstrate the standard of care or present evidence, despite the passage of decades, it found that it was not an error for the chambers judge to infer that attempting to do so would prejudice Imperial.

As a result, the court found that Brookfield had failed to show any reviewable error and dismissed the appeal.

Get Advice

When disputes arise in the oil and gas industry they can be complex, involving international parties and various pieces of specialized legislation. If you are involved in such a dispute, it’s important for you to have a legal team in place who knows how these interests and laws work together and can help you navigate this intricate terrain.

At DBH Law, our Calgary-based lawyers are uniquely positioned to advise clients on issues that may arise in oil and gas. We have worked with clients in Alberta, across Canada, and around the world and are intimately familiar with the global nature of this ever-changing industry.

Our extensive experience representing clients in the oil and gas industry has given us the tools to help our clients with their unique needs. Please contact us online or by phone at 403.252.9937 to find out how we may be able to help you.