LAURIE CHINN

A Well of Uncertainty

Alberta needs new rules on urban drilling

By Jeff Doherty

When I stand on the rear deck of my two-year-old home on the outer edge of Copperwood, one of west Lethbridge’s fastest-growing suburbs, my attention is drawn west. The scene is classic southwestern Alberta: big sky, open prairie, mountain horizon. I cherish the view, but I know it won’t last. Every month the developer pushes closer with newly paved roads and attractive homes with front-attached garages. Give it another year, two at the most, and my view will be blocked by a new row of houses complete with backyard barbecues.

That’s if everything goes as planned.

If things don’t go as planned, my view might instead be blocked by drilling rigs, flare stacks and petroleum tanks. That’s a threat my neighbours and I narrowly avoided early in 2014 when Calgary-based Goldenkey Oil Inc. sought approval to drill three exploratory wells on future residential land inside Lethbridge city limits. Two of the wells would have been only a few hundred metres from homes.

Goldenkey shelved their plans after widespread community opposition. Not only did the mayor and council, both of the school boards and most of the city’s residents oppose the wells, but so did the MLAs for Lethbridge-East and Lethbridge-West. Even representatives from the business community were opposed, including the Lethbridge Chamber of Commerce and the Lethbridge and District Association of Realtors. The executives at Goldenkey decided to cut their losses, writing off the hundreds of thousands of dollars they’d put up to lease the mineral rights and hold public consultations.

When Lethbridge Mayor Chris Spearman learned on May 1, 2014, that Goldenkey was pulling out of town, he was delighted but nevertheless cautious. “Goldenkey’s plans have been abandoned,” he wrote in a public statement, “but the issue of urban drilling has not gone away.” There are other oil and gas companies, all of them with the primary concern of return on investment.

Lethbridge is only the latest high-profile example. Drayton Valley, Balzac, Cochrane and the Royal Oak and Rocky Ridge neighbourhoods in Calgary, among others, have all had their run-ins with the oil and gas industry. But if the recent resistance in Lethbridge can be taken as an indication, urban Albertans, who now make up 83 per cent of the province’s population, are ready to defend their neighbourhoods. Our thinking on oil and gas development has changed. A recent public opinion poll by the Canada West Foundation reveals that a majority of Albertans mistrust the energy industry. No longer can oil and gas companies expect quiet acquiescence from the people of Alberta.
What’s needed in this new Alberta is clarity, both for those living in the suburbs and for the industry executives who want predictability. Rural Albertans will also have a stake in any discussions because less drilling in urban areas could mean more in rural areas. Clarity won’t be easily achieved, but one thing’s for sure: the status quo, defined by uncertainty and conflict, is increasingly unworkable. It’s finally time to develop a better set of rules on drilling in our province’s cities.
Unless they’ve had a close brush with this urban side of the industry, most people would probably assume that drilling in cities is prohibited. But that’s not the case. When it comes to oil and gas development in Alberta, nothing distinguishes urban municipalities (cities, towns, villages) from rural municipalities (municipal districts, counties, hamlets). There’s only one Municipal Government Act (MGA), and it applies equally to both the city and the country.
That would be fine except for a specific section in the 20-year-old MGA that exempts oil and gas developments—wells, batteries and pipelines—from local land use regulations. Called s.618 by those in the know, the exemption clause allows oil and gas development to proceed on any land—urban or rural, public or private—without regard for the municipality’s future land-use plans. Lethbridge, for example, has at least six operating gas wells and 25 wells in total within city limits.
The approvals are the responsibility of the Alberta Energy Regulator (AER), a centralized agency funded by the administration fees it collects from oil and gas companies. AER receives its overall direction from a corporate-style board that’s appointed by Alberta’s Lieutenant Governor and chaired by Gerry Protti, a former executive at Encana Corporation and the founding president of the Canadian Association of Petroleum Producers. The board’s other six members include a business consultant, a veterinarian, a chartered accountant, an engineer, a forester and a former VP at Nova Chemicals.
Direct decisions on major applications are delegated to AER hearing commissioners, while routine applications are vetted by AER officials and staff. During a recent 12-month period, the AER received 8,807 well-licence applications and approved all except for 222, which were withdrawn. The criteria aren’t publicly available, but if the specialist content of the AER’s many regulatory directives is an indication, the primary concern is technical compliance, not social compatibility.
As a result of the AER’s far-reaching powers, our democrat-ically elected city councillors have no authority to regulate whether, or where, wells are drilled. These local leaders can—in fact, must—regulate other intensive or controversial land uses such as slaughterhouses, gravel pits and wrecking yards, but the section 618 exemption clause puts oil and gas out of their reach. The MGA requires municipal governments to implement logical and orderly land use planning; this way we don’t have bedrooms backing onto concrete plants, or night clubs located next to retirement villas. Why don’t city councillors have this same kind of common-sense control when it comes to oil wells and flare stacks?
Nickie Vlavianos, a law professor in the Faculty of Law at the University of Calgary and an expert in oil and gas law, explains there are good reasons to put oil and gas out of the reach of municipal bylaws. “One advantage of the exemption,” she says, “is that it allows environmental and safety standards to be uniform across the province no matter where the well is drilled.” Moreover, she says, the exemption allows the AER to make decisions that reflect not the narrow interests of one municipality but the social and economic interests of the province as a whole.

Drilling can proceed on any land—urban or rural, public or private—without regard for land-use plans.

Still, the exemption strikes an undemocratic chord. Some municipal leaders have called for more control. But local decision-making also has its issues. As Vlavianos points out, some municipalities might outright prohibit drilling, putting a drag on the provincial economy, while others might relax regulations and standards to attract development. Neither scenario is desirable.
Another issue is the sheer number of municipalities. Alberta has 269 urban and 74 rural municipalities. If those municipalities were separately put in charge, the resulting patchwork of regulations would be so incomprehensible it might sink the oil and gas industry. When it’s seen this way, the status quo of centralizing all decisions with the AER begins to make some sense. At least that’s the message Albertans have been hearing from successive energy ministers.
For Lethbridge Mayor Chris Spearman, however, the status quo isn’t an option. The urban drilling issue dominated the agenda during the 2013 municipal election. He was opposed to it during the campaign and, along with the other eight members of council, he’s still opposed. “Our formal position,” he says, “is that drilling isn’t appropriate in urban boundaries.” His main concern: “sterilization” of developable residential lands.
It’s a valid concern. With over 93,000 residents, Lethbridge’s population is growing at an annual rate of nearly 3 per cent. In west Lethbridge, however, the rate of growth is over 4 per cent, a whole point higher than even Calgary’s overall rate of growth. The oil and gas industry has only a minor presence in Lethbridge. The economy is centred instead on agriculture and agricultural processing. According to Economic Development Lethbridge, the city is also an up-and-coming high-tech centre, a natural outgrowth of having affordable land, two federal research centres and two high-quality post-secondary institutions. Lethbridge needs clean land for commercial and residential expansion.
Oil and gas development also contributes to the problem of inefficient land use. AER regulations require at least a 100 metre separation between houses and wells. The three exploratory wells and the interconnecting pipelines would have “sterilized” more than eight hectares, an area roughly equivalent to 10 CFL football fields. By Lethbridge’s residential density standards, that’s enough land for more than 300 single-family detached homes. Removing those homes from the inventory runs counter to the province’s recently released 10-year strategy for efficient land use in southern Alberta. “Land is a limited, non-renewable resource,” reads the South Saskatchewan Regional Plan, “and so it should not be wasted.”
If not in the city, where exactly should oil and gas wells be located? Council was not willing to answer directly. “This city council and the previous council,” they wrote in a public statement, “have emphasized from the start that we are not opposed to oil and gas exploration, generally.” They just didn’t want to see it occurring within the boundaries of Lethbridge. When asked the obvious question, Spearman is quick to counter any charges of NIMBYism. “We really do have plans for development,” he says.
In fact, the entire area in question, which amounts to more than eight sections (over 2,000 hectares), was annexed in 1984 specifically for residential development. In the meantime, the owners of the annexed land—farmers now seeding their crops in Lethbridge rather than the County of Lethbridge—have continued to work their fields. As needed, portions of the land have been purchased by developers who have installed roads and street lights. To come out ahead, they subdivide the land and sell the serviced residential parcels to builders who in turn build homes that are mortgaged by regular working people—nurses, plumbers, the young couple covering the night shift at the potato chip plant.
april15_a-well-of-uncertanity_alberta-views-3 Dave McCaffrey says No Drilling Lethbridge’s concerns included possible water contamination, odours or a hydrogen sulphide leak.

Growth was slower during the late 1990s and the very early 2000s. During those years, the Bonavista Energy Corporation encountered little to no opposition when it drilled a number of gas wells on the annexed land. One of those still-producing gas wells is only 300 metres from my home, but it was over 1.5 kilometres from the nearest homes when it was drilled. This illustrates how quickly the supply of land is disappearing in west Lethbridge.

That Alberta Energy would today auction off the mineral rights under the remaining land, ignoring the City’s residential plans is, at best, inefficient and counterproductive. At worst, it’s a disaster in the making.

Concerns about public safety were paramount for No Drilling Lethbridge, a citizen group that formed during the summer of 2013 to oppose Goldenkey’s proposed exploratory wells. Sheila Rogers and Dave McCaffrey, both of whom were prominent volunteers with the group, recall a list of public concerns that included water contamination from hydraulic fracturing, odours, air and light pollution, dangerous goods transportation on residential roads, and emergency evacuation capability in the event of a fire or a release of deadly hydrogen sulphide gas. These last two concerns were especially salient given the newest subdivisions located downwind of the wells’ proposed location.

Admittedly, some of the health and safety concerns were misunderstood or exaggerated. Noise and light pollution, for example, were high on the protest agenda, but the community would have experienced little of either after the initial drilling. A pump jack moving in slow motion in the middle of a stubble field isn’t going to keep anyone awake at night. Diesel pickup trucks, which serve as commuter vehicles for a surprising number of suburban families, are far more disruptive.

Based on the tone at the public consultations, however, the people of Lethbridge generally weren’t open to discussing the rationality of their fears. Nor did they want to learn how their concerns might be mitigated with regulations or technology.

David Hill is a regulatory consultant with Hill and Associates Consulting Ltd. He and his colleagues represented Goldenkey during the public consultation events in Lethbridge in late 2013 and early 2014, trying to convince Lethbridge residents that their quality of life would be unaffected by the exploratory wells. The group did not win over very many minds.

“The biggest surprise for me,” Hill says, “was the misinformation and the willingness of people to believe what they wanted to believe.” When he and his colleagues attempted to clarify the issues, their lengthy explanations met with skeptical groans. Collective fear had taken hold: “There was a groupthink that happened,” Hill says.

There’s truth in Hill’s assessment, but still, residents working in the oil and gas industry were also opposed to the idea of urban drilling. They weren’t persuaded when Goldenkey referred to the AER’s catalogue of regulatory directives. “We did have support from people in the industry,” McCaffrey says, referring to the No Drilling Lethbridge campaign. “They knew the hazards that were real and those that were overblown, and they made their own decisions.”

Judging by how often it appeared in news headlines and on protest placards, Lethbridge residents were most concerned about Goldenkey’s hydraulic fracturing plans. “Fracking,” as it’s called, refers to the process of pumping highly pressurized fluids and sands (or other solids) into a well to fracture the geologic formations so that the oil and gas flows more freely. The practice has caused considerable controversy, especially when conducted in shallow gas wells, because it’s widely believed that the process contaminates underground water.

A clearer set of rules would also help oil and gas companies benefit from their investment.

Pending further study of the negative effects, moratoriums on fracking have been put in place in Quebec and Nova Scotia. During No Drilling Lethbridge’s campaign, Newfoundland followed suit as did municipal officials in Los Angeles. At the same time, residents in three cities in Colorado voted against fracking. In this context it’s not surprising that Lethbridge residents were fearful of Goldenkey’s plans.
The result of that fear was widespread opposition. On February 20, 2014, researchers from the Lethbridge College Citizen Society Research Lab asked a representative sample of residents if they supported or opposed oil and gas drilling within the boundaries of their city. More than 75 per cent of respondents were opposed, and of those, most were strongly opposed. Volunteers from No Drilling Lethbridge subsequently pulled together an 11,000-signature petition, which they delivered to the Legislature in late March.

When Goldenkey pulled out of town, Spearman took to social media and called it a “victory of activism over apathy.” And he’s right. If anyone deserves credit, it’s the volunteers at No Drilling Lethbridge and all the engaged residents of Lethbridge who wrote letters, attended consultations and walked the streets with protest placards. “Mayor and council asked for assistance,” McCaffrey says. “And the people responded.”

But, at the same time, McCaffrey has a sober warning: “This wasn’t a victory for democracy,” he says, explaining that the residents of Lethbridge were forced to resort to protests and petitions even though their elected representatives at the municipal and provincial levels were opposed to Goldenkey’s plans. This lack of confidence in the regulatory and political channels only underscores that there’s a need for new urban drilling rules.

It’s not exactly clear when those new rules will be coming. When Kaiser Exploration Ltd. relocated to appease the residents of northwest Calgary, then-Minister of Energy Ken Hughes promised an urban drilling policy by the end of 2013. Next in line was his successor, Diana McQueen, who promised a policy by the end of 2014. To her credit, she completed discussion sessions and an online survey despite all the upheaval that came with Premier Alison Redford’s resignation. Under Premier Jim Prentice, Frank Oberle took over as Energy boss in September of 2014. Those hoping for some action were disappointed that urban drilling wasn’t mentioned in his mandate letter.

New Democrat leader Rachel Notley has accused the Progressive Conservatives of foot-dragging. But the 12-term PC government is in a tricky position because they must also consider the wants and needs of rural Albertans. We only need to recall Wiebo Ludwig and his direct activism to remind ourselves that city folks aren’t the only people who take issue with the oil and gas industry. A more recent example is Rosebud-area oil patch consultant Jessica Ernst’s ongoing legal battle with Encana Corporation and Alberta Energy over the issue of contaminated well water. Then there’s the problem of the in-between people, the wealthy urban refugees who live on the fringes of the cities in country residential acreage developments. Although many of them earn their living working in oil and gas, they are quick to mobilize when their industry gets too close to home.

So, what can be done?

All parties would likely agree on revamping the process for the disposition of mineral rights—a good first step. Currently, Alberta Energy leases mineral rights to oil and gas companies at auction, but they do not consult with or notify local people or the municipality. Only after the company has leased the mineral rights for a large sum does it apply to the AER for a well licence, thereby triggering the public consultation process. At that point things can quickly take a skid, as they did in Lethbridge. For municipalities and residents, consulting after the fact is unfair and frustrating to say the least, but for oil and gas companies it’s particularly troubling because they’ve already invested large sums of their shareholders’ money. “It’s not reasonable,” says Hill, “to be sold something and then not be able to use it.”

As mayor of Lethbridge, Spearman would like to see some changes to the AER’s processes for public hearings. Currently, the rules require AER to provide notice of each proposed development so that any party likely to be “directly and adversely affected” may file a statement of concern as an intervener. However, the AER is not obligated to hold a hearing if it determines (behind closed doors) that the would-be interveners are unlikely to be directly or adversely affected. Environmental coalitions, for example, are usually unable to gain intervener status. Since municipalities are responsible for land-use planning and the provision of emergency services, Spearman asserts that their status as interveners should be a given in every case: “We have to manage all the risks, so we should have a higher level of say.” Spearman presented this resolution at the Alberta Urban Municipalities Association’s 2014 annual conference, and the AUMA made it their official position.

The proposed changes to the rules governing mineral rights disposition and public hearings would benefit urban and rural municipalities alike. But what about Lethbridge City Council’s hard-line position that oil and gas development is never appropriate within the boundaries of a city? Most MLAs would likely disagree for fear of offending the overrepresented rural vote. Additionally, in certain areas—land contaminated by a former urban landfill, for example—oil and gas wells might be the only appropriate development.

Still, we all know the city isn’t the countryside. While it’s possible to overemphasize the difference between the two types of municipalities, the AER’s current approach of evaluating only whether a well can be drilled and produced safely, dismisses difference at all. Oil and gas may be the backbone of our economy, but that doesn’t mean it should always come first.

As for my situation in Copperwood, I can only hope that the land behind my new home will be developed for houses, as planned. But so long as the section 618 exemption is there, putting oil and gas development out of the reach of city councillors, the future status of the land will remain in question. A modern policy on urban drilling could change that. In the meantime, I hope someone in the City’s planning department is carefully monitoring Alberta Energy’s public auctions so that the right people can be alerted if the mineral rights underneath Lethbridge are again leased to an oil and gas company.

For their part, oil and gas executives probably wouldn’t much care if drilling were finally prohibited in our cities. Urban municipalities comprise only a small portion of the province’s land mass, and as Goldenkey learned in Lethbridge, approvals in a city can quickly get messy. Industry shouldn’t be misled to believe that they will be rewarded if they follow a road leading to the rapidly expanding suburbs. Instead we should have a clear set of rules so that oil and gas companies can focus on places where they can reasonably expect to benefit from their investment and efforts.

As Hill says, “Industry wants certainty. That’s what they hang their hats on.”

Jeff Doherty is a writer and history buff based in Lethbridge. He has worked as a roughneck, a bureaucrat and a legal researcher.

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