Hi Bob:
Thought you would be interested in this article, which appeared in the National Post on Saturday. The last couple of paragraphs refer to the problems that BEA/STF are having.
Regards
Oilpatch under siege
An Alberta farmer's court award from Mobil Oil signals a disturbing trend -- Westerners biting the hand that feeds them, says George Koch
George Koch
Financial Post
Oilpatch under siege
In 1984, Douglas Jones, a schoolteacher and neophyte rancher near Olds, north of Calgary, noticed that his cattle weren't doing very well. Mr. Jones blamed Mobil Oil Canada Ltd., which had several operating and suspended well sites on his land. Over the next six years, Mobil re-fenced its sites, conducted tests, carted away thousands of tons of soil and reclaimed disturbed land. That didn't satisfy Mr. Jones, who demanded $3-million in compensation. In 1990, he sued. Last month, a Calgary court awarded Mr. Jones $176,800, plus 10 years' interest.
Strange things are afoot in Alberta. In the last year, an irate land owner shot an oilman dead, and eco-activist Wiebo Ludwig has been charged with oilfield violence. Less dramatically, there has been a series of civil attacks on resource producers by land owners, many of whom are legally savvy and wealthy enough to afford good lawyers. While the land owners see themselves as merely defending their property rights, they're taking the concept of nuisance to such an extreme that they're threatening the legitimate activities of resource producers, who also hold property rights derived from the Crown's ownership of natural resources. Most ominously, these attacks suggest that some Albertans are losing sight of the linkage between their province's No. 1 industry and their own material well-being.
Mr. Jones' vastly scaled-down award appears to be a victory for Mobil, but it isn't. Mobil was fighting a point of principle, worried that if it caved in on what it considered a dubious claim, many others would follow. Its legal costs vastly exceeded what it stood to save by beating Mr. Jones in court.
The best Mr. Jones could do at trial was to suggest that his cattle were less healthy than normal, that these cattle were probably exposed to chemicals at Mobil's well sites and that, according to a single expert witness, the chemicals that Mobil's sites contained could, if ingested, cause various health problems.
In defence, Mobil called three expert witnesses. They demonstrated that the soil on Mr. Jones' land was naturally deficient in key minerals, that these deficiencies were apparent in veterinary tests of several of Mr. Jones' cows, and that they constituted a "severe problem" that would indeed cause the kinds of health problems suffered by Mr. Jones' herd. Mr. Jones' veterinarians even supported these findings.
In standard tort actions, a plaintiff must substantively demonstrate a causal connection between the harm he has suffered and the acts of which he is complaining. This causal link must, on a balance of probabilities, appear stronger than any alternative causal chain presented by the defence.
No matter. On July 5, Madame Justice Barbara Romaine ruled in favour of Mr. Jones. Although she concluded Mobil had not acted negligently, she "inferred" that "it is more likely than not" that the chemicals from Mobil's well sites had poisoned Mr. Jones' cattle. Mobil's lawyers hint strongly that they'll appeal. Although Mobil won't comment further, other tort specialists worry that what one litigator calls Judge Romaine's "extraordinarily loose" causal standard could otherwise vastly increase companies' -- and individuals' -- exposure to liability claims.
Bacteria in your well water? Why, just show that these could have percolated from your neighbour's feedlot and collect a cheque. The oil and gas industry? An alternative form of crop insurance. Meanwhile, the threshold for claims related to all manner of other perceived threats, such as second-hand smoke, plastic toys, high-voltage power lines or defective vehicles, would drop. Already dangerously influential in civil cases, junk science would be unleashed completely by a loosened causal standard.
Just northwest of Calgary lies Bearspaw, an unincorporated region of hobby farms and estatelettes. The vast proportion of the wealth that paid for this riotous melange of three-storey Mediterranean-tiled villas, white post-and-rail fences and trendy ostrich pens, of course, was generated by oil and gas.
Now, many locals are opposing plans by Canadian 88 Energy to sink a well in their midst. The so-called Lochend play is admittedly a technical challenge, a "level four critical" sour gas well. High in hydrogen sulphide (H2S), such wells, if they blow out, can kill. But in practice, residents have almost nothing to fear. Sour gas has killed some 30 oilpatch workers. But there hasn't been a single fatality of a bystander in the industry's century-long history. (The family that owns the proposed drilling location, in fact, backs the project and will be compensated for the intrusion.)
Alberta's Energy and Utilities Board (EUB) rated the chances of a major sour gas leak -- one requiring temporary evacuation of nearby residents, though not necessarily causing any adverse health effects -- at one in 10,000 over the project's expected 40-year life. That's if this geologically high-risk exploration well even strikes commercial volumes of sour gas, a prospect the EUB rates at one in 10.
But if successful, it could be a huge find, possibly approaching one trillion cubic feet of natural gas. At today's prices, that would be worth more than $2-billion. The government's royalty share would fund a lot of hospitals and schools and pave a lot of roads, while the cash-flow generated and reinvested in further projects would provide jobs for lots of young people, making acreage owners out of more than a few.
It shouldn't be necessary to restate such blindingly obvious benefits. But to some people in Bearspaw, as well as other opponents such as the Calgary Regional Health Authority, they're not only obscure, they're irrelevant. They fear the well, and there's a mathematical chance it might one day slightly disrupt their lives, and that's reason enough to stop it.
Last month, the EUB approved the Lochend well, saying it represented a "normal industrial risk accepted by society," but imposed 18 additional conditions on top of its already stringent controls on sour gas wells. The EUB's vocabulary, however rational it may be, is almost quaintly out of date. We live in an age when people cocoon themselves inside the protection of anti-lock brakes, air bags and side-door impact beams, and when environmentalists demand that industry commit to "zero" emissions. To such post-moderns, the only "normal" risk is no risk, and the only bearable inconvenience to themselves, none at all.
Southwest of Calgary lies Priddis, an even more upscale area than Bearspaw. There, landowners are fighting plans by Stampede Oils Inc., a Calgary junior, to pursue another potentially high-impact development. Some of Stampede's most vocal opponents are themselves oilmen. Rob Peters founded Peters and Co., a specialty oil and gas brokerage, and has sat on numerous corporate boards. Richard Cones runs Rio Alto Exploration Ltd., a fast-growing natural gas producer. We're not talking beneficiaries of abstruse, spinoff economic effects: Both men have become wealthy off oil and gas. Now, they appear unwilling to allow a competitor its own shot at striking pay dirt.
It's clear the industry can no longer take Albertans' goodwill for granted. Increasing numbers are losing the ability or willingness to weigh the costs -- minor inconvenience and very small physical risk -- against the benefits -- high-paying industry jobs, spinoff effects generating 35% of Alberta's GDP, billions of dollars of government revenues and, not least, cheap and plentiful energy supplies. Equally, the EUB, which for half a century has astutely ruled Alberta's oilpatch and regulated industry-landowner relations, must prepare itself for an era of brokering irrational fears and unreasonable standards of risk.
George Koch is a Calgary business journalist.
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